Market Talk
– The US dollar declined to a more than a one-week low on Wednesday after data showed a drop in U.S. private sector employment in January due to the increase in COVID-19 infections and Fed officials ruled out a 50-basis-point increase in the benchmark overnight interest rate in March.
– ADP reported on Wednesday that U.S. private payrolls dropped by 301,000 jobs in January. Data for December was revised lower to show 776,000 jobs added instead of the initially reported 807,000. However, the data is unlikely to prevent the Fed from hiking interest rates at the March 15-16 policy meeting.
– The euro gained for a third consecutive day, coming off a 20-month low last week, as euro zone inflation rose to a new record high of 5.1% last month, up more than twice the ECB’s 2% target. That fueled bets the European Central Bank could raise interest rates sooner than expected.
– Sterling rose 0.4% to $1.3584, after earlier hitting a nearly two-week peak against the dollar at $1.3587 ahead of a Bank of England policy meeting on Thursday. Investors have fully priced in an expected increase in the BoE base rate by 25 basis points to 0.5% later today.
– Spot gold added 0.3% to $1,806.81 an ounce despite a downbeat jobs report and underpinning demand for the safe-haven metal amid simmering tensions between Russia and the West over Ukraine.
Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation.
2. Buy NZD/USD at 0.6600. Stop at 0.6570 and profit target at 0.6700.
3. A softer US labour market and a scaling back of hike’s expectation is weighing on the US dollar.
4. Price is likely to be supported by a strong support point with MACD hinting at a bullish price trend.
Fundamental Comments
1. A softer labour market is likely to limit the Federal Reserve ability to hike rates more aggressively.
2. A scaling back of US rate hikes expectation is likely to weigh on the US dollar.
Technical Comments
1. Price is likely to be supported by the Fibonacci 38% support as well as the 20EMA line.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 0.6595 | 0.6560 | 0.6525 |
| Resistance | 0.6625 | 0.6665 | 0.6705 |
Technical Overview
USD/JPY – Our buy call on Monday was wrong and we lost 30 pips on this trade. Price had reached a low of 114.13 in the form of a Hammer candlestick price pattern on the 4-hourly chart. Stochastic is also in the oversold zone and MACD is turning up. These could be signs that price may have hit a bottom and could be moving higher. However, 20EMA remains bearish.
| Support | 114.15 | 113.80 | 113.45 |
| Resistance | 114.60 | 114.90 | 115.15 |
EUR/USD – Price reached a low of 1.1119 last Friday and from that low, we have seen a reversal that has brought price to high of 1.1330. The Fibonacci 62% of the decline from 1.1481 to the low at 1.1119 comes in at 1.1343. Price will need to move above this resistance to negate the bearish price trend. Stochastic is in the overbought zone but both MACD and 20EMA are bullish and hinting at a bullish price trend.
| Support | 1.1280 | 1.1230 | 1.1185 |
| Resistance | 1.1330 | 1.1370 | 1.1405 |
GBP/USD – Price had reached a low of 1.3358 last Thursday and we have seen a rally to 1.3578 last night. However, the rally in price is still below the Fibonacci 62% of the decline from the high of 1.3748 to the low at 1.3358. Unless price can move above 1.3600, we are likely to see another decline back to 1.3470 in the next 1-2 days. Stochastic is in the overbought zone and hinting at a price decline but both MACD and 20EMA re hinting at a bullish price trend.
| Support | 1.3535 | 1.3500 | 1.3470 |
| Resistance | 1.3585 | 1.3625 | 1.3665 |
XAU/USD – Last night, we saw a new high at $1810.58 but this high was accompanied by a divergence warning from the stochastic indicator. MACD remains bullish but is weak. This could be a sign that price has reached a high and we could see a decline to $1795.35 in the next 24-48 hours. 20EMA remains bullish and is complicating things at the moment. We still favour a short term decline to $1795.35.
| Support | 1800.45 | 1793.45 | 1780.10 |
| Resistance | 1810.80 | 1822.20 | 1835.75 |
USD/CHF – From Monday’s high at 0.9342, we have seen a price decline to 0.9176. This is also the resistance turned support line. If price is able to hold above this support, we could see a rally to test 0.9235. However, a break of this support is likely to send price lower to 0.9110 in the next 48 hours. The stochastic indicator remains in the oversold zone and MACD is turning up. Both are hinting at a price rally but 20EMA is hinting at a bearish price trend ahead.
| Support | 0.9170 | 0.9145 | 0.9105 |
| Resistance | 0.9200 | 0.9235 | 0.9275 |