Market Talk
– The dollar was down on Tuesday morning in Asia against a basket of currencies as recent employment data prompted some Wall Street banks to raise their estimates for how quickly the Federal Reserve will raise interest rates this year.
– The benchmark U.S. 10-year Treasury yield rose to its highest level in almost two years, as investors increasingly expect a tight labour market and rising inflation fuel expectations the Fed will become more aggressive in raising rates and tapering its balance sheet.
– The dollar was little changed at $115.23 yen after bouncing off a one-week low of $115.04 overnight. The Australian dollar added 0.17% to $0.7186, getting support from local retail sales data that came in much higher than economists forecast.
– The euro was about flat at $1.1332, stuck in the middle of its trading range since mid-November. Sterling was stable at $1.3582 after easing back from Monday’s two-month high of $1.3602.
– Gold was up on Tuesday morning in Asia, with a weaker US dollar lending support to the yellow metal. Investors are focused on key inflation data due later this week that could underpin faster rate hikes by the U.S. Federal Reserve.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2645. Stop at 1.2605 and profit target at 1.2720.
3. Rising US Treasury yields and rising number of coronavirus cases are both likely to aid the US dollar against the Canadian dollar.
4. Fibonacci 62% support is hinting that price is in a correction and MACD support the bullish view with its bullish hint.
Fundamental Comments
1. Rising US Treasury yields will be an aid to the US dollar.
2. Rise in number of coronavirus cases globally is aiding the safe haven US dollar.
Technical Comments
1. Price is supported above the Fibonacci 62% correction point, which is a hint that the decline is a correction.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 1.2640 | 1.2605 | 1.2565 |
| Resistance | 1.2670 | 1.2700 | 1.2730 |
Technical Overview
USD/JPY – The overnight rally was capped by the 20EMA line at 115.35 and price could be heading lower to the Fibonacci 127% price projection target at 114.83. MACD remains bearish and is turning down, hinting at a bearish price trend. Stochastic is near to the overbought zone. 20EMA remains bullish. A price move above 115.50 would negate our bearish view for the next couple of days.
| Support | 115.20 | 114.90 | 114.65 |
| Resistance | 115.50 | 115.95 | 116.35 |
EUR/USD – Price tested the bottom end of the range at 1.1275 but stayed above the range last night. Price has moved up to 1.1342 this morning and we are expecting the rally to continue towards the top end of the range at 1.1385 in the next 48 hours. MACD remains bullish and is hinting at a bullish price trend. However, Stochastic is inside the overbought zone and is hinting at a limited upside.
| Support | 1.1315 | 1.1275 | 1.1230 |
| Resistance | 1.1345 | 1.1385 | 1.1430 |
GBP/USD – Price tested the topside at 1.3600 on Friday and Monday as well as this morning. On those three occasions, price has failed to move above the 1.3600 barrier. Price may also be forming a Rising Wedge chart pattern on the 4-hourly chart, which is a bearish sign. Stochastic is now in the overbought zone. MACD remains bullish but is turning down. 20EMA remains bullish. If price cannot move above 1.3600 soon, it is likely to decline to 1.3460 in the next few days.
| Support | 1.3555 | 1.3515 | 1.3480 |
| Resistance | 1.3605 | 1.3660 | 1.3700 |
XAU/USD – Yesterday, we had a sell call on this pair but price reached a high of $1809, triggering our stop loss at $1807.50. We are out of this trade with a loss of $9.50. MACD remains bearish but Stochastic is rising from the oversold zone. 20EMA is bullish, which tips the scale on the bullish side. A price move above $1811.80, which is the Fibonacci 62% correction point, would confirm the bullish price trend.
| Support | 1799.70 | 1783.15 | 1773.55 |
| Resistance | 1811.80 | 1822.10 | 1830.15 |
USD/SGD – Last Friday, we had a sell call at 1.3590 and yesterday, we had placed stop at 1.3565 and profit order at 1.3535. Price rose to a high of 1.3578 overnight and our stop was triggered. We still managed to make 25 pips on this trade. Price has reached the previous low 1.3535 last night and currently both MACD and Stochastic are turning up, which is a hint of a bullish price trend ahead.
| Support | 1.3530 | 1.3500 | 1.3470 |
| Resistance | 1.3570 | 1.3615 | 1.3665 |