Market Talk
– The dollar hit 2021 highs against the Euro and the British pound on Thursday, while the yen was smarting from its sharpest drubbing in a month, after the hottest U.S. inflation reading in a generation fanned bets on a U.S. rate hikes.
– Data on Wednesday showed U.S. consumer prices grew at their fastest annual pace since 1990 last month and traders think the Fed could respond by lifting interest rates faster than peers in Europe and Japan. The inflation data suggests that inflation could remain high well into 2022, as bottlenecks persist in supply chains.
– The euro dropped sharply, as the European Central Bank is seen lagging on policy tightening, and it slipped further to 1.1465 on Thursday, its lowest since July 2020. It is without major chart support until around $1.12. Sterling hit an 11-month low at 1.3392.
– The Australian dollar slid to its lowest in more than a month on Thursday after a surprisingly soft set of local jobs numbers added to the pain already delivered by a high reading on U.S. inflation.
– Gold prices eased on Thursday after rallying to a five-month high in the previous session, as investors reassessed how the U.S. Federal Reserve would respond to a surge in consumer prices recorded their biggest annual gain in 31 years last month.
Chart Focus AUD/JPY
Key Points
1. Sell AUD/JPY recommendation.
2. Sell AUD/JPY at 83.40. Stop at 83.80 and profit target at 82.55.
3. Soft Aussie job data and an increase in risk sentiment are weighing on the Aussie dollar.
4. Price is capped by a strong resistance zone and MACD is hinting of a bearish price trend.
Fundamental Comments
1. The Aussie dollar is weighed down by a soft job data.
2. A sharp decline in the equity market has increased risk which favours the safe haven JPY.
Technical Comments
1. Price is likely to be capped by the 20EMA as well as the Fibonacci 38% correction point.
2. MACD remains bearish and is hinting of a bearish price trend.
Key Levels
| Support | 82.95 | 82.50 | 82.05 |
| Resistance | 83.40 | 83.95 | 84.30 |
Technical Overview
USD/JPY – Our bearish view was negated when price moved above 113.30 overnight. Price has reached a high of 114.15 at the point of this writing and we are expecting the rally to continue higher to 114.70 in the next 48 hours. Stochastic continues to rise while MACD has turned bullish. 20EMA is bullish and hinting of a bullish price trend. Only a break of 113.10 would negate our bullish view.
| Support | 113.90 | 113.55 | 113.10 |
| Resistance | 114.30 | 114.70 | 115.00 |
EUR/USD – We had a sell call yesterday at 1.1585 but unfortunately, price only reached a high of 1.1582, missing our sell entry price. Price has since declined to a low of 1.1464. We think the downtrend is likely to continue. Resistance at 1.1505 should cap the rally and another decline to 1.1400 is likely in the next couple of days. MACD and 20EMA are bearish. Stochastic is near to the oversold zone.
| Support | 1.1450 | 1.1405 | 1.1370 |
| Resistance | 1.1480 | 1.1510 | 1.1545 |
GBP/USD – Price reached a low of 1.3392 overnight but this low was accompanied by a divergence warning from the MACD indicator, which is warning of a possible price low in the making. Stochastic is also near to the oversold zone and hinting of a limited downside. However, 20EMA is hinting of a strong bearish price trend. We are bearish but favour a pullback towards 1.3500 to get into the short trade. A price move above 1.3540 would hint of a possible price low at 1.3392 and negate our bearish view.
| Support | 1.3390 | 1.3345 | 1.3300 |
| Resistance | 1.3425 | 1.3460 | 1.3505 |
XAU/USD – Price reached a high of $1868.45 overnight, which was a 5-month high, on inflation fear. While 20EMA is hinting of a strong bullish price trend, MACD is warning with a divergence of a possible price high in the making. Stochastic is near to the overbought zone but Stochastic is hinting that price can continue to move higher. We are expecting this rally to continue to the Fibonacci 161.8% price projection target at $1878.
| Support | 1848.80 | 1832.60 | 1822.30 |
| Resistance | 1868.45 | 1878.00 | 1889.80 |
NZD/USD – Price test the Fibonacci 50% correction point of the rally from 0.6856 to 0.7218. If price is unable to hold above the Fibonacci 50% support at 0.7035, we are likely to see a test to the Fibonacci 62% correction point at 0.6995. Stochastic is inside the oversold zone. However, both MACD and 20EMA are bearish and hinting of a bearish price trend. We favour another decline.
| Support | 0.7035 | 0.6995 | 0.6960 |
| Resistance | 0.7080 | 0.7120 | 0.7175 |