Market Talk
– The dollar was firm on Friday as traders wagered U.S. inflation figures could settle the course of interest rate rises next year. Increased restrictions in parts of the world to contain the spread of COVID-19, including the new Omicron variant, also tempered investors’ appetite for riskier currencies.
– Data released on Thursday showed that 184,000 initial jobless claims were filed throughout the week. This is the lowest number in more than 52 years, as labour market conditions continued to tighten amid an acute worker shortage.
– U.S. consumer price index (CPI) for November is due later Friday and a Reuters poll of economists expect it to have risen 6.8% year-on-year, overtaking a 6.2% increase in October, which was the fastest gain in 31 years. A higher-than-expected reading would strengthen the case for a policy tightening decision at the U.S. central bank’s meeting.
– In China, a central bank directive to hold more foreign exchange in reserve for a second time this year, which markets interpreted as an attempt to slow down a recent rapid appreciation of the yuan, send the USD/CNH from a low of 6.3303 on Wednesday to 6.3892 this morning.
– Gold was up on Friday morning in Asia, but set for a fourth consecutive weekly fall. Investors kept moves small, ahead of U.S. inflation data that could impact the Federal Reserve’s next monetary policy move.
Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.7135. Stop at 0.7095 and profit target at 0.7225.
3. Profit taking and interest rate differential are both in the Aussie dollar favour.
4. Price is supported by the 20EMA line with both MACD and 20EMA line hinting at a bullish price trend.
Fundamental Comments
1. Profit taking on the US dollar after a rally is likely to aid the Aussie dollar.
2. Interest rate differential is in the Aussie dollar favour.
Technical Comments
1. Price is supported by the 20EMA line which is also hinting at a bullish price trend.
2. MACD is bullish and is hinting at a bullish price trend.
Key Levels
| Support | 0.7135 | 0.7095 | 0.7050 |
| Resistance | 0.7160 | 0.7190 | 0.7235 |
Technical Overview
USD/JPY – Our buy call was filled at 113.45 on Wednesday when price declined to a low of 113.30. Yesterday, we had placed stop at 113.25 and profit order at 114.35. Price had moved to a high of 113.95 on Wednesday but MACD had given a divergence warning when price reached this high. Last night, price went to a low of 113.26 which was just above our stop. Stochastic is near to the oversold zone and MACD is turning bullish. We would recommend keeping orders unchanged for today.
| Support | 113.25 | 112.95 | 112.55 |
| Resistance | 113.60 | 113.95 | 114.35 |
EUR/USD – Price moved below the 20EMA to a low of 1.1277 overnight. The low was also below an important and strong support. However, price only stayed below this support briefly and has managed to bounce higher. The bounce was capped by the 20EMA at 1.1300. Stochastic is declining but MACD remains bullish. 20EMA is bearish. The picture is mixed and the next direction is likely to be determined by the CPI report tonight.
| Support | 1.1275 | 1.1230 | 1.1185 |
| Resistance | 1.1315 | 1.1355 | 1.1385 |
GBP/USD – Price managed to hold above the previous low at 1.3165 and we saw a rally but this rally was capped by the 20EMA at 1.3230. Stochastic is hinting at a price rally but MACD remains bearish. MACD also had a divergence warning of a potential price low. If price stay below the 20EMA, we are likely to see a price move to 1.3165. If price can move above the resistance line, we could see a test to 1.3370.
| Support | 1.3215 | 1.3165 | 1.3105 |
| Resistance | 1.3260 | 1.3290 | 1.3335 |
XAU/USD – Our view was for a rally to $1815 but price has now declined below the 20EMA and a strong support point to $1771.35. Stochastic is also declining and hinting at a bearish price trend. MACD and 20EMA are bearish and both are hinting at a bearish price trend. Gold has probably make a high at $1792.75 and we could be heading lower to $1761.75.
| Support | 1767.75 | 1758.65 | 1745.70 |
| Resistance | 1779.60 | 1792.75 | 1802.15 |
USD/CAD – We had a sell order at 1.2695 which was filled when price reached a high of 1.2721. We would recommend keeping stop and profit order unchanged at 1.2725 and 1.2600 respectively. Stochastic is rising but is close to the overbought zone. MACD remains bearish and is hinting at a bearish price trend. 20EMA is bullish but is not strong. A move above 1.2745 could hint at a move higher to 1.2853, which is the previous high.
| Support | 1.2695 | 1.2645 | 1.2600 |
| Resistance | 1.2730 | 1.2770 | 1.2810 |