Market Talk
– The US dollar is headed for its first weekly decline versus major peers since the start of last month, falling back from a one-year high as traders turned their attention to when the U.S. Federal Reserve will start raising interest rates.
– Improved market sentiment, which has lifted global stocks, commodity prices and bond yields, is also weighing on the safe-haven dollar. U.S. data released on Thursday showed that US PPI rose 0.5% month on month in September and a lower than expected 293k initial jobless claims added to the greenback weakness.
– Only against the yen – another safe haven – has the dollar managed to maintain the momentum of the past five weeks touching 113.88 yen for the first time since December of 2018.
– The euro slipped to 1.1588 after touching 1.1624 on Thursday for the first time since Sept. 4. Sterling was little changed at 1.3670 following its climb to the highest since Sept. 24 at 1.3734 overnight.
– Gold was down on Friday morning in Asia, but was set for its best week in more than five months. Declines in both the US dollar and U.S. Treasury yields also capped the yellow metal’s losses even as the U.S. Federal Reserve prepares to begin asset tapering.
Chart Focus GBP/USD
Key Points
1. Buy GBP/USD recommendation.
2. Buy GBP/USD at 1.3660. Stop at 1.3630 and profit target at 1.3745
3. A decline in Treasury yield and softer than expected US dollar are both weighing on the US dollar.
4. A strong price support coupled with a bullish MACD is hinting of a bullish price trend.
Fundamental Comments
1. A decline in US benchmark 10-year Treasury yield is weighing on the US dollar.
2. Lower than expected US PPI for September and initial jobless claims are both weighing on the US dollar.
Technical Comments
1. Price is likely to be support by a previous resistance turned support line and the 20EMA.
2. MACD is bullish and is hinting of a bullish price trend.
Key Levels
| Support | 1.3660 | 1.3615 | 1.3570 |
| Resistance | 1.3700 | 1.3735 | 1.3780 |
Technical Overview
USD/JPY – Yesterday we had a buy call at 113.30 which was filled when price declined to a low of 113.28. Price has since moved higher to 114.07 at the point of this writing. MACD and 20EMA remain bullish. Stochastic is rising. All these 3 indicators are hinting of a bullish price movement. We would recommend bringing stop higher to at 113.65 while keeping profit target at 114.50.
| Support | 113.75 | 113.30 | 113.00 |
| Resistance | 114.15 | 114.55 | 114.75 |
EUR/USD – Price had broken above the neckline of a Double Bottom chart pattern on Wednesday which has a price target of 1.1645. However, price only reached a high of 1.1625 overnight. Price had remained above 1.1585 support and with MACD and 20EMA both hinting of a bullish price trend, we are looking at another test of 1.1645 within the couple of days. Stochastic is also rising and has not yet reached the overbought zone.
| Support | 1.1585 | 1.1555 | 1.1520 |
| Resistance | 1.1620 | 1.1665 | 1.1700 |
XAG/USD – Yesterday, price broke above the resistance at $23.15 and has moved almost to the price target of $23.60. Stochastic is in the overbought zone but MACD remains bullish and MACD is hinting of a bullish price trend ahead. 20EMA is pointing up with a steep slope, which is a sign of strong bullish price trend. The next price resistance lies at $23.95.
| Support | 23.25 | 23.00 | 22.80 |
| Resistance | 23.60 | 23.95 | 24.10 |
XAU/USD – Price broke above a Flag chart pattern yesterday but was unable to move to its price target at $1824. Stochastic is in the overbought zone but MACD remains bullish. 20EMA is also bullish. If MACD can turn around above the zero line and price can stay above the $1781, we are likely to see another test of the price target at $1824. A decline below$ 1781 would hint of a test of $1757.
| Support | 1790.30 | 1781.20 | 1769.15 |
| Resistance | 1800.35 | 1808.50 | 1818.90 |
EUR/AUD – We had a sell recommendation on Wednesday which was filled 1.5750. Yesterday we had recommended placing stop at 1.5715 and profit target at 1.5650. Our profit target was filled overnight and we made 100 pips on this trade. Price reached a low of 1.5610 but was accompanied by MACD divergence. This could be a possible price low. Stochastic is also starting to rise from the oversold zone.
| Support | 1.5610 | 1.5580 | 1.5545 |
| Resistance | 1.5660 | 1.5700 | 1.5755 |