Market Talk
– The US dollar pared losses on Monday morning after its steepest weekly loss in more than a month after Federal Reserve Chairman Jerome Powell said the U.S. central bank should begin reducing its asset purchases soon, but not yet time to begin raising interest rates.
– Powell’s remarks came as investors have priced in Fed rate hikes starting in the second half of next year and yet have begun to trim long dollar positions in anticipation that other central banks could get moving even sooner.
– Sterling was up at 1.3772, with markets now eyeing a near 60% chance of a Bank of England hike next week. The dollar was firm at 1.1643 per euro while the greenback found a footing on the yen at 113.54 after Friday’s slide.
– The Australian and New Zealand dollars held below the multi-month peaks they had scaled in the previous week as traders scrambled to price in higher rates with inflation running hot. This week, Australian inflation data due on Wednesday is likely to set the tone for the next stage in a tussle between traders and a resolutely dovish central bank.
– Gold had rallied to its highest since early September 2021 on Friday, before giving up some gains on Powell’s comments on asset tapering. Inflation could persist for longer, and the Fed could begin asset tapering soon but remain patient on interest rate hikes as employment was still low, he said at a discussion panel on Friday.
Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation.
2. Buy NZD/USD at 0.7150. Stop at 0.7120 and profit target at 0.7215
3. Powell’s remark to be patient with interest rate hike could weigh on the US dollar with RBNZ expected to hike rate before the Fed.
4. Price is supported by the 20EMA with both MACD and Stochastic hinting of a bullish price trend ahead.
Fundamental Comments
1. Powell’s remark that interest rate hike may have to wait is weighing on the US dollar.
2. With inflation running high, expectation is high that RBNZ will hike interest rate before its US counterpart.
Technical Comments
1. Price is supported by the 20EMA which is also hinting of a bullish price trend.
2. Both Stochastic and MACD are turning around and hinting of a bullish price trend ahead.
Key Levels
| Support | 0.7150 | 0.7125 | 0.7085 |
| Resistance | 0.7185 | 0.7220 | 0.7265 |
Technical Overview
USD/JPY – Last Thursday, we had a sell call at 113.95 which was filled. On Friday, we had place stop at 114.30 and profit order at 113.05. For today, we would recommend bringing stop down to cost at 113.95 while keeping profit order at 113.05. Both MACD and 20EMA are bearish and hinting of a bearish price trend. However, Stochastic is near to the oversold zone and could be turning up. This could bring a price correction past 114.00 or hint of a reversal.
| Support | 113.40 | 113.00 | 112.65 |
| Resistance | 113.90 | 114.30 | 114.75 |
EUR/USD – Price has been caught in a range of 1.1670 to 1.1615 for the past 4 days. Stochastic is near to the middle of its range while MACD is close to the zero line and is flat. MACD is hinting of a sideways movement. 20EMA is also in the middle of this price range. 20EMA is also hinting of a sideways correction. A breakout of this range will provide the clue to the next direction of this pair. Follow in the direction of the breakout.
| Support | 1.1615 | 1.1575 | 1.1540 |
| Resistance | 1.1650 | 1.1670 | 1.1700 |
GBP/USD – After reaching a high of 1.3834 on 20 October, price had declined to a low of 1.3735. This morning price is starting to move off this low after another test of the low. However, the rally was capped by the 20EMA and we could see another test of the low at 1.3735 if price is capped by the 20EMA. Stochastic is also moving lower, hinting of a bearish price trend. MACD is also hinting of a bearish price trend. A break of 1.3735 would lead to a decline to 1.3665.
| Support | 1.3735 | 1.3700 | 1.3665 |
| Resistance | 1.3785 | 1.3835 | 1.3865 |
XAU/USD – Price moved higher to $1813.35 on Friday, which was higher than our expectation at $1800. The high was accompanied by divergence warning from both the MACD as well as the Stochastic indicator. However, 20EMA remains bullish and is hinting of a bullish price trend. We are expecting price to move lower to $1786 in the next 48 hours. Above $1813 will call for a price move to $1833.
| Support | 1791.25 | 1779.40 | 1766.65 |
| Resistance | 1800.85 | 1813.65 | 1823.05 |
USD/CNH – We had a sell call on Friday at 6.3950 but our entry was not filled as price only reached a high of 6.3920. Price had declined on Friday and has reached a low of 6.3760 at the time of this writing. MACD and 20EMA are both declining and hinting of a bearish price trend ahead. However, Stochastic is near to the oversold zone. We remain bearish for 6.3690 over the next couple of days ahead.
| Support | 6.3685 | 6.3520 | 6.3300 |
| Resistance | 6.3790 | 6.4010 | 6.4235 |