FX Commentary – Yuan At 5-Month High On Positive Sino-U.S. Talk

Market Talk
– The dollar eased broadly against riskier currencies and the yuan which scaled a five-month high on Tuesday, as talks between U.S. and Chinese leaders seemed to have an amicable start, while traders awaited looming U.S. retail sales data.

– U.S. retail sales data is due at 1330 GMT and follows a surprisingly weak consumer sentiment reading last week and an unexpectedly strong business conditions survey, which could provide a clue to gauge the U.S. Federal Reserve’s next move on interest rate hikes.

– The euro also scraped off a 16-month low and rose to 1.1383 as it licks wounds from a drubbing on Monday amid concerns about COVID-19 outbreaks and pushback on rate hike expectations from ECB President Christine Lagarde.

– The Aussie shrugged off more jawboning from central bank head Philip Lowe who in a speech again pushed back on market pricing for hikes as soon as 2022, arguing inflation was likely to lag well behind spikes seen elsewhere. The Aussie traded just above its 50-day moving average at 0.7368.

– Gold was up on Tuesday morning in Asia, after hitting a five-month peak during the previous session. Persistent concerns about inflation continued to give the yellow metal a boost even as the dollar strengthened.

Chart Focus Silver

Key Points

1. Buy Silver recommendation.

2. Buy Silver at $25.05. Stop at $24.80 and profit target at $25.70

3. Rising inflation and a recovery in global economy are likely to lead to higher Silver prices

4. Price is supported by a strong support with MACD hinting at a bullish price trend.

Fundamental Comments

1. Rising inflation is likely to result in higher commodity price, benefiting Silver.

2. A recovering global economy is likely to lead to a higher demand for Silver

Technical Comments

1. Price is likely to be supported by a previous resistance turned support line as well as the 20EMA.

2. MACD remains bullish and is hinting at a bullish price trend.

Key Levels


Technical Overview

USD/JPY – We had a buy call yesterday at 113.80 but our order was not filled as price only reached a low of 113.80 on the bid side. Price has reached 114.30, which was also a previous high. Price will need to move above 114.30 to regain its bullish impetus. Stochastic is moving higher and hinting at a bullish price trend. MACD is bullish. 20EMA is pointing up with a steep slope, hinting at a strong bullish price trend.


EUR/USD – Price declined to another new low overnight. Price reached a low of 1.1355 but this time, the low was accompanied with a divergence warning from the MACD indicator. Stochastic has also given a divergence warning, hinting at a possible price low. 20EMA remains bearish and is hinting at a strong bearish price trend. We think price may have reached a low and a rally to 1.1430 is likely within the next 48 hours.


GBP/USD – Price reached a high of 1.3449 overnight but could have reached a high. Stochastic has a bearish crossover and is moving lower, hinting at a bearish price trend. MACD remains bearish and is hinting at a bearish price trend. 20EMA is neutral at the moment, giving rise to the possibility of price going in either direction. If price is unable to move above 1.3450, we could see another test of 1.3352 over the next 48 hours. Above 1.3450, the next target is at 1.3515.


XAU/USD – Price created a new high overnight at $1870.35, negating the Double Top chart pattern formation. However, MACD remains bearish and is hinting at a possible price decline. Stochastic is also near to the overbought zone and is hinting at a price decline. Only 20EMA remains bullish, hinting at a bullish price trend. Above $1870, the next target is at $1900. We think the upside could be limited and would prefer to sell short above $1900.


NZD/USD – Price reached a high of 0.7080 overnight and there was also an Evening Star candlestick price pattern at the high. This is a sign of a reversal in trend. We think price is likely to decline back to last week’s low at 0.6994 again in the next few days. Stochastic has a bearish crossover and MACD remains bearish. 20EMA is also bearish and hinting at a bearish price trend.


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