Market Talk
– The U.S. dollar hit a new five-year top on the yen on Friday morning after a strong U.S. inflation report overnight send the benchmark 10-year Treasury yield above 2% for the first time in two weeks, locking in expectations that the Federal Reserve will raise interest rates next week.
– Consumer prices surged in February to its hottest reading in forty years of 7.9% annual growth rate, according to the Labour Department. There will be more to come in the next or two months as some of the rising commodity prices get incorporated into future consumer prices.
– The euro retreated from its overnight gains following the European Central Bank’s announcement it will phase out its stimulus in the third quarter, which left the door open to an interest rate hike before the end of 2022 as soaring inflation outweighs growth risks emanating from the Ukraine crisis
– The greenback rose as high as 116.55 yen in early trade, its highest level since January 2017. The dollar is up 1.5% on the yen this week, its biggest weekly gain since October. The war has also weighed on sterling which was languishing at $1.3093 near a 16 month-low.
– Gold was lower on Friday morning in Asia as investors took stock of February inflation data from the United States. A rush to safe-haven assets earlier this week had pushed gold near the record levels hit in August 2020.
Chart Focus EUR/AUD
Key Points
1. Sell EUR/AUD recommendation.
2. Sell EUR/AUD at 1.4985. Stop at 1.5035 and profit target at 1.4880.
3. War in Ukraine and interest rate differential are both weighing on the euro.
4. Price is 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. Interest rate differential is in the Aussie dollar’s favour
Technical Comments
1. Price is capped by the 20EMA line and the Fibonacci 38% correction point.
2. MACD is hinting at a bearish price trend ahead.
Key Levels
| Support | 1.4950 | 1.4905 | 1.4870 |
| Resistance | 1.5005 | 1.5055 | 1.5110 |
Technical Overview
USD/JPY – Price moved past 116.35 and is already close to the next resistance point at 116.85. Stochastic is in the overbought zone but MACD remains strong bullish. 20EMA is also pointing higher with a steep slope, hinting at a strong bullish price trend. We think price is likely to exceed 116.85 and moved to the next strong resistance at 117.10 in the next 48 hours. Below 115.80 would negate our bullish view.
| Support | 116.35 | 116.00 | 115.70 |
| Resistance | 116.75 | 117.10 | 117.50 |
EUR/USD – Price is sitting on the 20EMA currently after declining from the overnight high at 1.1121. Stochastic is declining but MACD remains bullish and is hinting at a bullish price trend. 20EMA is currently supporting price and if price can hold above the 20EMA, we are likely to see a test of 1.1120 again in the next 24 hours. A price move below 1.0960 would negate our bullish view.
| Support | 1.0975 | 1.0935 | 1.0880 |
| Resistance | 1.1020 | 1.1065 | 1.1105 |
GBP/USD – Price declined below 1.3081 to a new low at 1.3068 but this low was accompanied by a divergence warning from the MACD indicator, hinting at a possible price low. Stochastic is also close to the oversold zone but 20EMA remains bearish and is hinting at a bearish price trend. We think price is likely to move higher and test the previous high of 1.3195. A break of this resistance will send price higher to 1.3270. A move below 1.3065 will negate our bullish view.
| Support | 1.3065 | 1.3035 | 1.2980 |
| Resistance | 1.3100 | 1.3140 | 1.3195 |
XAU/USD – We had a buy call at $1979.50 which was filled overnight when price fell to a low of $1724.30. Price had rallied to a high of $2009.00 but has declined to $1980.75 at the point of this writing. Stochastic is declining and is hinting at a bearish price trend. Both MACD and 20EMA are also hinting at a bearish price trend. We would recommend closing the position at current market level for a small gain.
| Support | 1970.40 | 1960.70 | 1950.65 |
| Resistance | 1987.50 | 1999.75 | 2009.00 |
USD/CAD – The decline from the high at 1.2900 has managed to stay above the Fibonacci 50% correction point, hinting that the decline could be a correction. Stochastic is also in the oversold zone but MACD and 20EMA has turned bearish. We think price is likely to be capped by the 20EMA resistance point at 1.2795 and a decline will send price lower to 1.2685 in the next 24 hours.
| Support | 1.2750 | 1.2710 | 1.2670 |
| Resistance | 1.2795 | 1.2830 | 1.2875 |