Market Talk
– The US dollar edged up in narrow-range trading on Wednesday morning as markets awaited news from upcoming central bank meetings that might spark volatility. Analysts said the US dollar might continue to hold steady pending a slew of central bank meetings and economic data that could shift views on interest rates, inflation and growth rates.
– A weakening of the yen, since the previous trading session, after the country reported slower-than-expected producer price increases on Tuesday has pushed the Japanese currency past the 114 level against the dollar, a level that it touched last week for the first time since 2016.
– Data released showed Australian core inflation rose at its fastest annual pace since 2015 in the September quarter, and quicker than the Reserve Bank of Australia’s projections. The increase sent the Aussie higher to 0.7535 after the data was released.
– The euro was little changed at 1.1601 ahead of ECB meeting tomorrow. The European Central Bank, which holds its policy meeting on Thursday, is also expected to be slow in tightening its policy, keeping the euro in check.
– Gold prices retreated further on Wednesday from a key $1,800/ounce level, as higher U.S. bond yields dented bullion’s appeal while investors assessed how central banks would address rising inflation pressures.
Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation.
2. Sell USD/JPY at 114.10. Stop at 114.45 and profit target at 113.10.
3. After touching a 5-year high and with Powell’s remark to be patient with US interest rate hike, the US dollar may have high a short term high.
4. Price could be forming an A-B-C wave correction with MACD and Stochastic supporting this bearish view.
Fundamental Comments
1. Powell’s remark that interest rate hike can wait is weighing on the US dollar.
2. After touching a 5-year high, the rally could be in need of a price correction.
Technical Comments
1. Price could be forming an A-B-C wave correction and a decline is likely.
2. Stochastic has a bearish crossover and MACD remains bearish. Both are hinting of a bearish price trend.
Key Levels
| Support | 113.90 | 113.40 | 113.00 |
| Resistance | 114.30 | 114.75 | 115.00 |
Technical Overview
XAG/USD – We had a buy call yesterday at $24.30. However, price fell to a low of $23.87 and we are out of this position with a loss of $0.31. Price has also broken below a rising trend channel and we could see a decline to $23.60. Stochastic is near to the oversold zone, hinting of a limited downside. 20EMA and MACD are both bearish and hinting of a bearish price trend ahead.
| Support | 23.85 | 23.55 | 23.15 |
| Resistance | 24.20 | 24.60 | 24.95 |
EUR/USD – Price broke below the range support at 1.1615 overnight and had declined to a low of 1.1589. We are expecting price to move lower to 1.1570, which is also the Triple Top chart pattern’s price target. Last night, a price rally was capped at 1.1625 resistance and we saw a decline to 1.1584. We are likely to see a tight range ahead of ECB meeting on Thursday.
| Support | 1.1585 | 1.1545 | 1.1515 |
| Resistance | 1.1625 | 1.1655 | 1.1690 |
GBP/USD – After reaching a high of 1.3834 on 20 October, price had declined to a low of 1.3735. We think price is likely to stay within the range of 1.3735 to 1.3835 until there is a breakout of this 100 pips range. Price was resisted at 1.3830 overnight and we are likely to see a test of the 1.3735 over the next 24 hours. MACD remains bearish. Stochastic is declining while 20EMA is neutral. Watch the range breakout for clues to the next trend direction.
| Support | 1.3755 | 1.3700 | 1.3665 |
| Resistance | 1.3790 | 1.3835 | 1.3865 |
XAU/USD – Gold continued to move within Friday’s range of $1782.25 to $1813.65 and last night price test the lower end of the range. Price managed to hold above the low and we have seen a rally, but this rally was capped by the 20EMA at $1795. MACD remains bullish but Stochastic is still declining and hinting of more price declines. 20EMA is bearish and pointing lower. However, we think price is likely to stay within Friday’s range.
| Support | 1782.05 | 1772.25 | 1760.10 |
| Resistance | 1794.90 | 1802.65 | 1813.65 |
NZD/USD – On Monday, we had a buy call at 0.7150 which was filled. Yesterday, we had recommended placing stop at 0.7120 while keeping profit order at 0.7215. Our view remains unchanged and we would recommend keeping both stop and profit orders. MACD has turned bullish and 20EMA is currently supporting price. We think price can move higher to 0.72 over the next 48 hours.
| Support | 0.7150 | 0.7120 | 0.7085 |
| Resistance | 0.7190 | 0.7220 | 0.7250 |