Market Talk
– The euro fell onto its weakest in a month as tensions between Russia and the West over Ukraine drew investors to the dollar, a day before the Federal Reserve is expected to reveal details on its plans to tighten monetary policy.
– The announcement, due later in the day, will be closely scrutinized for clues on how aggressive the Fed would be for the rest of 2022 and if it would signal more interest rate hikes to tackle inflation. The Fed is widely expected to hike interest rates in March 2022, followed by three more hikes throughout the year.
– The euro was about flat at $1.1303 after falling to $1.1264 overnight for the first time since Dec. 21, 2021. The Japanese yen strengthened 0.01% at 113.92 per dollar.
– The British pound edged up 0.12% to $1.3512. The U.K. is also dealing with an investigation into whether Prime Minister Boris Johnson potentially breached COVID-19 lockdown rules. The findings of an internal inquiry could be announced later in the day.
– Gold was down on Wednesday morning in Asia as geopolitical concerns over Ukraine pushed investors toward the safe havens bullion, ahead of the FOMC meeting that could offer cues on its monetary policy tightening plan.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.3530. Stop at 1.3565 and profit target at 1.3460.
3. Investigation in UK PM’s breach of lockdown rules and potential conflict in Ukraine are both aiding the US dollar.
4. Price is facing a strong resistance with MACD hinting of a bearish price trend.
Fundamental Comments
1. An investigation into whether UK PM Boris Johnson breached COVID-19 lockdown rules is weighing on the pound.
2. Potential military conflict in Ukraine is aiding the safe haven US dollar.
Technical Comments
1. Price is facing a strong resistance provided by the 20EMA.
2. MACD remains bearish and is hinting of a bearish price trend.
Key Levels
| Support | 1.3490 | 1.3440 | 1.3405 |
| Resistance | 1.3530 | 1.3570 | 1.3605 |
Technical Overview
USD/JPY – A possible Double Bottom chart pattern could be forming after price hit a low of 113.47 for a second time on Monday. Confirmation of this chart pattern will come if price were to move above 115.05. However, price has yet to move above 114.30, which is the next price resistance level. MACD had a divergence but remains bearish. Stochastic has a bearish crossover and hinting of a bearish price trend. Watch the resistance at 115.05 and the support at 113.47 for clues to the next direction.
| Support | 113.45 | 113.00 | 112.70 |
| Resistance | 113.95 | 114.30 | 114.80 |
EUR/USD – Price reached an overnight low of 1.1262 and there were divergence warnings given by the stochastic indicator and the MACD indicator. There is a possibility that price may have reached a low. A price move above 1.1358 would confirm the reversal. However, 20EMA is still hinting at a bearish price trend. We favour another decline to test the previous low of 1.1235.
| Support | 1.1265 | 1.1230 | 1.1185 |
| Resistance | 1.1315 | 1.1365 | 1.1390 |
USD/CAD – After reaching a high of 1.2700, price had declined to the 20EMA support at 1.2595. MACD remains bullish and is hinting at a bullish price trend. Stochastic is still declining, hinting that the correction may not be over as yet. If price can stay above the 20EMA support, we are likely to see another test of the previous high at 1.2700 over the next 48 hours. A price decline below 1.2540 would negate our bullish view.
| Support | 1.2595 | 1.2555 | 1.2515 |
| Resistance | 1.2625 | 1.2670 | 1.2700 |
XAU/USD – We had a buy order at $1834.20 from Monday and yesterday we had placed profit order at $1847.60 while shifting stop higher to cost at $1834.20. Yesterday, our profit order was filled and we are out of this position with a $13.40 profit. Price continues to be supported by the 20EMA, which is a hint of a continuation of the rally. We are likely to see another test of the high at $1853.60 again within the next 24 hours.
| Support | 1846.45 | 1837.30 | 1828.30 |
| Resistance | 1853.60 | 1865.75 | 1877.05 |
AUD/USD – Yesterday, we had a sell order at 0.7165 which was filled when price reached a high of 0.7168. Our view remains unchanged and we would recommend keeping stop at 0.7195 while keeping profit order at 0.7090. Stochastic continues to rise but MACD remains bearish. 20EMA is also hinting at a bearish price trend. We see another decline to test the previous low at 0.7085.
| Support | 0.7130 | 0.7090 | 0.7050 |
| Resistance | 0.7170 | 0.7210 | 0.7255 |