Market Talk
– The dollar was set to post a second week of chunky gains against the euro on Friday as traders wager on interest rates rising faster and further on the North Atlantic’s western shore, while sterling and the kiwi firmed with rate hike bets.
– Investors are expecting Fed to hike interest rate as inflation continues to rise and the economic recovery from COVID-19 continues. However, in Europe, COVID-19 is surging again and central bankers are vowing to hold rates low.
– Sterling has been the stellar performer besides the dollar among G10 currencies and has gained about 0.7% to 1.3499 as a surge in inflation to a 10-year high has firmed bets on the Bank of England hiking rates in a month.
– The kiwi also leapt 0.7% overnight and is steady for the week as traders start to wager on the RBNZ turning extra hawkish and lifting rates by 50 basis points next week, or perhaps lifting its long-term rates trajectory.
Gold was up on Friday morning in Asia, but was set for its first weekly decline in three as central banks are expected to hike interest rates quicker than expected to curb rising inflation. A hike in interest rate will weigh on gold as it increases the yellow metal’s holding cost.
Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation.
2. Sell EUR/USD at 1.1360. Stop at 1.1390 and profit target at 1.1265
3. Bets that interest rate will rise faster and further in the US than Europe and yields are both against the Euro dollar.
4. Price is likely to cap by a strong resistance point with MACD hinting at a bearish price trend.
Fundamental Comments
1. As traders wager on interest rates rising faster and further in the U.S. compared to Europe, the Euro is likely to be weighed down by this bet.
2. Bond yields is in favour of the US dollar and against the Euro dollar
Technical Comments
1. Price is likely to be capped by the 20EMA as well as a former resistance high.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1.1335 | 1.1295 | 1.1260 |
| Resistance | 1.1385 | 1.1430 | 1.1480 |
Technical Overview
USD/JPY – Our view remains the same as yesterday. We think the price correction could be over and we are likely to see another attempt to the previous high at 114.96 in the next couple of days. MACD and 20EMA are neutral at the moment. Stochastic is rising and hinting at a bullish price trend. However a move below 113.85 would negate our bullish view.
| Support | 114.15 | 113.85 | 113.50 |
| Resistance | 114.45 | 114.75 | 115.00 |
EUR/AUD – We had a sell call on this pair at 1.5570 yesterday but price rose to a high of 1.5647 which also triggered our stop loss. We are out with a loss of 45 pips. Our view remains unchanged. We see a decline from the overnight high to 1.5450 again in the coming few days. Stochastic is declining from the overbought zone. MACD remains neutral but 20EMA is bullish.
| Support | 1.5570 | 1.5540 | 1.5500 |
| Resistance | 1.5605 | 1.5640 | 1.5695 |
GBP/USD – We had a sell call on Wednesday at 1.3475 which was filled when price reached a high of 1.3503. Yesterday, price moved above our stop at 1.3505 and we are out of this position with a loss of 30 pips. Stochastic is in the overbought zone but both MACD and 20EMA remains bullish and hinting at a bullish price trend. However, as long as the Fibonacci 62% resistance point at 1.3515 is not taken out, the bearish trend remains in place.
| Support | 1.3465 | 1.3420 | 1.3395 |
| Resistance | 1.3515 | 1.3560 | 1.3605 |
XAU/USD – Price has been moving within Tuesday’s range of $1877.10 to $1849.40. Price is likely to stay within this range until we can see a breakout of this range. MACD and 20EMA are currently neutral and hinting at a sideways movement. Stochastic is also neutral and in the middle of its range. We would prefer to watch and follow in the direction of the breakout of this range.
| Support | 1856.65 | 1849.60 | 1832.60 |
| Resistance | 1870.80 | 1877.05 | 1889.80 |
USD/CHF – After reaching a high of 0.9329, a price correction has reached a low of 0.9249. The decline was also supported by the 20EMA as well as a previous resistance turned support line. 20EMA is neutral but MACD remains bullish and is hinting at a bullish price trend. Stochastic continues to decline but is near to the oversold zone. If price is supported above 0.9235, we are likely to see another test of the high at 0.9329 in the next few days.
| Support | 0.9235 | 0.9185 | 0.9155 |
| Resistance | 0.9270 | 0.9300 | 0.9330 |