Market Talk
– The US dollar firmed within striking distance of the year’s peaks on the euro and yen on Wednesday, as investors looked for the Federal Reserve to begin unwinding pandemic-era policy support faster than central banks in Europe and Japan.
– The Fed will hand down its decision later in the day, where it is likely to begin paring its monthly asset purchases by $15 billion each month until ending them by mid-2022, but the timeline for interest rate hikes remains uncertain.
– The Reserve Bank of Australia abandoned its short-term yield target and dropped its expectation of holding rates at record lows until 2024 after its policy decision yesterday. The Aussie dollar fell because the central bank also pushed back on investors’ expectation of aggressive pricing for 2022 hikes.
– Moves were slight in Asia ahead of the Fed’s meeting later in the day. The dollar bought 113.94 yen, against a 2021 peak of 114.69, and traded at 1.1578 per euro. Sterling traded near a two-week low at 1.3610 ahead of Bank of England monetary policy meeting tomorrow.
– Gold was down on Wednesday morning in Asia, as the US dollar gained ground ahead of a much-awaited U.S. Federal Reserve meeting that could provide a timeline on interest rate hikes amid rising inflationary pressures.
Chart Focus Gold
Key Points
1. Sell Gold recommendation.
2. Sell Gold at $1786. Stop at $1797 and profit target at $1762.
3. Tapering and expectation of a rate hike in mid-2022 is likely to lead to a stronger US dollar.
4. Price was capped by the Fibonacci 62% correction point with both MACD and Stochastic hinting of a bearish price trend.
Fundamental Comments
1. Tapering is likely to lead to an increase in bond yields which is likely to support the US dollar.
2. Expectation of a hike in mid-2022 is likely to lead to a stronger US dollar.
Technical Comments
1. Price was unable to move past the Fibonacci 62% correction point of the previous decline, which is a hint of a bearish price trend ahead.
2. Stochastic and MACD are both hinting of a bearish price trend ahead.
Key Levels
| Support | 1771.95 | 1760.10 | 1749.95 |
| Resistance | 1786.50 | 1795.60 | 1810.30 |
Technical Overview
USD/JPY – We were looking for a move down to 113.25 in the previous day but this view could be wrong. MACD has turned bullish and Stochastic has a bullish crossover near to the oversold zone. Both indicators are hinting of a possible price rally ahead. 20EMA is neutral and flat at the moment. If price can stay above 113.50, we could be heading back to test the high of 114.70 over the next few days ahead.
| Support | 113.50 | 113.25 | 112.95 |
| Resistance | 114.00 | 114.35 | 114.70 |
EUR/USD – We had a sell call at 1.1615 but this was not filled as price only reached a high of 1.1613 overnight. However, our view remains unchanged. We are looking for a price decline to 1.1505 over the next few days.20EMA and MACD are both hinting of a bearish price trend ahead. Stochastic is in the middle of its range but looks weak and could be turning down. Only a move above 1.1650 would negate our bearish view.
| Support | 1.1545 | 1.1505 | 1.1455 |
| Resistance | 1.1595 | 1.1625 | 1.1650 |
GBP/USD – Last night, price reached a low of 1.3605 and this low was accompanied by a divergence warning from MACD. This is sign of a possible price low in the making. Stochastic is also in the oversold zone and is hinting of a limited downside ahead. There is still a possibility of price moving lower to 1.3570 but if price can stay above 1.3605, we could see a price rally back to 1.3710 in the next couple of days.
| Support | 1.3605 | 1.3570 | 1.3540 |
| Resistance | 1.3640 | 1.3675 | 1.3710 |
EUR/AUD – Price reached a high of 1.5600 overnight and this could be a temporary high. 20EMA is hinting of a bullish price trend but Stochastic and MACD are both hinting of a high in place and a correction to the 20EMA support line at 1.5510. As the trend is bullish, we think this pullback could be a good opportunity to get into the long trade for another test of 1.5600 again in the next couple of days. A move below 1.5465 would confirm that top in place at 1.5600 and a downtrend has started for 1.5340.
| Support | 1.5550 | 1.5515 | 1.5465 |
| Resistance | 1.5600 | 1.5650 | 1.5690 |
AUD/USD – Price broke the neckline of a Double Top chart pattern yesterday at 0.7452. Price has declined to a low of 0.7419 overnight and we believe the decline is likely to continue to the Double Top’s price target at 0.7320 in the next few days. Stochastic is in the oversold zone and MACD is near to its extreme. However, 20EMA is hinting of a strong bearish price trend ahead. Above 0.7490 would negate our bearish view.
| Support | 0.7420 | 0.7375 | 0.7330 |
| Resistance | 0.7450 | 0.7485 | 0.7525 |