Market Talk
– The US dollar consolidated gains on Monday morning after posting its biggest weekly rise in seven months in the previous week as markets priced a year ahead of aggressive hikes in U.S. interest rates and equities markets volatility expected to push it higher in the short-term
– U.S. labour costs increased strongly in the fourth quarter, but less than expected, the Labour Department said. The Employment Cost Index (ECI), the broadest measure of labour costs, rose 1.0% after increasing 1.3% in the prior quarter.
– The euro was at $1.1148, just off last Friday’s low of $1.1119, its weakest since June 2020. The Aussie dollar was at $0.6991; also languishing near Friday’s 18-month low, while sterling was at $1.3401, near the one-month low hit last week.
– The yen was at 115.23 per dollar, in the middle of its recent range, buffeted by the headwind of rising U.S. rates with little prospect of rate hikes at home, but supported by some demand for it as a safe-haven.
– Gold extended declines as growing expectations for multiple U.S. interest rate hikes in the coming months pushed the dollar to a multi-month high, making bullion less attractive for overseas buyers.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 115.20. Stop at 114.90 and profit target at 116.00.
3. Expectations of multiple rate hikes and interest rate differential are both in the US dollar’s favour.
4. Price is likely to be supported by the 20EMA with MACD hinting at a bullish price trend.
Fundamental Comments
1. Expectations of multiple rate hikes in the US is supporting the US dollar.
2. Interest rate differential is in the US dollar’s favour.
Technical Comments
1. Price is likely to be supported by the 20EMA as well as a previous resistance turned support line.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 115.15 | 114.80 | 114.45 |
| Resistance | 115.65 | 115.95 | 116.50 |
Technical Overview
USD/CNH – We saw a sharp price rally to 6.3753 on Thursday and price has been in a consolidation since the high. The consolidation has brought price back to the 20EMA support. If price is able to hold above the 20EMA, we are likely to see another test of 6.3750 again the next few days. Stochastic is in the overbought zone but MACD remains bullish and is hinting at a bullish price trend.
| Support | 6.3575 | 6.3380 | 6.3220 |
| Resistance | 6.3750 | 6.3910 | 6.4080 |
EUR/USD – The decline continues and we saw a new low at 1.1119. We do not see this as the end of the downtrend. We think with Stochastic oversold, we are likely to see a corrective rally higher to the 20EMA resistance around 1.1185 and from there we should see another decline. MACD remains bearish and is hinting at a strong bearish price trend. 20EMA is also hinting at a bearish price trend.
| Support | 1.1140 | 1.1115 | 1.1075 |
| Resistance | 1.1185 | 1.1225 | 1.1265 |
GBP/USD – We had a sell recommendation at 1.3440 last Friday but it was not filled as price only reached a high of 1.3432. Our view remains unchanged. We think the 20EMA can cap the rally and price is likely to decline to test the previous low again at 1.3358. MACD remains bearish. Both MACD and 20EMA are supporting our bearish view but Stochastic is near to the oversold zone.
| Support | 1.3390 | 1.3355 | 1.3295 |
| Resistance | 1.3435 | 1.3490 | 1.3525 |
XAU/USD – After reaching a high of $1853 on Tuesday, we have seen price declined to a low of $1780.10. Stochastic is in the oversold zone but 20EMA is pointing lower with a steep slope and hinting at a strong bearish price trend. MACD is also hinting at a bearish price trend. Price is likely to be capped at $1800 and we are likely to see a decline to $1770 over the next few days.
| Support | 1780.10 | 1770.10 | 1761.80 |
| Resistance | 1792.80 | 1805.60 | 1816.20 |
NZD/USD – Price reached a low of 0.6528 last Friday. The bearish trend remains but we are likely to see a correction with Stochastic in the oversold extreme. The corrective rally is likely to be capped by the 20EMA at 0.6600. From there we could see another decline to 0.6500. MACD remains bearish and is hinting at a bearish price trend. 20EMA is also hinting at a bearish price trend.
| Support | 0.6525 | 0.6490 | 0.6440 |
| Resistance | 0.6560 | 0.6595 | 0.6630 |