Market Talk
– The US dollar failed to pick up ground on most major peers on Thursday as markets saw optimism in early data hinting the Omicron variant of the new coronavirus may not be as bad as feared, even as new COVID-19 restrictions in Britain hurt the sterling.
– Pfizer said on Wednesday that a three-shot course of their COVID-19 vaccine neutralized the new Omicron variant in a laboratory test, an early signal that booster shots could be key to protection against infection from the newly identified variant. This helps to increase investors’ risk appetite with the Aussie dollar rising for a third straight day.
– The British pound dropped to a year low at 1.3165 on Wednesday after British Prime Minister Boris Johnson imposed tougher COVID-19 restrictions in England, ordering people to work from home, wear masks in public places and use vaccine passes.
– The Canadian dollar was largely unchanged after the Bank of Canada held its key overnight interest rate at 0.25%, as expected, and maintained its guidance that a first hike could come as soon as April 2022, having gained to its highest in around three weeks ahead of the meeting along with higher oil prices.
– Gold was down on Thursday morning in Asia, with the U.S. dollar and Treasury yields on an upward trend. Investors now await U.S. inflation data which could provide clues on the Federal Reserve’s next policy move.
Chart Focus USD/CAD
Key Points
1. Sell USD/CAD recommendation.
2. Sell USD/CAD at 1.2695. Stop at 1.2725 and profit target at 1.2600
3. A rally in crude oil price and an increase in risk appetite are both aiding the Canadian dollar.
4. Price is facing a strong resistance and MACD is hinting at a bearish price trend.
Fundamental Comments
1. A rally in crude oil price is aiding the Canadian dollar.
2. Relief that omicron was not as severe as expected has increased investor risk appetite which is weighing on the US dollar.
Technical Comments
1. Fibonacci 38% correction point and the 20EMA line are providing resistance to price rally.
2. MACD is bearish and is hinting of a bearish price trend.
Key Levels
| Support | 1.2645 | 1.2600 | 1.2560 |
| Resistance | 1.2690 | 1.2730 | 1.2770 |
Technical Overview
USD/JPY – Our buy call yesterday was filled at 113.45 when price declined to a low of 113.30. Price had moved to a high of 113.95 overnight but MACD had given a divergence warning when price reached this high. Stochastic is in decline after a bearish crossover in the overbought zone. MACD is the only bullish indicator at the moment. We would recommend bringing stop higher to 113.25 while keeping profit target unchanged at 114.35.
| Support | 113.55 | 113.05 | 112.80 |
| Resistance | 113.95 | 114.35 | 114.75 |
EUR/USD – Price moved above 1.1280 on Wednesday and has moved higher to 1.1352 this morning. Currently there is a price correction which has brought price back to the 20EMA support at 1.1325. We are expecting price to be supported at this level and a rally to follow which should bring price to the previous high at 1.1382. MACD remains bullish but Stochastic is in the overbought zone. 20EMA is hinting of a bullish price trend.
| Support | 1.1315 | 1.1270 | 1.1230 |
| Resistance | 1.1355 | 1.1385 | 1.1430 |
GBP/USD – Price broke the low of 1.3194 and had declined to a low of 1.3165 overnight. However, the low was accompanied by a divergence warning from the MACD indicator, hinting at a potential price low. Stochastic is flat and in the middle of its range. 20EMA is bearish. We think that as long as price stays below the 20EMA, we are likely to see this bearish trend continues.
| Support | 1.3165 | 1.3105 | 1.3080 |
| Resistance | 1.3215 | 1.3260 | 1.3290 |
XAU/USD – Our view remains the same as yesterday. We think price had hit a low of $1761.77 last Thursday and we see price moving higher to $1815 over the next few days. Price has moved above $1787.30 and this is a good sign and confirms the rally to $1815. Stochastic has a bearish crossover in the oversold zone and is declining. MACD and 20EMA are both neutral.
| Support | 1779.60 | 1772.25 | 1761.75 |
| Resistance | 1792.75 | 1802.15 | 1815.45 |
NZD/USD – Our view remains the same as yesterday. Price had formed a mini Double Bottom with both lows at 0.6735. The price move above 0.6770 confirmed the chart pattern and is hinting at a price move to 0.6865 in the next few days. Stochastic is the overbought zone and hinting at a limited upside. 20EMA and MACD are both bullish and hinting at a bullish price trend.
| Support | 0.6800 | 0.6765 | 0.6730 |
| Resistance | 0.6830 | 0.6865 | 0.6895 |