Market Talk
– The US dollar rose in Asia on Friday after hotter-than-expected U.S. inflation and hawkish comments from a Federal Reserve official unleashed a wave of bets on aggressive rate hikes, though similar pressures worldwide kept a lid on gains.
– U.S. Labour Department data showed U.S. consumer prices up 7.5% year-on-year in January, a fourth straight month above 6% and slightly higher than economists’ forecasts for a 7.3% rise and marking the biggest annual increase in inflation in 40 years.
– St. Louis Fed President James Bullard told Bloomberg after the data’s release that he wanted to see a full percentage point worth of rate hikes from the Fed over the next three policy meetings, sending US 10-year Treasury yields above 2%.
– The greenback jumped to a five-week high of $116.34 against yen during volatile overnight trade. The euro was last down 0.4% at $1.1382 and the Australian and New Zealand dollars each dropped more than 0.5%.
– Gold was down on Friday morning in Asia, with stronger-than-expected U.S. inflation data and hawkish comments from a Federal Reserve policymaker increasing bets of a substantial interest rate hike. U.S. Treasury yields were also higher after the data weighing on Gold.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 115.75. Stop at 115.35 and profit target at 116.95
3. Increasing bets of a substantial US interest rate hike and interest rate differential are both in the U.S. dollar interest.
4. The price has a strong support and MACD is hinting at a bullish price trend. Together, both are hinting at a price rally.
Fundamental Comments
1. Increasing bets of a substantial US interest rate hike is aiding the US dollar.
2. Interest rate differential is in the US dollar’s favour.
Technical Comments
1. The 20EMA and a previous high resistance turned support are both likely to support price.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 115.70 | 115.35 | 114.90 |
| Resistance | 116.10 | 116.60 | 117.00 |
Technical Overview
EUR/JPY – Yesterday, we had a buy order at 132.00 but price only reached a low of 132.02 and our entry order was not filled. Price reached a high of 133.14 overnight but has declined to 132.15 at the time of this writing. We have probably seen the high and a decline 131.20 is likely in the next couple of days. Stochastic is near to the oversold zone but 20EMA has turned bearish and hinting at a bearish price trend. MACD could be about to turn bearish as well.
| Support | 132.00 | 131.60 | 131.25 |
| Resistance | 132.35 | 132.65 | 132.95 |
EUR/USD – We had a sell order on Tuesday at 1.1415 which was filled. Yesterday, we had left stop loss at 1.1455 and profit target at 1.1310. Our stop was triggered and we lost 40 pips on this trade. Price had declined below 1.1395 this morning, which triggered a Double Top chart pattern. Price could be heading to the target at 1.1295 in the next few days ahead. MACD and 20EMA had turned bearish and stochastic is declining and hinting at a bearish price trend.
| Support | 1.1355 | 1.1315 | 1.1270 |
| Resistance | 1.1395 | 1.1445 | 1.1490 |
GBP/USD – Price moved above the previous high of 1.3627 overnight but was unable to hold above the previous high. We saw a price decline to 1.3525 at the point of this writing and we are likely to see a decline to test the previous low at 1.3492 in the next 24 hours. A break of this support will confirm a Double Top chart pattern and call for a decline to 1.3350 in the next few days. Stochastic is declining towards the oversold zone. Both MACD and 20EMA are hinting at a bearish price trend.
| Support | 1.3490 | 1.3435 | 1.3395 |
| Resistance | 1.3535 | 1.3570 | 1.3620 |
XAU/USD – Price reached a high of $1841.86 overnight and we have seen a decline to $1822 at the point of this writing. We are likely to see a continuation of this decline to $1810 in the next 48 hours. Stochastic is declining from the overbought zone. MACD, while bullish, is declining from an extreme high. 20EMA has turned bearish and is hinting at a bearish price trend. Only a price move above $1842 will negate this bearish view.
| Support | 1815.25 | 1801.95 | 1788.40 |
| Resistance | 1827.95 | 1841.85 | 1853.65 |
USD/CHF – We had a buy order at 0.9240 on Wednesday, which was filled when price declined to a low of 0.9221. Yesterday, we had left stop order at.9210 and profit order at 0.9320. Last night, price rallied to high of 0.9296 before a decline to 0.9225. Price is higher this morning at 0.9270. For today, we would recommend bringing stop higher to cost at 0.9240 while keeping profit target unchanged at 0.9320. Stochastic, MACD and 20EMA are all hinting at a bullish price trend.
| Support | 0.9250 | 0.9220 | 0.9175 |
| Resistance | 0.9295 | 0.9340 | 0.9375 |