Market Talk
– The US dollar was down on Tuesday morning in Asia after an overnight climb to its strongest level in more than a month against the Japanese yen. A jump in U.S. Treasury yields overnight as investors bet on an early U.S. Federal Reserve interest rate hike gave the U.S. currency a boost.
– Treasury yields soared in relatively thin trading, with several markets closed, as investors braced for what could be an earlier-than-expected interest rate hike by the Federal Reserve this year despite the recent jump in COVID-19 cases.
– The US dollar rose as high as 115.40 yen for the first time since Nov. 25, boosted by long-term U.S. Treasury yields soaring 12.5 basis points overnight to hit 1.6420% for the first time since Nov. 24 in the previous trading session.
– The British pound was flat from Monday, but had fallen as low as $1.3431 for the first time since Nov. 29 before recovering. The euro traded at $1.1307, off the one-week low of $1.1279 from overnight. The Australian dollar near the near two-week low of $0.7184 hit during the previous session.
– Gold was up on Tuesday morning in Asia, with investors turning to the safe-haven asset as rising numbers of COVID-19 cases globally led to some countries tightening restrictive measures short of a lockdown. However, rising U.S. Treasury yields and interest rate hikes bets kept the yellow metal’s gains small.
Chart Focus USD/CAD
Key Points
1. Sell USD/CAD recommendation.
2. Sell USD/CAD at 1.2750. Stop at 1.2780 and profit target at 1.2625
3. Rise in crude oil price and an interest rate differential are both boosting the Canadian dollar.
4. The price correction is likely to be halted by the Fibonacci and 20EMA resistance and MACD is hinting at a bearish price trend
Fundamental Comments
1. Rise in crude oil price is boosting the Canadian dollar
2. Bank of Canada is likely to hike rate ahead of the Fed, boosting the interest rate differential in favour of the Canadian dollar.
Technical Comments
1. The price rally is likely to be halted by the 20EMA as well as the Fibonacci 38% correction point.
2. MACD remains bearish and is hinting of a bearish price trend.
Key Levels
| Support | 1.2710 | 1.2660 | 1.2620 |
| Resistance | 1.2750 | 1.2790 | 1.2830 |
Technical Overview
USD/JPY – The rally continues and price has moved above its previous high of 115.53. We think this rally is likely to continue higher to 116. 20EMA is pointing upward with a steep slope, hinting at a strong bullish price trend. MACD confirms the strong bullish trend. Stochastic is close to the overbought zone but there is still room to support a price rally above 116. Only a decline below 114.90 would negate this bullish view.
| Support | 115.50 | 115.15 | 114.70 |
| Resistance | 115.95 | 116.15 | 116.65 |
EUR/USD – We had a buy call yesterday at 1.1325 but we were wrong and got stopped out for a loss of 30 pips. Price is currently below the 20EMA and MACD has turned bearish. Price could be heading lower to 1.1230 in the next couple of days. However, Stochastic is close to the oversold zone, hinting at a limited downside. If price is unable to move above the 20EMA line at 1.1325, we are likely to see a decline to 1.1230.
| Support | 1.1295 | 1.1265 | 1.1230 |
| Resistance | 1.1325 | 1.1360 | 1.1390 |
GBP/USD – Price continues to move lower from last Friday’s high at 1.3550. Stochastic is declining from the overbought zone and MACD continues to move lower. Price has also moved below the 20EMA, which is hinting at a bearish price trend. We think price is likely to move lower to the Fibonacci 50% price correction point at 1.3360 in the next couple of days. A move above 1.3550 would negate the correction and calls for a move to 1.3610.
| Support | 1.3455 | 1.3405 | 1.3365 |
| Resistance | 1.3495 | 1.3550 | 1.3605 |
XAU/USD – Price continues its decline from last Friday’s high at $1831.75 to reach a low of $1798.28. The overnight decline may be sharp but price is still within a rising uptrend channel, keeping the bullish price trend intact. However, a break of the trend line at $1795 would end the bullish trend and calls for a move to $1760. MACD remains bullish but 20EMA has turned bearish.
| Support | 1794.65 | 1784.70 | 1773.55 |
| Resistance | 1806.95 | 1819.95 | 1831.75 |
NZD/USD – Price continues to decline from last Friday’s high at 0.6856 and price has reached a low of 0.6773 this morning. The low is just below the Fibonacci 50% correction point. Stochastic has also reached the oversold extreme and is hinting of a price rally. However, both 20EMA and MACD are bearish. Watch the low at 0.6773 for clue. If price can stay above this support, it is likely to move higher to test the high at 0.6856. A break of this low is likely to send price lower to 0.6700.
| Support | 0.6760 | 0.6730 | 0.6700 |
| Resistance | 0.6800 | 0.6830 | 0.6860 |