Market Talk
– The dollar clung to a late week bounce on Monday as investors braced for January’s U.S. Federal Reserve meeting and raised bets it will chart a year ahead holding several rate hikes, while China surprised analysts with a benchmark cut.
– The moves follow the dollar’s jump on Friday along with U.S. yields and underscore support for the greenback from the hawkish rates outlook, even if momentum for gains has started to wane. The cash Treasury market was closed for a U.S. holiday on Monday.inard on Thursday became the latest and most senior Fed official to signal that the Fed is getting ready to start raising interest rates in March 2022. U.S. interest rate futures have all but locked in four interest rate hikes in 2022.
– In China, Chinese bonds rallied to their highest level since June 2020 while the yuan slipped after the central bank cut borrowing costs for medium-term loans for the first time since April 2020, defying market expectations.
– The Australian and New Zealand dollars, which dropped sharply on Friday, remained under pressure on Monday. The Aussie was last down 0.2% at $0.7200, ending for now a brief foray above resistance around $0.7276. The kiwi edged 0.2% lower to $0.6791.
– Gold was up on Monday morning in Asia, while U.S. Treasury yields rose thanks to hawkish signals from the U.S. Federal Reserve. Markets are also beginning to price in a sooner-than-anticipated reduction in the Fed’s balance sheet.
Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation.
2. Sell EUR/USD recommendation at 1.1452. Stop at 1.1490 and profit target at 1.1398.
3. Rising US Treasury yields and expectation of US rate hike are likely to weigh on US dollar.
4. Price broke below the Double Top chart pattern.
Fundamental Comments
1. Rising US Treasury yields will strengthen the dollar.
2. Expectation of US rate hike will weigh on US dollar.
Technical Comments
1. Price broke below the Double Top chart pattern and is being capped by a declining trendline resistance.
2. MACD has turned bearish and Stochastic is falling.
Key Levels
| Support | 1.1398 | 1.1376 | 1.1333 |
| Resistance | 1.1483 | 1.1513 | 1.1568 |
Technical Overview
USD/JPY – Price is rebounding after a Bullish Engulfing was formed last Friday. It is now testing the 20EMA resistance point at 114.43. Price has to penetrate above this resistance for its previous high at 116.18 again. Both Stochastic and MACD are rising now.
| Support | 114.22 | 113.98 | 113.48 |
| Resistance | 114.70 | 115.04 | 115.46 |
USD/CAD – Our sell order at 1.2500 was filled and being stopped out last Friday when price rebounded to 1.2570. Price is currently having a corrective rebound after being supported by a rising trendline that formed since May 2021. Our view remains bearish and we could look for the strong resistance zone at 1.2634 for sell opportunity. Stochastic is near to the overbought region. MACD is bullish now but the slow line is still below the zero line.
| Support | 1.2470 | 1.2453 | 1.2430 |
| Resistance | 1.2570 | 1.2634 | 1.2654 |
GBP/USD – Price managed to stay above the channel at 1.3605 since the breakout on 11 Jan 2022. It it currently hovering at the channel support. Stochastic is falling and is moving towards the oversold region. MACD remains bullish. Our view remains bullish and we can expect price rebounds to its previous high at 1.3749 over 48 hours.
| Support | 1.3627 | 1.3589 | 1.3513 |
| Resistance | 1.3700 | 1.3749 | 1.3815 |
XAU/USD – Price has been hovering around the resistance zone around $1831. There is divergence warning given from both Stochastic and MACD that warns for a price top. We think it could be the $1831 top and a price correction towards 1782.53 is likely.
| Support | 1810.05 | 1806.20 | 1799.70 |
| Resistance | 1831.00 | 1843.00 | 1854.70 |
NZD/USD – Price rebounded after hitting the previous low support at 0.6783. Our view remains bullish and we are looking at a rally to 0.6890. Stochastic is currently at the oversold region and MACD remains bullish.
| Support | 0.6783 | 0.6733 | 0.6702 |
| Resistance | 0.6793 | 0.6850 | 0.6890 |