Market Talk
– The US dollar was up on Monday morning in Asia, starting the week off quietly ahead of a slew of key central bank policy decisions after losing some ground when U.S. consumer prices increased roughly in line with expectations in November.
– Labour Department data showed an increasing consumer price index (CPI) as cost of goods and services rose broadly amid supply constraints for the largest annual gain since 1982. The CPI rose 0.8% last month after surging 0.9% in October while in the 12 months through November, it rose 6.8%, following a 6.2% advance in October.
– The Fed is expected to accelerate its asset tapering, and potentially speed up interest rate hikes. Investors now see a more than 50% chance of an interest rate hike by May 2022, according to the CME Group’s FedWatch program.
– The pound slipped 0.1% to 1.3257 after British Prime Minister Johnson on Sunday said Britain faces a “tidal wave” of the Omicron variant of coronavirus and that two vaccine doses will not be enough to contain it.
– Gold has clung to the high $1,700s despite the threat of a U.S. rate hike getting increasingly closer. Gold’s safe-haven appeal and inflation hedge helped to cushion the threat of a US interest rate hike.
Chart Focus Gold
Key Points
1. Buy Gold recommendation.
2. Buy Gold at $1781.50. Stop at $1775.50 and profit target at $1799.80.
3. Gold is likely to benefit from high inflation but a slower rate hike by the Federal Reserve.
4. Price has moved above its 20EMA which is a bullish sign and Stochastic is hinting at a price rally.
Fundamental Comments
1. With US CPI coming in roughly near expectation, fear of an accelerated US interest rate hike has eased.
2. With inflation expected to stay high, Gold is likely to be in demand with its status as an inflation hedge.
Technical Comments
1. Price has managed to stay above the previous low and had moved above the 20EMA.
2. Stochastic is rising and hinting at a price rally ahead.
Key Levels
| Support | 1780.90 | 1770.05 | 1761.75 |
| Resistance | 1789.20 | 1802.15 | 1815.45 |
Technical Overview
USD/JPY – We had a long position from Wednesday when our buy call at 113.45 was filled. We had left stop order at 113.25 and profit order at 114.35 on Friday but unfortunately our stop at 113.25 was triggered when price declined to a low of 113.22. MACD and 20EMA are both flat and neutral at the moment. Stochastic is near to the oversold zone. We think price is likely to move in a sideways movement for today. We see a range from 113.00 to 114.20 until there is a breakout.
| Support | 113.20 | 112.95 | 112.55 |
| Resistance | 113.60 | 113.95 | 114.35 |
EUR/USD – We think last week’s range of 1.1354 to 1.1227 is likely to contain trading for this week. We see this range for this week until there is a breakout of either high or low. Stochastic is near to the oversold zone. MACD is neutral and hinting at a sideways movement. 20EMA has just turned bearish and is hinting at a price decline. All these 3 indicators are in conflict and are not offering us any good hints on price direction.
| Support | 1.1265 | 1.1230 | 1.1185 |
| Resistance | 1.1305 | 1.1355 | 1.1380 |
GBP/USD – Price had moved to a high of 1.3275 on Friday but this could be a corrective high and price could be heading lower to 1.3165 again in the next few days. With UK’s COVID-19 cases rising, and with price below the 20EMA, which is a hint of a bearish price trend, we see price declining. Stochastic is also near to the overbought zone, hinting at a limited upsides. Only a move above 1.3290 would negate our bearish view for the next few days.
| Support | 1.3215 | 1.3190 | 1.3165 |
| Resistance | 1.3255 | 1.3290 | 1.3335 |
USD/CAD – We had a sell order at 1.2695 which was filled when price reached a high of 1.2721 on Thursday. We had recommended keeping stop and profit order unchanged at 1.2725 and 1.2600 respectively. Unfortunately, our stop was triggered. Stochastic is in the overbought zone but MACD is flat and neutral. 20EMA remains bullish. Price will need to move above 1.2745 to regain its bullish impetus; else we risk another decline to 1.2600.
| Support | 1.2705 | 1.2675 | 1.2645 |
| Resistance | 1.2740 | 1.2770 | 1.2810 |
AUD/USD – We had a buy call on this pair last Friday at 0.7135 but price only reached a low of 0.7142 and our entry order was not filled. Price had moved up to 0.7180 on Friday’s night and we are expecting price to move above this resistance and continue towards 0.7235 over the next 48 hours. Stochastic and 20EMA are both hinting at a bullish price trend but MACD looks weak at the moment.
| Support | 0.7150 | 0.7115 | 0.7075 |
| Resistance | 0.7185 | 0.7235 | 0.7275 |