FX Commentary – US Rallied With Rise In US Treasury Yield

Market Talk
– The US dollar was up on Monday morning in Asia, as investors braced for a Federal Reserve meeting, which is expected to confirm the start of tapering. Tensions between the U.S. and Russia over Ukraine also supported the greenback.

– Market focus is now shifting to the U.S. Federal Reserve’s meeting on Jan. 25-26, and economists polled by Reuters expect the central bank to tighten policy at a much faster pace than thought a month ago to tame persistently high inflation.

– US 10-year Treasury yield crept up toward 1.77% on Monday after their fall during the previous week, keeping the dollar at $113.84 and uncomfortably close to last week’s low of $113.47, despite the Japanese yen benefiting from safe haven flows.

– The euro was stuck at $1.1324, having failed to sustain a recent rally to near $1.1500. The British pound was weaker at $1.3547 after weak UK retail sales last Friday weighed on the British pound.

– Gold was up on Monday morning in Asia but remained little changed. Tension in Europe helped the yellow metal but was offset by a rise in US 10-year Treasury yield which rose close to early 2020 high.

Chart Focus Gold

Key Points

1. Buy Gold recommendation.

2. Buy Gold at $1834.20. Stop at $1827.50 and profit target at $1847.60

3. Tension in Europe and a decline in US equity market are both helping the safe haven yellow metal.

4. Price is supported by the 20EMA with MACD hinting at a bullish price trend.

Fundamental Comments

1. Tension in Europe is helping the yellow metal.

2. A decline in the US equity market is also helping the yellow metal.

Technical Comments

1. Price is supported by the 20EMA, which is also hinting at a price rally.

2. MACD is bullish and is hinting of a bullish price trend.

Key Levels


Technical Overview

USD/JPY – Price is currently close to the Fibonacci 261.8% of the decline from 115.95 to the low at 115.03. Price will need to hold above this level. Stochastic is already in oversold extreme but MACD is in the bearish zone. 20EMA is also hinting at a bearish price trend like the MACD. We would prefer to stay on the bullish side. Watch the support at 113.55 for clue to the next direction.


EUR/USD – The price rally on Friday was capped by the 20EMA resistance at 1.1350. Unless price can move above this point, we are likely to see a decline to 1.1270, which was the previous low on 7 Jan 2022. Stochastic has a bearish crossover and is hinting at a bearish price trend. MACD is also in the bearish zone and is hinting at a bearish price trend. 20EMA remains bearish.


GBP/USD – The price rally on Friday was capped by the 20EMA resistance at 1.3630 and price is currently in a declining trend channel heading for the Fibonacci 38% correction point at 1.3525. The Fibonacci correction point was taken from the low at 1.3165 on 8 Dec 2021 to the high on 13 Jan 2022 at 1.3748. MACD is hinting with a divergence of a potential price low and Stochastic is in the oversold zone.


USD/CAD – We had a buy call last Thursday which was filled at 1.2510 when price declined to a low of 1.2505. Our view remains unchanged and we would recommend keeping profit target at 1.2600 and to bring stop higher to 1.2545. MACD remains bullish and Stochastic has room to move higher. Both are hinting of a price rally. 20EMA is also hinting of a bullish price trend.


NZD/USD – Last Friday, we were expecting the rebound to be corrective and a decline to 0.6715. Price has reached a low of 0.6710 this morning. If price can hold above the 0.6700 support, we are likely to see a bounce higher to 0.6810 but a break below 0.6700 will see a decline to 0.6595. Stochastic is already in the oversold zone but MACD and 20EMA are both hinting at a strong bearish price trend. Watch the support at 0.6700.


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