Market Talk
– The dollar hovered near a five-year high to the yen on Thursday, supported by a surge in U.S. Treasury after U.S. Federal Reserve meeting minutes signaled the central bank may have to raise interest rates sooner than expected.
– Treasury yields soared after minutes of the last Federal Reserve policy meeting came in more hawkish than expected, flagging three or more interest hikes this year to quell surging inflation. U.S. 10-year yield remained elevated at 1.6929%, just off Wednesday’s close of 1.7030%.
– ADP National Employment report showed private U.S. payrolls surged last month by more than double what economists polled by Reuters had forecast, potentially raising expectations for the non-farm payrolls numbers due Friday.
– The greenback stood at 116.11 yen, little changed from Wednesday, when it rallied back toward Tuesday’s high of 116.35, lifted by more hawkish rhetoric from Fed official and a strong ADP U.S. jobs report.
– Gold was down on Thursday morning in Asia, erasing earlier gains, as U.S. bond yields jumped after minutes from the last Federal Reserve meeting showed that the U.S. central bank may need to raise interest rates sooner than expected to curb inflation despite surging COVID-19 cases.
Chart Focus NZD/USD
Key Points
1. Sell NZD/USD recommendation.
2. Sell NZD/USD at 0.6765. Stop at 0.6790 and profit target at 0.6705
3. A hawkish FOMC minute and rising Treasury yields are both aiding the US dollar.
4. Price is exhibiting a corrective action with Stochastic, MACD and 20EMA supporting the bearish price trend.
Fundamental Comments
1. A hawkish FOMC minutes is aiding the US dollar.
2. A rising US Treasury yields is aiding the US dollar
Technical Comments
1. Price is likely correcting in an A-B-C correction with a projected decline to the Fibonacci 161.8% correction point.
2. Stochastic, MACD and 20EMA are all bearish and hinting at a price decline.
Key Levels
| Support | 0.6735 | 0.6700 | 0.6670 |
| Resistance | 0.6765 | 0.6795 | 0.6835 |
Technical Overview
USD/JPY – We had a buy order at 115.60 yesterday but price only reached a low of 115.61 and our entry order was not filled. Given the hawkish FOMC minutes and rising US Treasury yields, we foresee price moving higher again in the next couple of days. MACD remains bullish and 20EMA is also bullish. Both these indicators are supportive of a price rally but Stochastic is near to the overbought zone and is hinting at limited topside.
| Support | 115.60 | 115.20 | 114.90 |
| Resistance | 115.95 | 116.35 | 116.65 |
EUR/USD – A price rally overnight was cut short by a hawkish FOMC minutes. The high of the rally was also capped by the Fibonacci 62% of the decline from the high at 1.1386 to the low at 1.1271. MACD remains bearish but Stochastic is rising from the oversold zone. 20EMA is neutral at the moment. If price is capped at the Fibonacci 62% correction point, we are likely to see a price decline to 1.1271 initially and to 1.1230 eventually.
| Support | 1.1270 | 1.1230 | 1.1185 |
| Resistance | 1.1315 | 1.1360 | 1.1390 |
GBP/USD – Yesterday, price broke above last Friday’s high at 1.3550, negating the price correction. Price rose to a high of 1.3598 and we have seen a decline to 1.3528 this morning. Stochastic has also turned down after a bearish crossover in the overbought zone. However, both MACD and 20EMA are hinting at a bullish price trend. We still prefer to be on the bearish side, viewing 1.3598 as the high and a decline to 1.3400 over the next few days.
| Support | 1.3515 | 1.3480 | 1.3430 |
| Resistance | 1.3550 | 1.3600 | 1.3660 |
XAU/USD – Our view remains unchanged from yesterday. We are looking at $1777, which is also the Fibonacci 127% price projection target. Stochastic has a bearish crossover and is declining, hinting at a bearish price trend. MACD has turned bearish. 20EMA is also bearish and hinting at a bearish price trend. A price break below $1798.30 would be the first indication of an impending price decline to $1777.
| Support | 1798.30 | 1784.50 | 1777.75 |
| Resistance | 1808.90 | 1818.20 | 1831.75 |
USD/CAD – We had a sell order which was filled at 1.2750 and yesterday, we had left stop at 1.2765 and profit target at 1.2625. Unfortunately, price hit our stop and we are out of this position with a loss of 15 pips. Given the hawkish FOMC minutes and rising US Treasury yields, we are anticipating the US dollar to gain in strength. We see price moving higher to test the Fibonacci 62% resistance at 1.2835 over the next couple of days.
| Support | 1.2760 | 1.2730 | 1.2690 |
| Resistance | 1.2805 | 1.2845 | 1.2895 |