Market Talk
– The US dollar dipped, as risk sentiment improved and as investors focused on rising commodity prices at a time when global central banks are likely to raise rates sooner than expected to quell rising price pressures.
– Two U.S. Federal Reserve officials said on Wednesday, while asset tapering should begin soon, it was too soon to hike interest rates. Fed Governor Randal Quarles said he favours an initial move to begin asset tapering in November 2021, but added that mounting inflationary pressures that could require a policy response were also a concern.
– Sterling was also riding high on firming perceptions the Bank of England will raise interest rates as soon as next month to curb inflation, despite softer-than-expected UK price data on Wednesday. The British pound stood at 1.3828, just shy of its Tuesday peak of 1.3834, its highest level in over a month.
– The Canadian dollar rose to 1.2295 per U.S. dollar, hitting a high last seen in late June, thanks to higher-than-expected Canadian inflation data and rising crude oil prices. Oil prices have been supported by strong demand as countries started to reopen their economies.
– Gold was up on Thursday morning in Asia; extending small gains into a third session thanks to a weakening US dollar and worries over rising inflation and supply chain issues boosted the safe-haven metal’s appeal. Also boosting gold, U.S. benchmark 10-year Treasury yields pulled back after hitting a five-month peak earlier in the session.
Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation.
2. Sell USD/JPY at 113.95. Stop at 114.30 and profit target at 113.05.
3. A decline in Treasury yields and worries that interest rates hike will be pushed back are both weighing on the US dollar.
4. Price has a Double Top chart pattern and MACD is also hinting of a price high. Price could have reached a high and a reversal in trend is likely.
Fundamental Comments
1. Pullback in 10-year Treasury yield is likely to lead to a stronger yen.
2. Worries that US interest rate hike will only occur in 2023 is weighing on the US dollar.
Technical Comments
1. Price has a Double Top chart pattern and a move below 113.93 would be a confirmation of a price high.
2. MACD has a divergence warning of a possible price high.
Key Levels
| Support | 113.90 | 113.60 | 113.30 |
| Resistance | 114.35 | 114.75 | 115.00 |
Technical Overview
USD/CNH – Price had reached a low of 6.3684 on Tuesday 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 rising from 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 | 6.4000 | 6.4235 | 6.4395 |
EUR/USD – Yesterday, we had a buy order at 1.1625, which was filled when price declined to a low of 1.1616. For today, we would recommend bring stop higher to cost at 1.1625 while keeping profit target at 1.1680. MACD and 20EMA are both supportive of our bullish view. Stochastic is already in the overbought zone but we think that with the strong trend, preference should be given to the trending indicator.
| Support | 1.1645 | 1.1615 | 1.1575 |
| Resistance | 1.1670 | 1.1700 | 1.1725 |
GBP/USD – Price reached 1.3833 again for a second time last night. In the process, price may be forming a Double Top chart pattern. If price is unable to move past 1.3835, we are likely to see a price decline lower to 1.3710. A move above 1.3835 will likely see price test 1.3910. Stochastic is already in the overbought zone but both MACD and 20EMA remain bullish and are hinting of a bullish price trend ahead.
| Support | 1.3785 | 1.3740 | 1.3700 |
| Resistance | 1.3835 | 1.3865 | 1.3910 |
XAU/USD – We had a buy call on Wednesday which was filled. Yesterday, we had kept stop at $1760 and profit target at $1786. Price reached a high of $1789 overnight and we are out of this position with a $15 profit. Stochastic is moving into the overbought zone but 20EMA remains bullish. 20EMA and MACD are both indicating a bullish price trend ahead. The next resistance lies at $1800.
| Support | 1779.40 | 1766.65 | 1757.80 |
| Resistance | 1789.15 | 1800.35 | 1808.55 |
XAG/USD – Price managed to stay above the previous resistance turned support point at $23.60 and we have seen a price rally that brought price to $24.47 this morning. While there are no signs of divergences, we think price may have reached a temporary high and a correction back to $23.60 is likely in the next couple of days ahead as Stochastic is in the overbought zone. Stochastic is hinting that the market is overbought after a 3-day rally.
| Support | 24.15 | 23.80 | 23.50 |
| Resistance | 24.50 | 24.65 | 24.90 |