Market Talk
– The U.S. dollar was up on Friday morning in Asia, and was set for its best week in five months. Investors continue to bet that higher-than-expected inflation will prompt central banks to hike interest rates quicker than expected.
– While the inflation data suggested that the current wave of price spikes due to chronic worldwide supply constraints could have more staying power than many had hoped, many investors still think inflationary pressure will eventually ease, rather than strengthen.
– The euro slipped to 1.1449, near its lowest since July last year. The yen softened to 114.26 per dollar, near its four-year low hit last month while sterling dipped to 1.3356, its weakest level this year.
– Commodity currencies such as the Australian dollar and the Canadian dollar were also on the back foot. The Australian dollar hit a five-week low of 0.7286 while the Canadian dollar slipped to 1.2588 per dollar, a low last seen in early October.
– Gold was down on Friday morning in Asia, but was set for its biggest weekly gain in six months as continuing concerns about high inflation in the U.S. capped some losses for the yellow metal as investors sought inflation hedges.
Chart Focus AUD/USD
Key Points
1. Trading Buy AUD/USD recommendation
2. Buy AUD/USD at 0.7290. Stop at 0.7260 and profit target at 0.7360
3. Investors’ expectation that inflation pressure will eventually ease and interest rate differential are in the Aussie dollar favour.
4. A bullish Engulfing candlestick price pattern and bullish momentum indicators are hinting of a price rally.
Fundamental Comments
1. Investors’ expectation that inflationary pressure will eventually ease, rather than strengthen is likely to weaken the US dollar.
2. Interest rate differential is in the Aussie dollar favour.
Technical Comments
1. A bullish Engulfing candlestick price pattern is hinting of a possible price low and a reversal.
2. Stochastic is oversold and MACD is turning up after hitting an extreme low. Both are hinting of a price rally.
Key Levels
| Support | 0.7270 | 0.7240 | 0.7215 |
| Resistance | 0.7310 | 0.7360 | 0.7395 |
Technical Overview
USD/JPY – The rally continues and price reached a high of 114.30 overnight. We are expecting this rally to continue higher to 114.70 in the next 48 hours. Stochastic continues to rise but is in the overbought zone. MACD remains bullish. 20EMA is bullish and hinting of a strong bullish price trend. Only a break of 113.70 would negate our bullish view and call for a return to 112.70.
| Support | 113.90 | 113.55 | 113.10 |
| Resistance | 114.30 | 114.70 | 115.00 |
EUR/USD – The decline continues to a low of 1.1435 and looks likely to continue as both Stochastic and MACD has not given any divergence warnings of a possible price low. Stochastic is currently in the oversold zone. MACD is turning up from its extreme low. Both indicators are hinting of a price correction higher but 20EMA is hinting of a strong bearish price trend.
| Support | 1.1435 | 1.1400 | 1.1370 |
| Resistance | 1.1470 | 1.1510 | 1.1545 |
GBP/USD – Price reached a low of 1.3352 overnight but this low was with a divergence warning from the MACD indicator. This is a warning of a possible price low in the making. Stochastic is also in the oversold zone and is hinting of a limited downside. However, 20EMA is hinting of a strong bearish price trend. Price will need to move above 1.3450 to confirm the 1.3352 low.
| Support | 1.3350 | 1.3310 | 1.3280 |
| Resistance | 1.3390 | 1.3430 | 1.3460 |
XAU/USD – Price reached a high of $1865.75 overnight and was unable to move above Wednesday’s high of $1868.45 which was a 5-month high. While 20EMA is hinting of a strong bullish price trend, MACD is warning with a divergence. Stochastic is deep in the overbought zone We are expecting this rally to continue to the Fibonacci 161.8% price projection target at $1878 in the next 48 hours to complete the rally.
| Support | 1848.80 | 1832.60 | 1822.30 |
| Resistance | 1868.45 | 1878.00 | 1889.80 |
AUD/JPY – We had a sell call yesterday at 83.40 but price only reached a high of 83.30, missing out our entry price. Price was also unable to move below the previous low and this could be a sign of a possible low forming. Stochastic and MACD are both hinting of a price rally ahead. Stochastic and MACD have also given divergence warning of a possible price low in the making. However, 20EMA is hinting of a of a bearish price trend.
| Support | 82.95 | 82.50 | 82.05 |
| Resistance | 83.40 | 83.95 | 84.30 |