Market Talk
– The US dollar rose to an almost four-year high against the yen as Treasury yields climbed to a hit a 4-1/2-month’s peak of 1.6440%. However the greenback remained lower against other currencies, including sterling, which were boosted by expectations of sooner-than-previously expected interest rate hikes.
– Fed Governor Christopher Waller said that although the U.S. central bank will likely begin asset tapering in November 2021, interest rate hikes are probably “still some time off” as he expects inflation to moderate.
– Although persistent inflation is likely to be the biggest risk for the U.S. economy over the coming year, the Federal Reserve is widely expected to wait until 2023 before hiking interest rates, according to a Reuters’ poll.
– The euro was about flat at 1.1633 from Tuesday, when it jumped as high as 1.1670 for the first time since Sept. 29. Sterling was little changed at 1.3793 after touching a one-month peak of 1.3834 in the previous session.
– Gold prices pared gains on Wednesday morning, after climbing as much as 1.2% on Tuesday to $1784.85, as their safe-haven appeal took a knock from rising U.S. Treasury yields and upbeat earnings from American companies which improve investors’ risk sentiment.
Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation.
2. Buy EUR/USD at 1.1625. Stop at 1.1595 and profit target at 1.1680
3. Soft US economic data in the 3rd Quarter due to labour and supply constraints is likely to delay a US rate hike, weighing on the US dollar.
4. Price is supported by a strong support with MACD hinting of a bullish price trend.
Fundamental Comments
1. US data on Tuesday supported expectations that economic growth slowed sharply in the third quarter due to labour and supply constraints
2. A less rosy US economic outlook is likely to lead to the Federal Reserve putting off interest rate hike till 2023, weighing on the US dollar.
Technical Comments
1. Price is supported by the 20EMA as well as a resistance turned support line.
2. MACD remains bullish and is hinting of a bullish price trend ahead.
Key Levels
| Support | 1.1620 | 1.1575 | 1.1545 |
| Resistance | 1.1670 | 1.1700 | 1.1725 |
Technical Overview
USD/JPY – Price reached a low of 113.87 overnight against our expectation of a decline to 113.30. Price has since moved higher to a new high at 114.70, which is the highest since Dec 2017. MACD remains bullish while Stochastic is still rising and is not the overbought zone as yet. Both indicators are hinting there could be more upsides ahead. 20EMA remains bullish.
| Support | 114.45 | 113.95 | 113.60 |
| Resistance | 114.75 | 115.00 | 115.45 |
USD/CNH – Price reached a low of 6.3684 overnight and we are currently seeing a corrective price rally. We think this rally is likely to be capped by the 20EMA line at 6.4030. If price is capped at this price point, we could see another decline to test 6.3684 again in the next few days. Stochastic is in the oversold zone but both MACD and 20EMA are bearish and hinting of a strong bearish price trend ahead.
| Support | 6.3785 | 6..3685 | 6.3520 |
| Resistance | 6.3900 | 6.4030 | 6.4235 |
GBP/USD – Price reached a high of 1.3834, which was close to the Fibonacci 161.8% price projection target at 1.3835. Both Stochastic and MACD are warning with divergence warning, hinting of a possible price high in the making. Stochastic is also in the overbought zone. However 20EMA remains bullish and is hinting with a steep slope of a bullish price trend ahead. If price can stay above 1.3750, there is a good chance we may see 1.3910 tested in the next few days ahead.
| Support | 1.3775 | 1.3740 | 1.3700 |
| Resistance | 1.3835 | 1.3865 | 1.3910 |
XAU/USD – We had a buy call yesterday at $1771 and this was filled when price declined to a low of $1766.68. Stochastic remains bullish and is rising. Stochastic is hinting of a bullish price trend ahead. However both MACD and 20EMA are hinting of a sideways movement. Price has also broken below the trend channel again for the 2nd time. We will keep stop at $1760 and profit order at $1786. We would see how price reacts around the trend channel today and review this position tomorrow.
| Support | 1766.65 | 1757.80 | 1745.10 |
| Resistance | 1779.40 | 1790.30 | 1800.35 |
XAG/USD – Price broke above the resistance point at $23.60 overnight and reached a high of $24.12. After the high, a price correction was supported by the 20EMA line as well as the previous resistance turned support at $23.60. If price can stay above $23.50, we are likely to see another test of $24.12 again in the next 24 hours. MACD is warning with a divergence, hinting that a possible price high could be in the making. This could be the final rally before price starts to decline.
| Support | 23.50 | 23.30 | 23.00 |
| Resistance | 23.95 | 24.15 | 24.35 |