The US dollar strengthened, while the safe-haven yen and Swiss franc weakened, reversing some of Friday’s moves, as fears about the new coronavirus variant receded, with governments around the world seeking further information about the most recent mutation and its impact.
– Biden said on Monday that Omicron-related lockdowns were off the table for now and he urged Americans not to panic about the variant. Biden recommends vaccination and masks wearing to combat the virus and said the United States was working with pharmaceutical companies to make contingency plans if new vaccines were needed.
– U.S. Federal Reserve Chairman Jerome Powell said on Monday that he still expects inflation to recede over 2022 as supply and demand come into better balance, countering the benefit from the Omicron uncertainty for the US dollar because of its status as a safe haven.
– Activity in China’s services sector grew at a slightly slower pace in November, official data showed on Tuesday, as the sector took a hit from fresh lockdown measures as authorities raced to contain the latest outbreak. The USD/CNH pair was lower at 6.3765.
– Gold was up on Tuesday morning in Asia, with investors remaining cautious about the omicron COVID-19 variant’s impact on the global economic recovery. Powell comment that inflation is transitory also aided the yellow metal.
Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.7105. Stop at 0.7080 and profit target at 0.7220.
3. As fear of the new coronavirus variant receded and coupled with Powell’s comment that inflation is transitory could weigh on the US dollar.
4. A possible reversal chart pattern coupled with momentum indicators hinting of a possible price bottom are hinting of a price rally.
Fundamental Comments
1. As fears about the new coronavirus variant receded, investors are moving into riskier currencies instead of safe havens.
2. Powell comment that inflation is transitory could lead to a delay in US interest rate hike, weighing on the US dollar.
Technical Comments
1. Price could be forming a Double Bottom chart pattern.
2. Stochastic and MACD are both showing divergence warning of a possible price low.
Key Levels
| Support | 0.7090 | 0.7055 | 0.7020 |
| Resistance | 0.7125 | 0.7160 | 0.7195 |
Technical Overview
USD/JPY – Price could be forming a Double Bottom chart pattern, which is a hint of a possible price low in the making. However, price will need to move above 113.95 to confirm this Double Bottom chart pattern. Stochastic is also in the oversold zone but MACD remains bearish. 20EMA is also pointing lower with a steep slope, hinting of a strong bearish price trend.
| Support | 112.95 | 112.70 | 112.25 |
| Resistance | 113.30 | 113.75 | 114.20 |
EUR/USD – We had a buy call yesterday at 1.1260, which was filled when price fell to a low of 1.1257. Our view remains the same as yesterday. We would recommend bringing stop higher to cost price while keeping profit order at 1.1370. MACD remains bullish and is hinting at a bullish price trend. Stochastic is moving higher, hinting at a price rally. 20EMA is also hinting at a bullish price trend.
| Support | 1.1290 | 1.1255 | 1.1220 |
| Resistance | 1.1330 | 1.1360 | 1.1390 |
GBP/USD – Price had reached a low of 1.3278 on Friday and the low was accompanied by a divergence warning from the MACD indicator. Another attempt at the low last night was not successful as price managed to hold above Friday’s low. Stochastic is now moving higher and MACD is now close to the zero line. 20EMA is neutral at the moment. If price can move above 1.3360, it would confirm a rally to 1.3450 and a low in place.
| Support | 1.3280 | 1.3250 | 1.3205 |
| Resistance | 1.3330 | 1.3365 | 1.3410 |
XAU/USD – Price traded on Monday within Friday’s range and this is a sign of a consolidation. MACD is hinting with divergence of a possible price low and Stochastic is hinting that price could be moving higher towards Friday’s range high. 20EMA is neutral at the moment. We think price can move higher to $1815 within the next couple of days. A price movement above the 20EMA would be the first sign of a price movement to $1815.
| Support | 1781.10 | 1770.40 | 1758.65 |
| Resistance | 1796.20 | 1815.45 | 1822.15 |
USD/CAD – Price was supported by the 20EMA at 1.2725 overnight and we saw a rally this morning to test the previous high at 1.2800, which was the high on Friday. MACD is hinting with a divergence that price is unlikely to move much higher. Stochastic is also close to the overbought zone. However, 20EMA remains strongest bullish and hinting of a bullish price trend.
| Support | 1.2760 | 1.2715 | 1.2670 |
| Resistance | 1.2800 | 1.2845 | 1.2895 |