Market Talk
– The U.S. dollar hit a fresh high since March 2017 against the yen and traded close to a 16-month peak versus a basket of major peers on Wednesday, as a run of strong economic data boosted bets for earlier Federal Reserve interest-rate hikes.
– U.S. retail sales rose 1.7% in October, topping consensus expectations of a 1.4% rise, as Americans started their holiday shopping early to avoid empty shelves amid shortages of some goods as the ongoing pandemic squeezes supply chains.
– The Eurozone economy expanded at a strong 2.2% pace in the third quarter, almost fully recovering the gap from the Covid-19 induced recession, but growth is expected to slow sharply in the months ahead as the boost from the reopening fades.
– The Aussie dollar weakened to 0.7260 after wage growth data came in as economists expected on Wednesday, doing nothing to sway a dovish Reserve Bank of Australia. RBA governor Philip Lowe had on Tuesday pushed back against market pricing for a rate hike next year, saying recent data and forecasts did not warrant such a move.
– Gold prices inched higher on Wednesday but hovered around a recent low, after a jump in U.S. retail sales kept the dollar strong and close to a 16-month high. Inflationary expectations had help to cap the yellow metal loss.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.3475. Stop at 1.3505 and profit target at 1.3360
3. A strong retail sales data and expectation of an earlier than forecast rate hike is keeping the US dollar strong.
4. Price is facing a strong resistance with momentum indicators hinting at a price decline.
Fundamental Comments
1. A strong US Retail Sales data is a warning that the Fed will hike interest rate earlier than forecast.
2. Expectation of an earlier than forecast rate hike is aiding the US dollar
Technical Comments
1. Price is likely to be capped by the 20EMA as well as the Fibonacci 50% correction point.
2. Stochastic and MACD are both hinting at a likely price decline.
Key Levels
| Support | 1.3420 | 1.3355 | 1.3310 |
| Resistance | 1.3480 | 1.3540 | 1.3570 |
Technical Overview
USD/JPY – Price reached new peak at 114.96 this morning. MACD is warning with a divergence of a possible price high. Stochastic is deep in the overbought extreme. However, 20EMA is pointing higher with a steep slope, hinting at a strong bullish price trend. We think the upside could be limited to 115.00-115.25. We see a corrective decline to 114.30 before the rally can continue higher over the next few days.
| Support | 114.70 | 114.45 | 114.10 |
| Resistance | 115.00 | 115.45 | 115.95 |
EUR/USD – Price reached a low of 1.1262 in late morning and this low was accompanied with divergence warnings from both the MACD indicator as well as the Stochastic indicator. This is a sign of a likely price low and a likely reversal. However, 20EMA is pointing down with a steep slope, hinting at a strong bearish price trend. We do not think the trend is likely to reverse but we see a corrective price rally to 1.1385 to unwind the oversold condition before the downtrend resumes.
| Support | 1.1265 | 1.1235 | 1.1200 |
| Resistance | 1.1305 | 1.1340 | 1.1390 |
EUR/AUD – Price was capped by the 20EMA in its rally and currently a bearish Flag chart pattern has formed on the 4-hourly chart. We are likely to see a decline to the previous low at 1.5335 in the coming few days. Stochastic is rising after reaching the oversold zone but MACD is hinting at a bearish price trend. 20EMA is pointing lower with a steep slope, hinting at a strong bearish price trend.
| Support | 1.5500 | 1.5450 | 1.5390 |
| Resistance | 1.5550 | 1.5585 | 1.5625 |
XAU/USD – Price reached a high of $1877.02 overnight and this high was accompanied with a divergence warning from the MACD indicator. This is a warning of a possible price high. A bearish Engulfing candlestick price pattern is also hinting at a bearish price trend ahead. Stochastic is moving lower, hinting at a bearish price trend. 20EMA has turned bearish. There are strong hints of a price decline.
| Support | 1849.35 | 1832.60 | 1822.05 |
| Resistance | 1864.15 | 1877.05 | 1889.80 |
XAG/USD – We had a buy call on this pair at $25.05 yesterday, which was filled when price declined to a low of $24.76. Unfortunately, the low also triggered our stop at $24.80. We lost $0.25 on this trade. Stochastic is in the overbought zone and MACD had given a bearish divergence warning of a possible price high. However, MACD and 20EMA both remain bullish, with 20EMA hinting at a strong bullish price trend.
| Support | 24.75 | 24.50 | 24.15 |
| Resistance | 25.05 | 25.40 | 25.70 |