Market Talk
– The dollar eased back from an almost 16-month high versus major peers on Monday, as traders awaited fresh clues on the U.S. economy after bringing forward bets last week for a Federal Reserve interest rate hike on the back of red-hot inflation, casting doubts on the Fed’s stance that price pressure will be transitory.
– The main event on the U.S. economic calendar this week will be Tuesday’s retail sales data, particularly after a survey on Friday showed consumer confidence unexpectedly plunged to a decade low in early November as high inflation hit sentiment.
– The euro added 0.13% to 1.1457, but still within sight of Friday’s 16-month low of 1.1433. Later on Monday, ECB president Christine Lagarde will speak before the Committee on Economic and Monetary Affairs of the European Parliament.
– The risk-sensitive Australian dollar rose to 0.7344, supported by better-than-expected Chinese retail sales and industrial output readings on Monday. The currency climbed 0.54% on Friday as it rebounded from a more than one-month low of 0.7276 reached the same day.
-Gold was down on Monday morning in Asia, retreating from the more-than-five-month high hit during the previous session. Mounting inflationary pressure continues to be on investors’ radars which are likely to limit the downside for the yellow metal.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 113.80. Stop at 113.50 and profit target at 114.40
3. Yields and investors’ expectations that US interest rate will be hiked are both in favour of the US dollar.
4. Price is likely to be supported by a strong support point as well as a bullish MACD.
Fundamental Comments
1. Investors’ bets that red hot inflation will trigger a US rate hike are likely to keep the US dollar strong.
2. Interest rate differential and bond yields are both in the US dollar favour.
Technical Comments
1. Price is likely to be supported by the Fibonacci 38% correction point as well as the 20EMA.
2. MACD remains bullish and is turning around, hinting at a bullish price trend.
Key Levels
| Support | 113.70 | 113.30 | 112.90 |
| Resistance | 114.05 | 114.45 | 115.00 |
Technical Overview
USD/CHF – After reaching a price high at 0.9237 last Friday, price has declined to the 20EMA support at 0.9186. If price can hold above this support, we are likely to see a rally back to test last Friday’s high at 0.9237. Stochastic is still hinting at a price decline. However, MACD is bullish and is hinting at a bullish price trend. 20EMA remains bullish and we prefer to follow the 20EMA indicator instead of the stochastic indicator.
| Support | 0.9185 | 0.9155 | 0.9110 |
| Resistance | 0.9210 | 0.9240 | 0.9275 |
EUR/USD – Price reached a low of 1.1432 on Friday, which as slightly lower than Thursday’s low of 1.1435. Stochastic is turning up from the oversold extreme. MACD is rising but is still below the zero line. There is no divergence warning of a potential price low from MACD. 20EMA is bearish and hinting at a bearish price trend. Price will need to move above 1.1515 to negate the bearish price trend.
| Support | 1.1435 | 1.1400 | 1.1370 |
| Resistance | 1.1475 | 1.1515 | 1.1545 |
GBP/USD – Price reached a low of 1.3352 but this low was accompanied with a divergence warning from the MACD indicator. This is a warning of a possible price low in the making. Stochastic is rising from the oversold zone but 20EMA is capping price at 1.3435. Price will need to move above this resistance to regains its bullish impetus. Watch the resistance at 20EMA resistance at 1.3435 for clues to the next direction.
| Support | 1.3390 | 1.3350 | 1.3310 |
| Resistance | 1.3440 | 1.3480 | 1.3510 |
XAU/USD – Price reached a high at $1868.28 last Friday. Price could be forming a Double Top chart formation with last Wednesday’s high at $1868.45. A price movement below $1841.15 would confirm this Double Top chart pattern and call for a price decline to $1813. MACD is bullish but a potential divergence would be forming. 20EMA remains bullish. Stochastic is close to the overbought zone.
| Support | 1855.05 | 1841.40 | 1832.60 |
| Resistance | 1868.50 | 1878.00 | 1889.80 |
AUD/USD – We had a buy call last Friday at 0.7290 but price only reached a low of 0.7292, missing out on our entry price. We think the price rally is likely to continue towards 0.7400 in the next few days ahead. Stochastic is rising and hinting at a price rally. 20EMA has turned bullish. MACD remains bearish. However, MACD has turned around from its extreme point and is moving towards the bullish zone.
| Support | 0.7320 | 0.7285 | 0.7240 |
| Resistance | 0.7360 | 0.7395 | 0.7430 |