Market Talk
– The U.S. dollar was up on Wednesday morning in Asia as currency markets paused for breath after a choppy few sessions as whipsawed markets looked to get a handle on the latest developments in Eastern Europe amid a deepening crisis in Ukraine.
– The US imposed sanctions targeting Russia’s sale of sovereign debt abroad and the country’s elites after Russian President Vladimir Putin ordered Russian troops to “maintain peace” in the two breakaway regions in eastern Ukraine on Monday.
– The Kiwi jumped to its highest in 4 weeks to $0.6770 after the Reserve Bank of New Zealand hiked its interest rates for the third straight meeting to tame inflation. The bank also said there could be more tightening to tame inflation.
– The euro was holding steady at $1.1325, sterling was pinned at $1.3593, and the safe haven yen and Swiss franc also took a breather having dropped sharply as investors held out hopes a major war over Ukraine could be averted.
– Gold was down on Wednesday morning in Asia, as a rise in Treasury yields offset safe haven status following U.S. and European sanctions on Russia after Russian President Vladimir Putin recognized two breakaway regions in the country and ordered troops to the area.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 115.00. Stop at 114.70 and profit target at 115.70
3. A rise in US Treasury yields and interest rate differential are both in the US dollar favour.
4. Price is supported by the 20EMA with Stochastic and MACD both hinting at a price rally.
Fundamental Comments
1. A rise in US Treasury yields is aiding the US dollar.
2. Interest rate differential is in the US dollar favour.
Technical Comments
1. Price is supported by the 20EMA
2. Stochastic is rising while MACD had given a divergence warning of a possible price low.
Key Levels
| Support | 114.95 | 114.50 | 114.10 |
| Resistance | 115.25 | 115.55 | 115.85 |
Technical Overview
EUR/JPY – After reaching a low of 129.35, a price rally was capped by the 20EMA. We think the 20EMA is likely to cap and we are likely to see another price decline lower to 129.35 again. MACD remains bearish and is hinting at a bearish price trend. Stochastic is rising but we could see a bearish crossover in the near future. A price move above 131.00 would negate our bearish view.
| Support | 130.15 | 129.70 | 129.35 |
| Resistance | 130.45 | 130.90 | 131.45 |
EUR/USD – We had short position at 1.1370 from Monday and yesterday, we had lowered stop to 1.1335 while keeping profit order at 1.1285. Unfortunately, price moved above our stop and we are out with a 35 pips profit. Stochastic is declining but is close to the oversold zone. MACD and 20EMA are both neutral and is hinting at a sideways movement.
| Support | 1.1320 | 1.1280 | 1.1240 |
| Resistance | 1.1360 | 1.1395 | 1.1425 |
GBP/USD – Price moved below 1.3570 overnight but price only declined to 1.3538 and there was a quick bounce higher to the 20EMA at 1.3600. Price has been capped by the resistance at 1.3647 and supported by the low at 1.3490 and we think price is likely to stay within this range until Bank of England monetary policy meeting in mid-March or until we see a break of this range.
| Support | 1.3565 | 1.3525 | 1.3490 |
| Resistance | 1.3600 | 1.3640 | 1.3670 |
XAU/USD – We seen another move to the high at $1913.38 overnight but this move was accompanied by divergence warnings from both the Stochastic and the MACD indicator. This is a warning of a possible price high. There was also an Evening Star candlestick price pattern hinting at a price reversal as well. We think price could be heading lower to the next support at $1879 in the next couple of day.
| Support | 1886.50 | 1875.30 | 1861.35 |
| Resistance | 1900.95 | 1913.85 | 1930.35 |
USD/CAD – We had a sell order at 1.2760 yesterday which was filled when price rallied to a high of 1.2783. Our view remains unchanged. We would recommend keeping orders at 1.2795 for stop and 1.2660 for profit target. Stochastic is declining and is hinting of a bearish price trend. MACD remains bullish but a divergence would be developing. 20EMA remains bullish and is hinting at a bullish price trend.
| Support | 1.2720 | 1.2690 | 1.2650 |
| Resistance | 1.2760 | 1.2795 | 1.2835 |