Market Talk
– The dollar was down on Friday morning and was set for the worst week in nearly two years on Friday as the euro held firm at a three-week high and sterling gained, after hawkish shifts from the European Central Bank and the Bank of England.
– U.S. non-farm payroll data is due later Friday, but the data won’t be as crucial for the Fed as in the past, as the focus is more on inflation rather than full employment. Canadian job data will also be released at the same time as the US labour data.
– The euro was at $1.1452, it’s highest since Jan. 14, after ECB president Christine Lagarde acknowledged mounting inflation risks and hinted on Thursday that it could reverse its dovish stance and hike interest rates in 2022.
– Sterling was at $1.3604 having risen to a two-week top of $1.3626 on Thursday. In addition to the BoE’s 25 basis points rate hike, nearly half of its policymakers wanted a bigger increase to contain rampant inflation.
– Gold was up on Friday morning in Asia and set for a weekly gain. A weakening US dollar, alongside continuing concerns over high inflation, and U.S.-Russia tensions over Ukraine gave the safe-haven yellow metal a boost.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 114.85. Stop at 114.55 and profit target at 115.70.
3. With US likely to hike rate, the difference in interest rate and yields are both likely to aid the US dollar.
4. Price is likely to be supported with MACD hinting at a bullish price trend.
Fundamental Comments
1. The Fed is likely to hike interest rate while the BOJ is likely to keep rate steady which is likely to weigh on the yen.
2. Interest rate differential is in the US dollar’s favour.
Technical Comments
1. Price is likely to be supported by the Fibonacci 38% support zone and 20EMA.
2. MACD is turning bullish and is hinting at a bullish price trend.
Key Levels
| Support | 114.80 | 114.45 | 114.10 |
| Resistance | 115.15 | 115.65 | 116.00 |
Technical Overview
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. Price has managed to hold above the support line but the rally was capped by a previous resistance at 0.9235. We are likely to see price range from 0.9180 to 0.9235 in the next couple of days. MACD and 20EMA remains bearish. However, Stochastic is rising and hinting at a bullish price trend.
| Support | 0.9180 | 0.9145 | 0.9105 |
| Resistance | 0.9235 | 0.9275 | 0.9320 |
EUR/USD – Price reached a low of 1.1119 last Friday and from that low, we have seen a rally that has brought price to high of 1.1471. Expectations of ECB rate hike are likely to keep the Euro strong. MACD is bullish and 20EMA is hinting at a strong bullish price trend. However, Stochastic is in the overbought zone and we are likely to see a corrective decline before the uptrend resumes.
| Support | 1.1450 | 1.1405 | 1.1385 |
| Resistance | 1.1480 | 1.1515 | 1.1550 |
GBP/USD – Price had reached a low of 1.3358 last Thursday and we have seen a rally to 1.3627 last night. Stochastic is in the overbought zone and hinting at a price decline. 20EMA is hinting at a bullish price trend but MACD is developing a divergence warning, hinting at a possible price high in the making. We think price is likely to go into a corrective decline to the Fibonacci 50% of the rally from last week low to the overnight high at 1.3495 in the next 24 hours.
| Support | 1.3580 | 1.3535 | 1.3500 |
| Resistance | 1.3625 | 1.3665 | 1.3700 |
XAU/USD – Price could be going into a sideways consolidation for the next couple of days. MACD is bullish but has turned flat near to the zero line. 20EMA is also flat and hinting at a sideways movement. Stochastic is close to the overbought zone. Fibonacci 50% correction point is also likely to cap the rally at $1816.90. We would prefer to stay aside and wait for better trading opportunities.
| Support | 1801.95 | 1793.45 | 1780.10 |
| Resistance | 1816.90 | 1828.30 | 1838.60 |
NZD/USD – We had a buy recommendation on this pair yesterday but our entry order at 0.6600 was not filled as price only reached a low of 0.6623. Price has moved higher this morning to a high of 0.6682. A possible divergence warning is developing on the MACD indicator warning of a potential price high. Stochastic is also into the overbought zone and is hinting at a price decline. 20EMA remains bullish.
| Support | 0.6650 | 0.6610 | 0.6580 |
| Resistance | 0.6680 | 0.6710 | 0.6750 |