Market Talk
– The US dollar was up on Monday morning in Asia after edging lower against a basket of currencies on the last day of 2021 as easing fears of fallout from the Omicron coronavirus variant supported higher-risk currencies such as the Australian dollar and British pound.
– The global spread of the omicron COVID-19 variant also continues to impact on sentiment. Although the number of cases in the western Chinese city of Xi’an edged down, Johns Hopkins University data showed that the global number of cases topped 290 million as of Jan. 3.
– The dollar ended 2021 with a gain of nearly 7% as investors bet the U.S. Federal Reserve will raise rates earlier than most other major economies amid surging inflation driven by COVID-19 stimulus initiatives.
– The Euro edged lower to 1.1340 after hitting a high of 1.1386 last Friday. The British pound was down 0.2% to 1.3500, while the USD/JPY pair rose to 115.30. However, markets in China, Japan, Australia, and New Zealand were all closed for a holiday, and the thin trade could make it more difficult to see the dollar’s real moves.
– Gold was down on Monday morning in Asia, as a drop in U.S. Treasury yields supported the safe-haven asset yellow metal amid concerns about rising COVID-19 cases. Trade also remained thin as key Asia Pacific markets, including China, Japan, and Australia, were closed for a holiday.
Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation.
2. Buy EUR/USD at 1.1325. Stop at 1.1295 and profit target at 1.1390
3. A slide in US Treasury yield and an increase in market risk are both weighing on the safe haven US dollar.
4. Price is supported by the 20EMA in a rising trend channel and MACD is hinting at a bullish price trend as well.
Fundamental Comments
1. A slide in US Treasury yield is weighing on the US dollar.
2. Easing fears of fallout from Omicron is moving capital into riskier currencies from the safe haven US dollar.
Technical Comments
1. Price is supported by the 20EMA in a rising trend channel.
2. MACD is bullish and is hinting of a bullish price trend.
Key Levels
| Support | 1.1325 | 1.1295 | 1.1260 |
| Resistance | 1.1360 | 1.1390 | 1.1430 |
Technical Overview
USD/JPY – The rally continues and we think price is likely to test the previous high of 115.53 in the next couple of days. 20EMA is hinting of a strong trend and Stochastic is showing signs of a strong trend keeping this indicator in the overbought zone for the past 1 week. However, while MACD is hinting of a bullish price trend, MACD is also warning with a divergence that a price top could be close at hand. A move below 114.90 would negate our bullish view.
| Support | 115.20 | 114.90 | 114.50 |
| Resistance | 115.55 | 115.95 | 116.15 |
AUD/USD – This pair continues to rise after hitting a low at 0.6990 a month ago. However, the rally may be coming to an end as both Stochastic and MACD are warning with divergences. Price has also moved below the 20EMA and could be heading lower. Stochastic has a bearish crossover and MACD is also hinting of a price decline. Only a move above 0.7280 would negate our bearish view.
| Support | 0.7220 | 0.7190 | 0.7155 |
| Resistance | 0.7255 | 0.7280 | 0.7325 |
GBP/USD – Price has rallied from a low of 1.3172 two weeks ago to a high of 1.3550 last Friday and we think price could be near to a high. MACD is warning with divergence of a possible price high. Stochastic has a bearish crossover in the overbought zone and is hinting at a price decline. However, 20EMA remains bullish and is hinting of a bullish price trend. A price move below the 20EMA line at 1.3485 would confirm a reversal and a price decline to 1.3340.
| Support | 1.3475 | 1.3430 | 1.3400 |
| Resistance | 1.3515 | 1.3550 | 1.3605 |
XAU/USD – Price reached a high of $1831.75 this morning but this could be the high. Price could be heading lower in a short term correction to $1815.90 in the next 48 hours. Stochastic has a bearish crossover in the overbought zone and is hinting at a price decline. Both MACD and 20EMA remain bullish and are hinting of a bullish price trend. A move above $1832 would negate our short term bearish view.
| Support | 1816.10 | 1805.90 | 1790.80 |
| Resistance | 1831.75 | 1843.00 | 1858.65 |
USD/CAD – Price has declined from a high of 1.2963 two weeks ago to a low of 1.2618 last Friday and we think there is likely to be a price correction of this decline. The correction could bring price higher to 1.2730. Stochastic and MACD are both supporting this view. Both these indicators are turning up from their extreme value. 20EMA is hinting of a strong bearish price trend.
| Support | 1.2660 | 1.2615 | 1.2580 |
| Resistance | 1.2700 | 1.2735 | 1.2770 |