Market Talk
– The dollar held its recent gains in Asian trading on Wednesday as investors looked towards a key Federal Reserve policy meeting to see if it would reinforce growing market expectations for earlier and additional rate rises next year.
– Data from the Labour Department showed the producer price index (PPI) for final demand in the 12 months through November shot up 9.6%, clocking its largest gain since November 2010. That followed an 8.8% increase in October. Data enhances the prospects of faster US rate hike.
– Investors are betting that the Fed will taper its assets between $25 billion-$30 billion every month, from $15 billion currently, by March 2022, and also expect one or two US interest rate hikes in 2022.
– The euro last traded at 1.1264, not far from 1.1184 hit in November, which was its lowest in over a year. The British pound languished at 1.3250 as Britain grapples with rising cases of the Omicron variant of the new coronavirus.
– Gold was down on Wednesday morning in Asia, as investors await a decision on asset tapering and earlier interest rate hikes by the U.S. Federal Reserve in its latest policy decision.
Chart Focus Silver
Key Points
1. Buy Silver recommendation.
2. Buy Silver at $21.85. Stop at $21.60 and profit target at $22.40
3. Silver is likely to benefit inflationary pressure and a Powell’s belief that inflation is transitory
4. Price action and MACD indicator are both giving strong hints of a possible price bottom forming.
Fundamental Comments
1. Commodities prices are likely to benefit from inflationary pressure.
2. While the market is hawkish, Powell has insisted before that inflationary pressure is transitory.
Technical Comments
1. The decline to new low is getting more marginal which is a hint of a possible price bottom
2. MACD has given a triple divergence warning, which is usually a strong case for a reversal.
Key Levels
| Support | 21.80 | 21.65 | 21.40 |
| Resistance | 22.05 | 22.40 | 22.60 |
Technical Overview
USD/JPY – Our view remains the same as yesterday. We see a range from 113.20 to 114.00 for the next few days until there is a breakout of this range. FOMC announcement could be one event to force price out of this range. Stochastic is approaching the overbought zone but MACD remains flat and neutral. 20EMA is also flat. Both MACD and 20EMA are hinting of a non-trend sideways movement.
| Support | 113.60 | 113.20 | 112.95 |
| Resistance | 114.00 | 114.35 | 114.65 |
EUR/USD – Our view remains the same as yesterday. We think last week’s range of 1.1354 to 1.1227 is likely to contain trading for this week or until there is a breakout of this range. Stochastic is near to oversold zone. MACD remains bearish but is flat and near to the zero line. 20EMA remains bearish and is hinting at a bearish price trend. We favour a break of the downside.
| Support | 1.1250 | 1.1225 | 1.1185 |
| Resistance | 1.1285 | 1.1315 | 1.1350 |
GBP/USD – We were expecting price to test the previous low of 1.3161 again but after hitting a low of 1.3190 yesterday, price has bounced up to 1.3262. Price could be trading within last week range of 1.3289 to 1.3165 ahead of FOMC. Stochastic is rising but MACD is hinting of a sideways movement. 20EMA is hinting of a bullish price trend. Watch last week range for clue to the next direction.
| Support | 1.3230 | 1.3190 | 1.3160 |
| Resistance | 1.3275 | 1.3320 | 1.3370 |
XAU/USD – Price broke below last week’s low of $1770.05 and we think the decline is likely to continue lower to 1761.75. A break of this support is likely to send price lower to the next support point at $1745.60. Stochastic is declining but is close to the oversold zone. MACD has turned bearish and is hinting at a bearish price trend. 20EMA is also hinting at a bearish price trend.
| Support | 1761.75 | 1745.60 | 1733.80 |
| Resistance | 1773.65 | 1785.55 | 1792.75 |
AUD/USD – We had a sell call on this pair yesterday at 0.7130, which was filled when price reached a high of 0.7135. After declining to 0.7095 overnight, price has climbed back again to 0.7120. We would recommend lowering stop loss order to 0.7145 while keeping profit order unchanged at 0.7050. Stochastic is rising and is hinting at a price rally. MACD remains bearish but 20EMA has turned bullish.
| Support | 0.7115 | 0.7090 | 0.7045 |
| Resistance | 0.7150 | 0.7185 | 0.7210 |