Market Talk
– The dollar was up on Thursday morning in Asia, clawing back from new lows hit overnight after data showed that U.S. consumer prices rose at their fastest rate in nearly 40 years but not worrying enough to change an already hawkish monetary policy.
– Wednesday’s data showed that the U.S. core consumer price index (CPI) grew 0.6% month-on-month and 5.5% year-on-year in December while CPI grew 7% year- on-year, the fastest pace since 1982. However, these data were within expectation and is unlikely to alter an already hawkish rates outlook.
– After a couple of months in a tight range, the dollar dropped 0.6% on the euro overnight to $1.1453, its lowest since mid-November. The greenback fell against the yen, dropping through support around 115 to hit 114.38 yen per dollar, a more than two-week low.
– The British pound edged up 0.11% to $1.3716 over bets that the Bank of England could hike its own interest rates as soon as February 2022. Investors are also optimistic that the economy will survive the latest surge of COVID-19 cases.
– Gold was down on Thursday morning in Asia but remained near the one-week high hit in the previous session. The US dollar and Treasury yields retreated overnight despite U.S. inflation data highlighted the need for a quicker interest rate hike.
Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation.
2. Buy NZD/USD at 0.6855. Stop at 0.6825 and profit target at 0.6950
3. A retreat in US Treasury yields and a data within expectation are both weighing on the US dollar.
4. Price is breaking out of a Rectangle formation with MACD hinting at a bullish price trend.
Fundamental Comments
1. A retreat in US Treasury yield is weighing on the US dollar.
2. Investors have priced in a hawkish Fed and it will take more extreme data to aid the US dollar.
Technical Comments
1. Price is breaking out of a Rectangle formation, which is a bullish sign.
2. MACD is bullish and is hinting at a bullish price trend.
Key Levels
| Support | 0.6810 | 0.6770 | 0.6740 |
| Resistance | 0.6860 | 0.6895 | 0.6945 |
Technical Overview
USD/JPY – We had a sell call yesterday at 115.40 which was filled when price reached a high of 115.46. Price declined to a low of 114.35 and our profit order at 114.70 was filled. We are out of this trade with a 70 pips profit. MACD and 20EMA remain bearish and both are hinting of a bearish price trend ahead. The next price support lies at 114.20, which is the Fibonacci 62% price correction point of the rally from 113.13 to the high at 115.94.
| Support | 114.30 | 113.95 | 113.50 |
| Resistance | 114.70 | 115.00 | 115.40 |
EUR/USD – Price broke above 1.1385 yesterday and we are likely to see the rally continue towards 1.1500 in the next 48 hours. Stochastic is in the overbought zone but both MACD and 20EMA are hinting at a strong bullish price trend ahead. A strong trend is able to keep the Stochastic in the overbought zone for a prolong period of time. 20EMA is also providing support to price at 1.1425, which could be a good level to buy for 1.1500.
| Support | 1.1420 | 1.1385 | 1.1350 |
| Resistance | 1.1455 | 1.1490 | 1.1515 |
GBP/USD – Price broke above 1.3605 yesterday and the rally has continued higher to 1.3718 at the point of this writing. We are expecting the rally to continue towards the next resistance at 1.3830 over the next few days. Stochastic is already in the overbought zone but both MACD and 20EMA are hinting of a strong bullish price trend. 20EMA is also likely to provide support at 1.3640.
| Support | 1.3695 | 1.3645 | 1.3605 |
| Resistance | 1.3730 | 1.3790 | 1.3835 |
XAU/USD – Price reached a low of $1783.15 last Friday and has rallied to the high at $1828.15 this morning. We are expecting the rally to continue towards $1831.17 in the next 24 hours. Above this resistance, the next price level to watch will be at $1843.00. Stochastic is in the overbought zone but 20EMA are hinting at a strong bullish price trend with a steep slope. MACD is bullish.
| Support | 1820.70 | 1810.05 | 1799.70 |
| Resistance | 1830.15 | 1843.00 | 1854.70 |
USD/CNH – The decline since the beginning of the week has stayed above the Fibonacci 62% of the rally from 6.3374 to the high at 6.3909. As long as price stays above this support level, we are likely to see a rally to 6.6909 again. However, a break below this support is likely to send price to 6.3374. Stochastic is in the oversold zone and is turning up; hinting at a price rally, but MACD and 20EMA remains bearish at the moment. We are also inclined to be on the bearish side. Watch the Fibonacci 62% correction point at 6.3578.
| Support | 6.3575 | 6.3500 | 6.3370 |
| Resistance | 6.3705 | 6.3790 | 6.3910 |