Market Talk
– The U.S. dollar was down on Thursday morning in Asia while the yen, a fellow safe-haven asset, remained near a seven-week high, impacted by concerns over the new omicron COVID-19 variant and its rapid global spread.
– On Wednesday, in his second day of testimony to Congress, Powell said the U.S. Federal Reserve must prepare for the possibility that inflation may not recede in the second half of 2022 as most forecasters currently expect.
– Sterling, often considered a risk-on currency, was little changed at 1.3276. It had plunged to a near one-year low of 1.3194 on Tuesday. The British pound is struggling to recover on fears over vaccine effectiveness against the Omicron variant.
– The euro was steady at 1.1316, continuing its recovery after dipping to a near 17-month low of 1.1186 last month. Against the yen, the greenback remained closed to Tuesday’s low of 112.53 against the yen, a level not seen since Oct. 11.
-Gold was down on Thursday morning in Asia, but has climbed up from a three-week low. Investors are mulling how central banks are likely to respond to surging inflation amid concerns over the impact of the Omicron coronavirus variant.
Chart Focus GBP/JPY
Key Points
1. Sell GBP/JPY recommendation.
2. Sell GBP/JPY at 150.25. Stop at 150.55 and profit target at 149.50
3. Fears over vaccine effectiveness against the Omicron variant and reduction in risk appetite are both likely to aid the safe haven yen.
4. Price is capped by a strong resistance zone with MACD hinting of a bearish price trend.
Fundamental Comments
1. Worries that UK vaccination will not be effective against the Omicron variant is weighing on the pound.
2. The rapid global spread of the Omicron variant is reducing risk appetite and aid the safe haven yen.
Technical Comments
1. Price is capped by the Fibonacci 50% correction point as well as the 20EMA.
2. MACD is bearish and is hinting at a bearish price trend.
Key Levels
| Support | 150.15 | 149.85 | 149.45 |
| Resistance | 150.45 | 150.75 | 151.15 |
Technical Overview
USD/JPY – We think price may have hit a low on Tuesday at 112.52 and a rebound to 114.00 is likely within the next few days. Last night, we saw a low at 112.66, which is a confirmation of our view that the low on Tuesday could be a temporary low. Stochastic and MACD are rising from their extreme but MACD remains in the bearish zone. 20EMA is also hinting at a bearish price trend.
| Support | 112.90 | 112.50 | 112.05 |
| Resistance | 113.25 | 113.60 | 113.95 |
EUR/USD – The price decline was supported by the 20EMA and if the 20EMA continue to hold and support price, we are likely to see a test of the previous high at 1.1382 in the next few days. MACD remains bullish and is hinting at bullish price trend. Stochastic continues to move higher and 20EMA remains bullish. Only a move below 1.1295 would negate this bearish view.
| Support | 1.1305 | 1.1260 | 1.1225 |
| Resistance | 1.1340 | 1.1380 | 1.1415 |
GBP/USD – We think the low on Tuesday at 1.3194 could be a low and we are likely to see a test to 1.3370 in the next couple of days. Stochastic has a bullish crossover near the oversold zone and is hinting at a bullish price trend. However, MACD and 20EMA are both bearish and hinting at a bearish price trend. A price move below 1.3260 would hint at a decline to 1.3194.
| Support | 1.3260 | 1.3225 | 1.3195 |
| Resistance | 1.3340 | 1.3370 | 1.3410 |
XAU/USD – Price had reached a low of $1769.85 on Tuesday and the low was accompanied by a divergence warning from the MACD indicator. Stochastic is close to the oversold zone and is hinting at a limited downside ahead. However, 20EMA remains bearish. If price can stay above $1769.85, we are likely to see a rally to $1808. However, a break below $1769.85 is likely to see a price decline to $1758.65.
| Support | 1775.05 | 1769.85 | 1758.65 |
| Resistance | 1790.25 | 1802.15 | 1815.65 |
USD/CAD – We had a sell call on this pair yesterday at 1.2740. Overnight price reached a high of 1.2829 which was also above our stop loss at 1.2785. We lost 45 pips on this trade. Stochastic and MACD are both showing a divergence and hinting at a possible price high. 20EMA continues to trend higher and hinting at a strong bullish price trend. We think price may have reached a high and we think there is likely to be a reversal.
| Support | 1.2775 | 1.2745 | 1.2715 |
| Resistance | 1.2805 | 1.2830 | 1.2895 |