Market Talk
– The dollar was weaker on Wednesday morning in Asia but gained against the Japanese yen, which fell to a near five-year low against the U.S. currency and saw losses on other crosses over investors bets that the Bank of Japan (BOJ) would fall behind its counterparts in tightening monetary policy to curb high inflation.
– U.S. yields rose on Tuesday as bond investors geared up for interest rate hikes from the Federal Reserve by mid-year to curb stubbornly high inflation. Benchmark U.S. 10-year treasury yields touched a six-week high on Tuesday and were last at 1.657%.
– The omicron variant continues to fuel a surge in cases, with the U.S. reporting a global record of almost 1 million new cases on Monday according to Reuters. A softer ISM manufacturing PMI, which was lower than expectation, also weighed on the US dollar.
– The British pound rallied 2.7% in a dozen trading days since Dec. 20 as traders reckon surging Omicron cases in Britain won’t deter the Bank of England from lifting rates. The pound last bought $1.3527 while the euro hovered near a two-week low against the dollar at $1.1279.
– Gold was up on Wednesday morning in Asia ahead of the minutes from the latest U.S. Federal Reserve meeting. Investors also weighed the possibility of an earlier-than-expected interest rate hike against surging numbers of COVID-19 cases globally.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 115.60. Stop at 115.25 and profit target at 116.30.
3. A rising US Treasury yields and expectation of a faster US rate hike are both weighing on the Japanese yen.
4. Price is likely to be supported by the 20EMA with both MACD and 20EMA hinting at a bullish price trend.
Fundamental Comments
1. A rising US Treasury yields is weighing on the Japanese yen.
2. Expectation of a faster US rate hike is boosting the US dollar.
Technical Comments
1. Price is likely to be supported by the 20EMA, which is hinting at a bullish price trend.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 115.90 | 115.40 | 115.00 |
| Resistance | 116.30 | 116.65 | 116.95 |
Technical Overview
NZD/USD – Price made a marginal low at 0.6764 yesterday and managed to climb back up to 0.6824. However, the high was just above the Fibonacci 62% correction point of the decline from 0.6855 to the low of 0.6764. MACD remains bearish and is hinting at a bearish price trend. 20EMA is also bearish. However, Stochastic is hinting of a price rally. We see price moving lower to 0.6740. Only a move above 0.6830 would negate our bearish view.
| Support | 0.6765 | 0.6730 | 0.6700 |
| Resistance | 0.6805 | 0.6835 | 0.6860 |
EUR/USD – Price tested the previous week low at 1.1275 overnight but had reversed at 1.1271. Stochastic is turning around from the oversold zone and is hinting at a price rally. MACD could have a bullish crossover soon if price does not move lower. These two indicators are hinting at a bullish price trend ahead but 20EMA is still bearish and hinting at a bearish price trend. Ability to hold above 1.1271 could see a rally back to 1.1385.
| Support | 1.1270 | 1.1235 | 1.1185 |
| Resistance | 1.1310 | 1.1340 | 1.1385 |
GBP/USD – Price broke above last Friday’s high at 1.3550, reversing the bearish price trend. We are likely to see a continuation of the rally to the next resistance point at 1.3605. However, MACD is hinting with a divergence of a possible price high. Stochastic is also close to the overbought zone, hinting at a limited upside. 20EMA remains bullish and is hinting at a bullish price trend. We would prefer to be bearish on this pair.
| Support | 1.3520 | 1.3480 | 1.3430 |
| Resistance | 1.3560 | 1.3605 | 1.3660 |
XAU/USD – Price rallied from Monday’s low of $1798.30 to a high of $1816.85 this morning. The high was just above the Fibonacci 50% correction point. If price is unable to move higher, it is likely to test Monday’s low of $1798.30 again in the next 48 hours. MACD remains bearish but 20EMA is bullish. Stochastic continues to rise from the oversold zone. While the indicators are hinting at a sideways movement, we are bearish and looking at a test of $1798.30 initially and eventually to $1777, which is the Fibonacci 161.8% projection price target.
| Support | 1805.30 | 1790.75 | 1777.30 |
| Resistance | 1816.90 | 1831.75 | 1843.05 |
USD/CAD – Price reached a high of 1.2765 overnight and our sell order was filled at 1.2750. Our view remains unchanged from yesterday. 20EMA and MACD are both bearish and hinting at a bearish price trend and supporting our bearish view. Stochastic has a bearish crossover and is heading lower, hinting at a bearish price trend. We would recommend bringing stop lower to 1.2765 while keeping profit target at 1.2625.
| Support | 1.2690 | 1.2660 | 1.2620 |
| Resistance | 1.2730 | 1.2765 | 1.2810 |