– The dollar fell on Wednesday due to the retreat of U.S. Treasury yields after hitting roughly two-year peaks on 2-year and 10-year notes but it remains steady as investors prepared for a widely expected interest rate increase in March.
– The Fed’s meeting is on next week and they will likely provide clarity and details on the end of quantitative easing, possibly in March. The U.S. central bank could also signal the interest rates hike in March, right after ending QE.
– Sterling rose after data showed British inflation rose to 5.4% in December, its highest level in 30 years, raising rate hike expectations. Talks of a leadership challenge to Prime Minister Boris Johnson have kept the pound in check.
– The euro dropped to a 23-month low versus sterling after the red-hot UK inflation data. The pound was supported by the surge in UK yields, with the two-year gilt yield rising to 0.958%, its highest level since March 2018.
– Gold prices steadied near a two-month high hit on Thursday, with higher U.S. Treasury yields preventing any gains amid caution building around developments at the Fed’s meeting due next week.
Chart Focus XAU/USD
Key Points
1. Buy XAU/USD recommendation.
2. Buy XAU/USD recommendation at 1830.00. Stop at 1820.00 and profit target at 1856.00.
3. Retreat in dollar ahead of Fed’s meeting due next week and Ukraine’s tensions spark a rally in precious metals.
4. 20EMA and a Flag breakout hint at potential upside ahead.
Fundamental Comments
1. Dollar retreats ahead of next week Fed’s meeting.
2. Geopolitical tensions surrounding Ukraine lifted safe-haven.
Technical Comments
1. Price has moved above the 20EMA.
2. Price broke out from a Flag pattern and penetrated above its recent price high.
Key Levels
| Support | 1833.95 | 1829.00 | 1820.30 |
| Resistance | 1844.00 | 1857.80 | 1865.70 |
Technical Overview
EUR/USD – Price has been on a decline after violating a Double Top chart pattern. It is currently resisted by the falling 20EMA resistance point at 1.1366, which is also near to the strong resistance price zone. Stochastic is still weak despite having a bullish crossover. MACD is trading below the zero line, confirming the bearishness. Price is likely to continue its fall if it could not penetrate above the 20EMA.
| Support | 1.1314 | 1.1284 | 1.1260 |
| Resistance | 1.1366 | 1.1434 | 1.1478 |
USD/JPY –Price has been on a retracement after a consecutive five days’ rally. Our buy order was filled on 18 Jan 2022, but the stop-loss was triggered yesterday. This correction is likely to halt at the Fibonacci 62% correction point at 114.08. Stochastic is near to the oversold region. MACD has turned bearish but a bullish crossover is likely in the coming session. The yen is likely to rebound from this support level.
| Support | 114.02 | 113.47 | 113.22 |
| Resistance | 114.45 | 115.05 | 115.60 |
GBP/USD – Price has been declining aftePrice has been declining after reaching a high at 1.3748 on 13 Jan 2022. It is currently testing the 20EMA resistance point at 1.3630. Stochastic is rising but MACD has turned bearish. Price could move higher towards its previous high resistance at 1.3748 if it able to penetrate above the 20EMA.
| Support | 1.3572 | 1.3532 | 1.3490 |
| Resistance | 1.3648 | 1.3689 | 1.3748 |
NZD/USD – Our sell order was filled yesterday. A corrective rebound occurred on 18 Jan 2022, but this rebound is short-lived. It was resisted by the 20EMA resistance point. A Spinning Top candlestick pattern was formed at this resistance zone and price is now heading lower towards its previous low at 0.6751. Price could decline further till 0.6715 if it violates its previous low.
| Support | 0.6751 | 0.6733 | 0.6714 |
| Resistance | 0.6776 | 0.6790 | 0.6810 |
USD/CHF – Price pullback after hitting the support-turned-resistance level. However, this correction appears to halt at the Fibonacci 38% correction point of 13-18 Jan 2022’s rally. 20EMA is flat, suggesting the current neutral outlook. Stochastic is falling but MACD remains bullish. It is likely to rebound from this support level to retest the support-turned-resistance level at 0.9178.
| Support | 0.9141 | 0.9122 | 0.9091 |
| Resistance | 0.9169 | 0.9178 | 0.9205 |