FX Commentary – Dollar Fell On High Inflation And Tightening Monetary Policy Fears

– The dollar was down on Friday morning as fears on high inflation and tightening monetary policy soured investor sentiment, driving gains for the safe-haven Japanese yen vis-a-vis the riskier Australian dollar.

– U.S. Fed will convene for a two-day policy meeting to hand down its policy decision starting Tuesday, and it will give clues to investors for both interest rate hikes and asset tapering.

– The Aussie lapsed to $0.7184, having been as high as $0.7275 on Thursday, and was down 0.5% on the week as global stock markets undermined risk assets, but gave bonds a reprieve from recent selling.

– The kiwi dollar lagged further behind at $0.6724, in part because the Aussie was up 0.9% for the week on the kiwi at NZ$1.0687 and near a six-month top. Sterling lost 0.05% to $1.3586, nearing its lowest since Jan. 11 while euro slipped 0.06% to $1.1303, matching Thursday’s low, which was its weakest level since Jan. 10.

– Gold prices edged higher on Friday and were set for a second weekly gain, as safe-haven demand and lower U.S. bond yields lifted the metal’s appeal, while investors look forward to Fed’s meeting for clues to its tightening timeline.

Chart Focus USD/CAD

Key Points

1. Buy USD/CAD recommendation.

2. Buy USD/CAD recommendation at 1.2510. Stop at 1.2480 and profit target at 1.2600.

3. The benchmark yield’s advance and expectations of US rate hikes are likely to aid on US dollar.

4. Price is ranging now and divergence warning from Stochastic that hints at possible rebound.

Fundamental Comments

1. U.S. interest rate nears to its two-year high, which weigh on the dollar.

2. Expectation of US rate hikes will aid on US dollar.

Technical Comments

1. Price has been consolidating at 13 Jan 2022’s low for six consecutive sessions.  

2. There is divergence warning given from Stochastic that hints at possible price low.

Key Levels


Technical Overview

EUR/USD – Price is trading near to its support zone and could have formed a Bullish Harami reversal candlestick pattern. A close above 1.1329 would confirm the Harami pattern and we could see price rebounding towards the 20EMA resistance point at 1.1349. There is potential divergence warning given from both Stochastic and MACD that hints at possible price low.


USD/JPY –Price has been on a decline after violating the 20EMA support. It could be on the way heading lower towards its previous support zone at 113.57. The 20EMA is falling now, hinting at a bearish price trend now. Both Stochastic and MACD confirm the bearish trend and there is no sign of rebound yet.


GBP/USD – Price has been declining after reaching a high at 1.3748 on 13 Jan 2022. It has moved below the 20EMA which is now becoming the resistance point to the price. Should price stabilize at its recent low support of 1.3572, we are likely to see price rebounding from there. Both Stochastic and MACD are falling.


XAU/USD – Price is currently consolidating after breaking out from a Flag pattern and its previous price high resistance zone. The 20EMA is rising, confirming the bullish price trend. Both Stochastic and MACD are strong and bullish and a bullish Stochastic crossover is likely. We could see price rebounding if it able to hold at the 20EMA support at 1832.  


NZD/USD – Our sell order was filled on 19 Jan 2022 and our profit target was reached yesterday. A corrective rebound occurred on 18 Jan 2022, but this rebound was short-lived. It was resisted by the 20EMA resistance point and it has violated its previous low support level. We could see price heading lower towards 0.6715. Both Stochastic and MACD are bearish now.


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