Market Talk
– The US dollar was up on Thursday morning in Asia, hitting multi-week highs against other major currencies after U.S. Federal Reserve chair hinted at imminent interest hikes beginning in March after the Fed left interest rate unchanged at 0.25% in its FOMC meeting last night.
– Powell signaled a sustained battle to curb high inflation, saying there was “quite a bit of room to raise interest rates without threatening the labour market” and that the Fed would likely begin hiking interest rates in March 2022.
– The euro was sold to a six-week low of $1.1215. The yen inched a fraction lower to 114.74 per dollar on Thursday. Sterling is testing support at $1.3454, as investors keep an eye on the turmoil enveloping Prime Minister Boris Johnson, who is under pressure after attending parties during lockdowns.
– The Australian dollar fell about 0.4% to a seven-week trough of $0.7076. The New Zealand dollar headed for a sixth consecutive session of selling and touched an almost 15-month low of $0.6626, despite data showing inflation there running at a 30-year high.
– Gold extended losses, falling the most in two months as the US dollar and Treasury yields bounced after U.S. Federal Reserve Chairman Jerome Powell signalled a shift away from pandemic-era economic support measures, with the central bank on course for a March interest rate hike.
Chart Focus EUR/JPY
Key Points
1. Buy EUR/JPY recommendation.
2. Buy EUR/JPY at 128.70. Stop at 128.40 and profit target at 129.40.
3. An improvement in risk sentiment and interest rate differential are both weighing on the safe haven yen.
4. Price was supported at an important level with an MACD divergence warning of a potential low.
Fundamental Comments
1. An improvement in risk sentiment is weighing on the safe haven yen.
2. Interest rate differential is in the Euro dollar favour.
Technical Comments
1. Price correction was supported by the Fibonacci 62% correction point, hinting at an end of the correction.
2. MACD has a divergence warning of a potential price low and a reversal.
Key Levels
| Support | 128.50 | 128.20 | 127.80 |
| Resistance | 129.00 | 129.45 | 129.75 |
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. Price is moving higher and this morning, we saw price hit a high of 114.78. Confirmation of this chart pattern will come if price were to move above 115.05. Stochastic is in the overbought zone. MACD and 20EMA are both bullish and hinting at a continuation of the price rally.
| Support | 114.45 | 114.10 | 113.80 |
| Resistance | 114.80 | 115.10 | 115.45 |
EUR/USD – Price reached an overnight low of 1.1262 on the back of the FOMC meeting and Powell’s comments. Stochastic is still declining and hinting at a bearish price trend. MACD remains bearish and is hinting at a bearish price trend. 20EMA is pointing lower with a steep slope, which is a hint of a strong bearish price trend. We think the decline could continue lower to 1.1185 in the next 24 hours.
| Support | 1.1185 | 1.1145 | 1.1100 |
| Resistance | 1.1225 | 1.1265 | 1.1315 |
GBP/USD – Yesterday, we had a sell call at 1.3530 but the entry order was not filled as price only reached a high of 1.3524, missing our entry by 6 pips. Price had declined to 1.3430 this morning and we are like to see a continuation of the decline to 1.3390. Stochastic is declining, hinting at a price decline. MACD remains bearish but could be developing a divergence warning. 20EMA is pointing lower with a steep slope, which is a hint of a strong bearish price trend.
| Support | 1.3405 | 1.3350 | 1.3295 |
| Resistance | 1.3445 | 1.3490 | 1.3525 |
XAU/USD – After reaching a high of $1853 on Tuesday, price has been on a decline. We have reached a low of $1811.75 this morning and the decline is likely to continue to $1805.60 in the next 24 hours. Stochastic is still on the decline, confirming our view of a price decline. MACD remains bearish and is hinting at a bearish price trend. 20EMA is bearish and hinting at a bearish price trend as well.
| Support | 1805.60 | 1794.10 | 1783.15 |
| Resistance | 1816.20 | 1828.05 | 1838.55 |
AUD/USD – We had a sell order which was filled on Tuesday at 0.7165 and yesterday, we had left stop at 0.7195 and profit order at 0.7090. Our profit order was filled this morning and we are out of this position with a profit 75 pips. Stochastic is declining after a bearish crossover, which is a hint of a bearish price trend ahead. MACD and 20EMA remain bearish and hinting at a bearish price trend.
| Support | 0.7050 | 0.6990 | 0.6950 |
| Resistance | 0.7090 | 0.7130 | 0.7170 |