Market Talk
– Central bank policy makers buffeted currency trading on Thursday as the Australian dollar held firm on growing speculation about the Reserve Bank of Australia’s tightening plans, while the yen steadied as the Bank of Japan kept policy steady as expected.
– The US dollar fell against the Canadian dollar after the Bank of Canada signalled on Wednesday it could hike interest rates as soon as April 2022 and said inflation would stay above target through much of next year, due to higher energy prices and supply bottlenecks.
– The greenback declined against the yen to 113.63, after hitting a four year high of 114.69 hit October 20, as the Bank of Japan kept monetary policy settings steady and cut its consumer inflation forecast for the year ending in March 2022 to 0% from 0.6%, reinforcing market bets it will lag other central banks in dialling back crisis-mode policies.
– The euro was little changed at 1.1606 ahead of the ECB meeting, sitting above its 15-month low of 1.1523 hit earlier this month. The ECB is expected to keep policy unchanged and likely to push back expectations for an interest rate hike in 2022, according to Reuters
– Gold was up on Thursday morning in Asia, boosted by a fall in 10-year U.S. Treasury yields to a near two-week low but strong risk appetite in equity markets kept bullion’s gains in check. Silver was steady at $24.04 per ounce
Chart Focus AUD/USD
Key Points
1. Sell AUD/USD recommendation.
2. Sell AUD/USD at 0.7510. Stop at 0.7540 and profit target at 0.7435.
3. Dovish Australian central bank and yields differential are likely to weigh on the Aussie dollar.
4. Price may have hit a high after a 4-week rally and is in need of a correction and Stochastic is hinting of a bearish price trend ahead.
Fundamental Comments
1. Dovish Reserve Bank of Australia is likely to weigh on the Aussie dollar
2. Yields differentials between the US Treasury and the Australian bond favour the US dollar.
Technical Comments
1. Price may have hit a high after a 4-week rally and is in need of a correction.
2. Stochastic is declining and hinting of a bearish price trend.
Key Levels
| Support | 0.7480 | 0.7450 | 0.7425 |
| Resistance | 0.7510 | 0.7545 | 0.7570 |
Technical Overview
USD/JPY – We had a sell call on this pair at 114.10 yesterday but price only reached a high of 114.08 and our order was not filled. Price has declined to a low of 113.49 and our view remains unchanged from yesterday. We are expecting price to decline to 113.10 over the next 48 hours. Stochastic continues to decline towards the oversold zone.20EMA is bearish but MACD is neutral at the moment.
| Support | 113.40 | 113.00 | 112.60 |
| Resistance | 113.70 | 114.10 | 114.35 |
EUR/USD – For the past 2 days, price has been capped by the resistance at 1.1625 and was supported by the low at 1.1585. We are expecting this range to continue for today, at least until the end of ECB meeting tonight. ECB monetary decision is likely to determine the direction. MACD and 20EMA remains bearish. Stochastic is rising after a bullish crossover in the oversold zone.
| Support | 1.1585 | 1.1545 | 1.1515 |
| Resistance | 1.1625 | 1.1655 | 1.1690 |
GBP/USD – Price broke below 1.3735 overnight to reach a low of 1.3709. However, this low was accompanied by divergence warning from the MACD indicator. This could be a hint that price has hit a low and a reversal could be ahead. Stochastic is near to the oversold zone and is hinting of a possible price low as well. However, 20EMA remains bearish. We would prefer to wait for confirmation of a reversal before going long.
| Support | 1.3710 | 1.3670 | 1.3630 |
| Resistance | 1.3760 | 1.3790 | 1.3835 |
XAU/USD – Gold continued to move within last Friday’s range of $1782.25 to $1813.65 and on Tuesday’s night, price test the lower end of the range. After holding above the low, we are likely to see price test the top end of the range over the next couple of days. Price has already moved higher to $1803.90 this morning and we are expecting the rally to continue towards 1813.65 in the next 24 hours. Stochastic is rising. MACD and 20EMA are both bullish.
| Support | 1799.90 | 1791.25 | 1782.25 |
| Resistance | 1813.65 | 1823.05 | 1833.80 |
USD/CNH – After hitting a low at 6.3751, we have seen price rallied to 6.3950 this morning. The high was in the form of a Shooting Star candlestick price pattern, which is a reversal signal. Price was also capped by a rising trend line. Stochastic is in the overbought zone and is turning down, hinting of a price decline ahead. MACD and 20EMA remain bullish but we think price is likely to decline and test the previous low of 6.3685 again in the next 2-3 days.
| Support | 6.3880 | 6.3685 | 6.3520 |
| Resistance | 6.3950 | 6.4235 | 6.4395 |