Market Talk
– The U.S. dollar dipped on Monday after hitting 15-month highs on Friday following strong U.S. jobs data, as investors digested the report and the Federal Reserve’s plans to start reducing its bond purchases this month.
– The Fed had stuck to its view in last week FOMC meeting that current high inflation is expected to be transitory and said it would start trimming its massive bond-buying program this month, but wait for more job growth before raising interest rates.
– The Australian dollar, which is seen as a proxy for risk appetite, was up 0.26% on the day. The New Zealand dollar was 0.76% higher after Prime Minister Jacinda Arden announced that lockdown measures will likely be phased out by the end of the month.
– The euro was a touch higher at 1.1571. Euro zone inflation will ease next year and remains too weak in the medium term, European Central Bank chief economist Philip Lane told a Spanish newspaper, repeating the bank’s long-standing message that high price growth is temporary.
– Gold rose bolstered by a retreat in the dollar and persistent inflation concerns after key central banks indicated interest rates would remain low in the near term. Major central banks are still overall accommodative, and all the cash in the system looking for a home is moving more into the gold and silver market as an inflation hedge, said Jim Wyckoff, senior analyst at Kitco Metals.
Chart Focus AUD/USD
Key Points
1. Trading Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.7405. Stop at 0.7375 and profit target at 0.7475
3. A delay in US rate hike and an improvement in risk sentiment is weighing on the U.S. dollar.
4. A possible Engulfing candlestick pattern and a bullish MACD are both hinting of a possible price rally.
Fundamental Comments
1. Fed’s decision to delay hiking US interest rate is likely to weigh on the USD dollar.
2. An improvement in risk sentiment is aiding the risker Aussie dollar against the safe-haven U.S. dollar.
Technical Comments
1. A possible bullish Engulfing candlestick price pattern is a hint of a possible price rally.
2. A divergence warning given by the MACD indicator is a hint of a possible price low.
Key Levels
| Support | 0.7400 | 0.7355 | 0.7305 |
| Resistance | 0.7435 | 0.7470 | 0.7500 |
Technical Overview
USD/JPY – Price broke below the previous low support at 113.25 and declined to a low of 112.79 at the point of this writing. We are expecting this decline to continue lower to 112.10 in the next few days ahead. 20EMA is hinting of a strong bearish price trend. MACD is bearish as well. However, Stochastic is deep into the oversold zone. A move above 113.65 would negate our bearish view.
| Support | 112.65 | 112.05 | 111.80 |
| Resistance | 113.10 | 113.55 | 114.00 |
EUR/USD – Our view remains the same as yesterday. We think price may have hit a bottom at 1.1512 and we are likely to see a rally that could bring price to 1.1615. Price is currently just below the 1.16 handle and a break of 1.1615 is likely to send price higher to 1.1690 over the next few days. Stochastic, 20EMA and MACD are all hinting of a bullish price trend ahead.
| Support | 1.1575 | 1.1545 | 1.1510 |
| Resistance | 1.1615 | 1.1655 | 1.1690 |
GBP/USD – Price moved above 1.3550 overnight and this may be a hint that 1.3423 could be the low. We are likely to see a rally to 1.3700 over the next few days if price can stay above 1.3550. A move below 1.3550 is likely to send price back to 1.3423 again. Stochastic is rising and hinting of a price rally. 20EMA has turned bullish but MACD remains bearish at the moment.
| Support | 1.3555 | 1.3510 | 1.3470 |
| Resistance | 1.3605 | 1.3655 | 1.3695 |
XAU/USD – Price broke above the $1813 high and looks likely to continue its rally towards $1834 in the next few days ahead. We may see a price correction to $1810, but this is likely to be a buying opportunity. 20EMA and MACD are both hinting of a strong bullish price trend but Stochastic is deep into the overbought zone. A move below $1803 would negate our bullish view.
| Support | 1812.35 | 1799.05 | 1789.80 |
| Resistance | 1826.95 | 1833.95 | 1845.60 |
NZD/USD – We had a buy call on this pair yesterday at 0.7105 but price only reached a low of 0.7124. Price has rallied to a high of 0.7176 overnight. A price correction has sent price lower to 0.7146 but we think this is a buying opportunity. We see price going higher over the next 48 hours to 0.7180. MACD and 20EMA remains bullish but Stochastic is near to the overbought zone.
| Support | 0.7145 | 0.7115 | 0.7070 |
| Resistance | 0.7180 | 0.7205 | 0.7230 |