Market Talk
– The dollar was up on Wednesday morning in Asia, paused after a surge following Jerome Powell’s re-appointment as U.S. Federal Reserve Chairman. The New Zealand dollar eased following a smaller than expected interest rate hike by the Reserve Bank of New Zealand this morning.
– Data on Tuesday showed U.S. business activity slowed moderately in November amid labour shortages and raw material delays, contributing to prices continuing to soar halfway through the fourth quarter. The U.S. will release minutes from the last FOMC meeting, initial jobless claims and GDP data ahead of Thanksgiving holiday tomorrow.
– The Reserve Bank of New Zealand hiked interest rates to 0.75% as it handed down its policy decision this morning. The RBNZ move, a bid to curb inflationary pressures, was smaller than expected. The kiwi dollar fell as to a low of 0.6905.
– The euro bounced off 16-month lows, helped by better-than-expected business growth in the Eurozone region. The euro gained 0.16% against the dollar to 1.1251, after earlier hitting a 16-month low of 1.1226.
– Gold prices fell to a low of $1781.85 overnight but recovered to $1796 this morning as the re-nomination of U.S. Federal Reserve Chair Jerome Powell fuelled bets of faster interest rate hikes, bolstering the U.S. dollar and Treasury yields but hurting the yellow metal
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2670. Stop at 1.2635 and profit target at 1.2745.
3. Bets of faster US interest rate hike and recent decline in crude oil price are both likely to depress the Canadian dollar.
4. Price is supported by the 20EMA. 20EMA and MACD are hinting at a bullish price trend.
Fundamental Comments
1. The re-nomination of U.S. Federal Reserve Chair Jerome Powell fuelled bets of faster interest rate hikes which is aiding the US dollar.
2. The recent decline in crude oil price is likely to weigh on the Canadian dollar
Technical Comments
1. Price is supported by the 20EMA which is hinting at a bullish price trend ahead.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 1.2660 | 1.2625 | 1.2580 |
| Resistance | 1.2695 | 1.2740 | 1.2770 |
Technical Overview
USD/JPY – Price made a new high this morning at 115.23 but Stochastic is now in the overbought zone and is hinting at a limited upside. MACD is also near to its extreme although there are no divergence warnings at the moment. 20EMA remains bullish and hinting at a bullish price trend. If price can stay supported above 114.70, our view remains unchanged for a rally to 115.70.
| Support | 114.95 | 114.50 | 114.15 |
| Resistance | 115.25 | 115.50 | 115.80 |
EUR/USD – Despite the divergence warning from the MACD indicator and Stochastic in the oversold zone, price continues languish near a 16-month low. A better than expected Eurozone PMI had lifted price. However the rally was halted by the 20EMA line. Price will need to move above 1.1285 to negate this bearish price trend. We would prefer to wait for clearer trading direction.
| Support | 1.1225 | 1.1170 | 1.1140 |
| Resistance | 1.1250 | 1.1285 | 1.1320 |
GBP/USD – We had a sell call yesterday at 1.3405, which was filled when price reached a high of 1.3408. Price has declined to an overnight low of 1.3341 but has recovered to 1.3380 this morning. We remain bearish on this pair. We would recommend lowering stop to 1.3415 while keeping profit target at 1.3300. Stochastic is rising after hitting the oversold extreme but both MACD and 20EMA remains bearish.
| Support | 1.3370 | 1.3340 | 1.3300 |
| Resistance | 1.3410 | 1.3455 | 1.3485 |
XAU/USD – Price broke below the Fibonacci 62% correction point and yesterday’s low at $1802 to a new low at $1781.87. A Hammer candlestick price pattern on the 4-hourly chart is warning of a possible price low and reversal. Stochastic is in the oversold extreme and MACD is also turning up from its extreme point. We may see a corrective rally to the $1800 barrier in the next 1-2 days to unwind the oversold condition.
| Support | 1789.10 | 1781.85 | 1770.40 |
| Resistance | 1802.05 | 1811.85 | 1822.15 |
NZD/USD – RBNZ hiked rates to 0.75% this morning but the hike was smaller than expected. This had led to the Kiwi dropping below 0.6900. The low today at 0.6895 was accompanied by a divergence warning from the MACD indicator. Stochastic is in the oversold zone but 20EMA is hinting at a strong bearish price trend. Price will need to move above 0.6960 to negate this bearish trend.
| Support | 0.6895 | 0.6855 | 0.6805 |
| Resistance | 0.6930 | 0.6960 | 0.6990 |