FX Commentary – Currencies In A Holding Pattern Ahead of U.S. Inflation Data

Market Talk

– The dollar was up on Thursday morning in Asia, holding a narrow range as investors turned their attention to the latest U.S. inflation data due later tonight for clues to the next Federal Reserve action.

– Currencies were broadly stuck in a holding pattern on Wednesday ahead of the U.S. data.  The data could also provide further clues about the U.S. Federal Reserve’s timeline to tighten its monetary policy.

– Fed fund futures traders are already pricing in more than five 25 basis point interest rate hikes by December 2022, with a 27% chance that the first hike in March will be by 50 basis points. However, Cleveland Federal Reserve President Loretta Mester dented the 50bp view.

– The Australian dollar was not far from the $0.7194 touched the day before, which was near a three-week high. The kiwi was near a two-week high of $0.6697 hit on Wednesday. The improved risk sentiment also weighed slightly on the safe-haven yen, which traded near the weak end of a recent range.

– Gold was down on Thursday morning in Asia, remaining within a tight range. Investors now await the latest U.S. inflation data, which could offer further clues about the Federal Reserve’s timeline for monetary policy tightening.

Chart Focus EUR/JPY

Key Points

1. Buy EUR/JPY recommendation.

2. Buy EUR/JPY at 132.00. Stop at 131.65 and profit target at 133.40.

3. A divergence monetary policy is likely to favour the Euro over the yen.

4. An Ascending Triangle chart pattern and a bullish MACD are both hinting at a price rally.

Fundamental Comments

1. The ECB is likely to hike rate in 2022 while the BOJ is likely to keep rate steady in 2022.

2. Interest rate differential and bond yields are both in the Euro dollar favour.

Technical Comments

1. Price could be forming an Ascending Triangle chart pattern, which is a hint of a bullish price trend.

2. MACD remains in a bullish trend and is hinting of a bullish price trend.

Key Levels


Technical Overview

USD/JPY – Price is trying to move above the previous high resistance at 115.67. A break above this point would open the way for a test of 7 Jan 2022 high at 115.95. Stochastic is rising and hinting at a rising price trend. MACD is bullish and hinting at a bullish price trend. 20EMA is also hinting at a bullish price trend. A price move below 114.05 would negate our bullish view.


EUR/USD – We had a sell order on Tuesday at 1.1415 which was filled when price moved to a high of 1.1432. Yesterday, we had recommended keeping stop loss at 1.1455 and profit target at 1.1310. Price went to a high of 1.1447 overnight and both our stop and profit orders were not triggered. We would suggest keeping stop and profit unchanged for today. MACD and 20EMA are flat while Stochastic is about to have a bearish crossover, hinting at a bearish price trend ahead.


GBP/USD – Price moved past the Fibonacci 62% correction point yesterday but eased back below and declined to a low of 1.3530. Price has also declined below the 20EMA, which is currently hinting at bearish price trend. MACD is also in the bearish zone and is hinting at a bearish price trend. However, Stochastic is in the oversold zone and is moving higher, hinting at a bullish price trend. We would prefer to wait for better opportunities and the inflation data.


XAU/USD – Our view remains unchanged from yesterday. As price had moved above the Fibonacci 62% correction point, we are expecting price to move higher to test the previous high at $1853 in the next couple of days. Stochastic is in the overbought zone. MACD remains in the bullish zone and is hinting at a bullish price trend. 20EMA is also hinting at a bullish price trend.


USD/CHF – Yesterday, we had a buy order at 0.9240, which was filled when price declined to a low of 0.9221. For today, we would recommend keeping stop at 0.9210 and profit order at 0.9320. MACD remains bullish but Stochastic is near to the overbought zone. 20EMA is also bullish and hinting at a bullish price trend. Tonight inflation data would affect the chart view, so caution is advised.


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