Market Talk
The US dollar made a wobbly start to the week on Monday with the NZ dollar and sterling edging higher after red-hot inflation readout in New Zealand and hawkish remarks from Britain’s central bank chief that put rate rises in investors’ sights.
BOE Governor Andrew Bailey said on Sunday that surging energy prices would prolong a pulse in inflation and policymakers “will have to act” if they see risks. Sterling touched a high of 1.3773 but edged lower to 1.3733 on Monday morning.
New Zealand reported its biggest quarterly jump in consumer prices in a decade on Monday morning. The surprise leap in the CPI would only reinforce the need for the RBNZ to hike its interest rate, sending the kiwi higher to 0.7105.
The Japanese yen fell to 114.46 tracking a rise in US benchmark 10-year Treasury bond yields, which rose above 1.60% again. Inflationary pressures, could mean earlier-than-expected interest rate hikes from the U.S. Federal Reserve, are likely to keep the US dollar strong against the Japanese yen.
Gold was up on Monday morning in Asia as U.S. bond yields eased, recouping some losses after a steep sell-off during from last Friday session when US Treasury yields move higher on inflationary pressure.
Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation.
2. Buy NZD/USD at 0.7030. Stop at 0.6995 and profit target at 0.7100
3. Interest rate differential and expectation of an interest rate hike by the RBNZ are both aiding the kiwi against the US dollar.
4. Price is likely to be supported by 20EMA and Fibonacci point with MACD hinting of a bullish price trend.
Fundamental Comments
1. Red-hot inflation readout in New Zealand has led to expectation of an interest rate hike in the coming weeks.
2. Interest rate differential is in the kiwi’s favour
Technical Comments
1. Price is likely to be supported by the 20EMA and Fibonacci point.
2. MACD remains bullish and is hinting of a bullish price trend.
Key Levels
| Support | 0.7045 | 0.7015 | 0.6980 |
| Resistance | 0.7075 | 0.7105 | 0.7150 |
Technical Overview
USD/JPY – We had a buy call on this pair on Thursday which was filled at 113.30. We had placed stop at 113.65 and profit target at 114.50 on Friday. Price reached a high of 114.46, missing profit by 4 pips. There is a MACD bearish divergence forming warning of a potential price high. We would recommend closing out this position at currently 114.30 for a 100 pips profit, or to shift stop higher to 113.95 while keeping profit target at 114.50.
| Support | 113.95 | 113.60 | 113.20 |
| Resistance | 114.50 | 114.75 | 115.00 |
EUR/USD – Price was unable to break above 1.1625 on Friday and we have seen a price decline below 1.1585 this morning. We think price may have hit a high. If price is unable to regain ground above 1.1585, we are likely to see a high of the previous low at 1.1523 in the next couple of days. Stochastic and MACD are both moving lower but MACD is still in the bullish zone. 20EMA has turned bearish. We would recommend watching the reactions at 1.1585 for clues.
| Support | 1.1555 | 1.1520 | 1.1490 |
| Resistance | 1.1585 | 1.1625 | 1.1665 |
GBP/USD – We had a buy recommendation at 1.3660 on Friday but price did not move down to our entry price. Price had moved higher to a high of 1.3773 and this could be a high, as a price moved lower to 1.3723 on Monday afternoon. However, Stochastic has reached the oversold zone and both MACD and 20EMA are hinting of a bullish price trend. This correction is likely to bring price lower to 1.3690 and if price can hold above this support, there is another chance of a rally to 1.3773 again.
| Support | 1.3700 | 1.3660 | 1.3615 |
| Resistance | 1.3745 | 1.3775 | 1.3815 |
XAU/USD – Price may have reached a high of $1800.35 on Thursday. Since that high, we have seen a price decline to current $1761.80. If price is unable to move above $1787, we are likely to see a decline to $1742.30 in the next couple of days. Stochastic is into the oversold zone but MACD could be turning bearish. 20EMA has already turned bearish and is hinting of a bearish price trend.
| Support | 1760.10 | 1745.10 | 1734.80 |
| Resistance | 1772.10 | 1781.20 | 1790.30 |
XAG/USD – Price had reached a high of $23.58 on Friday but was unable to move above this Fibonacci 161.8% expansion ratio. However, the decline off this high has been supported by the 20EMA. As long as price is supported by this 20EMA, there is another chance of a test to $23.60. MACD remains bullish and is hinting of a bullish price trend. 20EMA is also bullish at the moment.
| Support | 23.20 | 23.00 | 22.75 |
| Resistance | 23.40 | 23.60 | 23.95 |