Market Talk
– The U.S. dollar and safe-haven currencies held firm while riskier ones struggled for traction on Monday, with traders on edge about the prospect of war in Europe after the U.S. sounded the alarm on Sunday and unsettled by soaring inflation.
– The Michigan consumer sentiment index was at 61.7, the lowest level in more than a decade, as expectations that inflation will continue to increase in the near term continue to increase, denting the US dollar. However, these expectations are unlikely to derail the Fed from an aggressive monetary path.
– The risk of war in Ukraine pushed the euro down on Friday and it was nursing losses at $1.1346 on Monday, well below last week’s top of $1.1495. The safe-haven yen climbed to 115.53 yen from a five-week low of 116.34 last week.
– Sterling held at $1.3542 on Monday as investors are convinced the Bank of England is hiking rates next month and pricing about a 40% chance of a 50 basis point rise. The Australian was pinned below last week’s level, trading at 0.7122 on Monday while the New Zealand dollar fell 0.5% to $0.6622.
– Gold was lower on Monday morning in Asia, after hitting a near-three-month high at $1865.05 in the previous session with the prospect of war in Europe and soaring inflation aiding the safe haven yellow metal.
Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation.
2. Sell EUR/USD at 1.1390. Stop at 1.1420 and profit target at 1.1265
3. The prospect of war in Ukraine and soaring inflation are both likely to aid the US dollar.
4. Price is facing a strong resistance with MACD hinting at a bearish price trend.
Fundamental Comments
1. The prospect of war in Ukraine is likely to weigh on the Euro.
2. Soaring inflation in the US is likely to lead to a more aggressive rate hike path by the Fed, aiding the US dollar.
Technical Comments
1. Price is likely to be capped by the 20EMA as well as the Fibonacci 38% correction point.
2. MACD has turned bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1.1335 | 1.1305 | 1.1260 |
| Resistance | 1.1370 | 1.1415 | 1.1460 |
Technical Overview
USD/JPY – We had a buy recommendation at 115.75 last Friday but our stop was triggered at 115.35 when price declined to a low of 115.00. We are out of this position with a stop of 40 pips. Stochastic is moving lower and hinting at a bearish price trend but MACD remains bullish and hinting at a bullish price trend. 20EMA has turned bearish. We think price could undergo a correction to 114.15 before the uptrend resumes again.
| Support | 115.25 | 114.90 | 114.55 |
| Resistance | 115.65 | 115.95 | 116.35 |
EUR/JPY – Price had reached a high of 133.14 last Thursday and we have seen a decline to 130.37 last Friday. We are likely to see the decline continue lower to 129.65 in the next few days. MACD had a bearish divergence warning when price hit the high, hinting at a possible price high. However, Stochastic is close to the oversold zone, which could limit the downside. 20EMA is pointing lower with a steep slope, hinting at a bearish price trend.
| Support | 130.50 | 130.05 | 129.60 |
| Resistance | 131.00 | 131.45 | 131.85 |
GBP/USD – Price moved above the previous high of 1.3627 on Thursday but was unable to hold above the previous high. A possible Double Top chart pattern could be forming. We saw a price decline to 1.3525 on Friday and we are likely to see a decline to test the previous low at 1.3492 in the next 48 hours. However, Stochastic, 20EMA and MACD are all hinting at a sideways moving. Our advice would be to watch the break of 1.3490 for clue.
| Support | 1.3530 | 1.3490 | 1.3435 |
| Resistance | 1.3570 | 1.3620 | 1.3660 |
XAU/USD – Price surged to a high of $1865.05 in the previous trading session but we have seen a decline and price is currently below the previous high of $1853.58. MACD remains bullish. 20EMA is also bullish. Stochastic is rising and has yet to reach the overbought zone. These 3 indicators are all hinting at a bullish price trend. We think price can continue to move higher to the next price resistance at $1877.
| Support | 1853.65 | 1841.85 | 1827.95 |
| Resistance | 1865.05 | 1877.00 | 1889.85 |
USD/CHF – We had a buy order at 0.9240 from Wednesday which was filled and we had left stop and profit order at 0.9240 and 0.9320 last Friday. Price went to a low of 0.9236 and our stop was triggered. We are out of this position at cost. However, our view remains unchanged. We think price can go higher to 0.9300 over the next couple of days as long as price stays above 0.9230.
| Support | 0.9235 | 0.9190 | 0.9160 |
| Resistance | 0.9265 | 0.9295 | 0.9340 |