Market Talk
– The dollar was up on Monday morning in Asia buoyed by uncertainty around the Omicron variant and the expectation of more hot U.S. inflation data putting pressure on Federal Reserve to curb surging inflation by hiking interest rates.
– The U.S. job report, released on Friday, was mixed. Jobs created came in at 210,000 in November, which was lower than forecasts. However, October’s job growth was revised up and unemployment rate dropped to 4.2% from 4.6%, the lowest level since February 2020.
– Omicron has found its way into around one-third of U.S. states. Although research into the variant continues, preliminary observations from South Africa suggesting that omicron patients had relatively mild symptoms help to increase risk appetite.
– The safe haven yen eased on Monday to 113.00 per dollar with the cautiously brighter mood, though analysts expect a bumpy ride ahead with trade most likely sensitive to Omicron news and U.S. inflation data on Friday. The euro was stable at 1.1303 and sterling was little changed at 1.3232.
– Gold was up on Monday morning in Asia, as uncertainty sparked by the Omicron coronavirus variant threat and a dip in U.S. Treasury yields boosted the safe-haven metal’s appeal.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 112.90. Stop at 112.55 and profit target at 113.95
3. Observation that omicron is mild and expectations on Fed to hike interest rate are likely to aid the US dollar
4. A Hammer candlestick price pattern and MACD divergence are both hinting at a bullish price trend.
Fundamental Comments
1. Observations from South Africa suggesting that omicron patients had relatively mild symptoms is weighing on the safe haven yen.
2. Expectation of more hot U.S. inflation data putting upward pressure on Federal Reserve to hike interest rates, aiding the US dollar
Technical Comments
1. A Hammer candlestick price pattern on the 4-hourly price chart is hinting of a bullish price trend.
2. MACD has a divergence forming, which is a sign of a price low and a likely reversal.
Key Levels
| Support | 112.85 | 112.50 | 112.10 |
| Resistance | 113.20 | 113.55 | 113.95 |
Technical Overview
XAG/USD – Price was capped by the 20EMA at $22.55 after rallying from the low at $22.03. Price will need to move above this resistance to regain its bullish impetus. Stochastic is moving up from the oversold zone, hinting at a price rally. MACD had a bullish divergence warning but remains bearish below the zero line. 20EMA is currently bearish and capping price on the 4-hourly chart.
| Support | 22.30 | 22.00 | 21.70 |
| Resistance | 22.60 | 22.95 | 23.30 |
EUR/USD – Our view remains the same as last Friday. We see price declining to 1.1235 initially and eventually to 1.1185. Stochastic is near to the oversold zone and is hinting of a limited downside. MACD is bearish and is hinting at a bearish price trend. 20EMA is pointing lower and is hinting at a bearish price trend ahead. A price move above 1.1360 would negate our bearish view.
| Support | 1.1265 | 1.1225 | 1.1185 |
| Resistance | 1.1305 | 1.1335 | 1.1380 |
GBP/USD – Price has declined to a low of 1.3208 this morning. We had thought the low was reached on 30 Nov and we were looking at a rally to 1.3370. A move below 1.3260 negated our bullish view. A break of 1.3194 is likely to send price lower to 1.3105. Stochastic is near to the oversold zone but both MACD and 20EMA remain bearish and both are hinting of a strong bearish price trend ahead.
| Support | 1.3195 | 1.3135 | 1.3100 |
| Resistance | 1.3240 | 1.3285 | 1.3320 |
XAU/USD – Price had hit a low of $1761.77 on Thursday and we think this could be a temporary low. Stochastic is rising and hinting of a price rally ahead. MACD had given a bullish divergence warning earlier and is hinting at a bullish price trend. 20EMA has turned bullish. We see price moving higher to $1815. A price move below $1761.75 would negate our bullish view over the next few days.
| Support | 1780.75 | 1771.50 | 1761.75 |
| Resistance | 1791.65 | 1802.15 | 1815.45 |
EUR/AUD – We had a sell call on Friday but we were wrong. We lost 40 pips on this trade. Price continues to move higher, reaching a high of 1.6169 on Friday. Stochastic is currently in the overbought zone but MACD remains bullish and is hinting of a strong bullish price trend. There is currently no divergence forming on the MACD indicator as well, hinting at a reversal. 20EMA is also hinting of a strong bullish price trend with its steep slope.
| Support | 1.6045 | 1.5975 | 1.5945 |
| Resistance | 1.6125 | 1.6170 | 1.6235 |