FX Commentary – Gold Extended Its Rally On Stagflation Fears

Market Talk

– The U.S. dollar was down on Wednesday morning in Asia, while commodity currencies also fell from recent highs, as investors calculate that sky-high energy, grains, and metals prices could decrease demand in the long run.

– The euro steadied in early trade, recovering from a 22-month low of $1.0806 hit on Monday to trade at the $1.0898 mark. News that the European Union was reportedly discussing joint bond issuance gave the single currency a boost.

– The Australian dollar steadied and is about 2% below Monday’s four-month high of $0.7440. The recent move towards commodity currencies as rising export prices boost terms of trade also appears to be slowing down. Increasing raw material costs are also acting as a tax on consumers and are hindering economic growth.

– Surging oil costs are also dulling the lustre of the yen as a safe haven, since import spending propelled Japan to its largest current account deficit since 2014 in January. The yen touched a three-week low of 115.87 on Wednesday.

– Gold extended its rally towards a record high, after investors made a beeline for the traditional safe-haven metal on mounting fears around the Russia-Ukraine crisis, with the U.S. and Britain saying they would ban oil from Moscow.

Chart Focus EUR/USD

Key Points

1. Sell EUR/USD recommendation.

2. Sell EUR/USD at 1.0940. Stop at 1.0970 and profit target at 1.0810

3. The Euro is likely to be weighed down by war in Ukraine and divergent policy between the ECB and Fed.

4. Price is likely to be capped by a strong resistance with MACD hinting at a bearish price trend.

Fundamental Comments

1. War in Ukraine is likely to weigh on the Euro.

2. ECB is likely to keep interest rate unchanged at its meeting tomorrow while the Fed is likely to hike rate next week, which is likely to weigh on the Euro.

Technical Comments

1. Price is likely to be capped by the 20EMA as well as a previous high resistance.

2. MACD remains bearish and is hinting at a bearish price trend ahead.

Key Levels


Technical Overview

USD/JPY – Price moved to a high of 115.90 but has declined below the previous range high. If price is unable to hold above this range high, we are likely to see price fall back into the range. Stochastic is in the overbought range but MACD is bullish. 20EMA is also hinting at a bullish price trend. If price can stay above 115.60, there is a good chance price can head higher to 116.35.


AUD/USD – From a high of 0.7440 on Monday, price has declined to a low of 0.7244. Price has also managed to stay above an important support at 0.7240, keeping the uptrend intact. MACD has turned bearish and 20EMA is bearish. However, Stochastic is in the oversold zone and is turning up. If price can stay above 0.7240, we are looking at a rally to 0.7440 again in the next few days ahead.


GBP/USD – The decline continues and price reached a new low of 1.3081 last night. Our view remains the same as yesterday. MACD and 20EMA are both hinting at a strong bearish price trend. Stochastic is in the oversold zone but is showing no sign of a price reversal as yet. We think the decline is likely to continue lower to 1.3040 over the next 24 hours. Only a price move above 1.3200 would negate our bearish view.


XAU/USD – Price reached a high of $2070.20 yesterday and we think a test of the previous all-time-high at $2079 is likely in the next couple of day. Stochastic is in the overbought zone but MACD is bullish and is hinting at a strong bullish price trend. 20EMA is also hinting at a strong bullish price trend. A price move below $2020 would confirm a top in place and a decline to $1950


EUR/AUD – We had a sell call on this pair yesterday but our call was wrong. Price went up to a high of 1.5048. MACD has given a divergence warning of a possible price high and Stochastic is declining from the overbought zone. However, 20EMA remains bullish and is hinting at a bullish price trend. We think the topside is limited and we are looking for a price decline back to 1.4890.


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