Market Talk
– The euro edged up a little in Asian trading, but was still nursing bruises after two sessions of sharp losses as investors contemplated the implications of a potential imminent Russian invasion of Ukraine driving up demand for the U.S. dollar and the safe-haven yen.
– Investors were spooked overnight by Ukrainian President Volodymyr Zelenskiy’s call for solidarity as well as Fed official James Bullard, who reiterated calls for a faster pace of interest rate hikes on Monday.
– The euro was at $1.1320, up 0.12% on Tuesday, having touched $1.1278 in the previous trading session, its lowest in a week-and-a-half, while the yen was at 115.4 per dollar, after briefly hitting 114.99 on Monday, its strongest in a week.
– The British pound was steady at $1.3540 while the Australian dollar was little changed at $0.7129. The New Zealand dollar stayed near a 1-week low at $0.6615. The Canadian dollar was weaker against the greenback despite oil prices rising to a 7-year high.
– Gold was up on Tuesday morning in Asia, heading towards a three-month peak hit during the previous session. Fears that Russia will invade Ukraine continue to mount and investors pull back from riskier assets, giving the safe-haven yellow metal a boost.
Chart Focus USD/CAD
Key Points
1. Sell USD/CAD recommendation.
2. Sell USD/CAD at 1.2750. Stop at 1.2790 and profit target at 1.2650.
3. A rise in crude oil price and interest rate differential are both in the Canadian dollar’s favour.
4. Price is near to the top of its recent range with both Stochastic and MACD hinting at a bearish price trend.
Fundamental Comments
1. A rise in crude oil price to a 7-year high is likely to benefit the Canadian dollar.
2. Interest rate differential is in the Canadian dollar’s favour.
Technical Comments
1. Price is near to the top of its recent sideways range.
2. Stochastic and MACD are both hinting at a bearish price trend ahead.
Key Levels
| Support | 1.2715 | 1.2675 | 1.2635 |
| Resistance | 1.2755 | 1.2795 | 1.2845 |
Technical Overview
USD/JPY – Price had stayed in a 75 pips range in the past 48 hours as the yen strengthened on the back of its safe haven status as a result of potential conflict in Ukraine. We are likely to see this range over the next 48 hours as MACD is flat and neutral. 20EMA is also flat and neutral at the moment. Stochastic is also approaching the oversold zone, hinting at a possible return to the top of the range. Watch the range boundaries at 115.00 and 115.75 for clues to the next price direction.
| Support | 115.25 | 114.90 | 114.55 |
| Resistance | 115.50 | 115.75 | 116.15 |
EUR/USD – We had a sell call on this pair yesterday but our entry order was not reached. Price has declined to a low of 1.1279 overnight but we think the decline is likely to continue lower to 1.1260 or 1.1230 over the next 48 hours. Stochastic is in the oversold zone but MACD remains bearish. 20EMA is also hinting at a bearish price trend. Only a price move above 1.1380 would negate our bearish price view.
| Support | 1.1280 | 1.1235 | 1.1185 |
| Resistance | 1.1330 | 1.1370 | 1.1415 |
GBP/USD – A confirmation of the Double Top chart pattern was averted last night when price managed to stay above 1.3490. However, the bounce from the overnight low at 1.3494 was weak and was capped by the previous resistance at 1.3550. MACD and the 20EMA are hinting at a sideways range while Stochastic is near to the overbought zone and is hinting at a price decline ahead. Our advice would be to watch the break of 1.3490 or 1.3550 for clue. A move above 1.3550 would call for 1.3627 while a break of 1.3490 would send price to 1.3360.
| Support | 1.3490 | 1.3445 | 1.3390 |
| Resistance | 1.3550 | 1.3595 | 1.3640 |
XAU/USD – Price has moved above a previous high at $1877 this morning and we are likely to see the rally continues towards $1900 in the next couple of days. Stochastic is in the overbought zone but MACD remains bullish. 20EMA is pointing higher with a steep slope, hinting at a bullish price trend. A price decline below $1850 would negate our bullish view for the next few days.
| Support | 1877.00 | 1859.80 | 1850.70 |
| Resistance | 1889.85 | 1900.00 | 1916.45 |
XAG/USD – Price has moved to a high of $23.98 this morning, which is also a previous high resistance. On the 4-hourly chart, a possible bearish Engulfing candlestick price pattern could be forming, which is a sign of a price high and a reversal to follow. Stochastic is also in the overbought zone and MACD is turning down from its extreme point. We could see a decline back to the Fibonacci 50% at $22.95 in the next few days. Above $24.00 could see a price rally to $24.70.
| Support | 23.65 | 23.20 | 22.85 |
| Resistance | 24.00 | 24.30 | 24.70 |