FX Commentary – US Dollar At A 5-Year High Against Yen On Rate Hike Expectation.

Market Talk

– The U.S. dollar was down on Wednesday morning in Asia but was near a five-year high against the yen. Investors await the U.S. FOMC policy decision on Thursday early morning, with the conflict in Ukraine and the surging number of COVID-19 cases in China as the backdrop.

– Treasury yields surged ahead of the Federal Open Market Committee decision, buoying the dollar against its Japanese peer, with traders fully priced for a first interest rate hike in three years, and giving 13% odds of a half-percentage point increase. The greenback was at 118.40, near its strongest level since January 2017.

– Australia’s currency also came under pressure at 0.7220 as top trade destination China saw new COVID cases more than doubling on Tuesday to a two-year high, raising concerns about the rising economic costs of its zero-tolerance policies to contain the disease.

– The euro continued to crawl back up from its plunge to a nearly 22-month low earlier in the month. The euro edged higher to $1.0969, clawing up from a low of $1.0806 hit on Mar. 7 as investors stayed optimistic that Russia-Ukraine talks could lead to an end to hostilities.

– The yellow metal remained little changed on Wednesday morning in Asia, after hitting its lowest since Mar. 1, at $1,906, during the previous session. Investors stayed away from big bets as they await the U.S. Federal Reserve’s latest policy decision.

Chart Focus USD/JPY

Key Points

1. Buy USD/JPY recommendation.

2. Buy USD/JPY at 117.80. Stop at 117.50 and profit target at 118.80

3. Expectations of a U.S. rate hike, bond yield and interest rate differential are all likely to aid the U.S. dollar.

4. Price is likely to be supported by the 20EMA line with MACD hinting at a bullish price trend.

Fundamental Comments

1. Expectations of a U.S. interest rate hike are likely to boost the U.S. dollar.

2. Bond yield and interest rate differential are both in the US dollar’s favour.

Technical Comments

1. Price is likely to find support from the 20EMA line.

2. MACD remains bullish and is hinting at a bullish price trend.

Key Levels


Technical Overview

XAG/USD – We had a sell recommendation yesterday at $25.15 but price only reached a high of $25.03 and our order was not filled. Stochastic is close to the oversold zone but looks weak. MACD is bearish and is hinting at a bearish price trend. 20EMA is also hinting at a bearish price trend. We see price moving lower to $24.00 in the next couple of days ahead. A price move above $25.45 would negate our bearish trend view.


EUR/USD – Our view remains the same as yesterday. We think price is consolidating within a range and is likely to stay in this range until we see a breakout of either 1.1120 or 1.0805. For today, we can narrow the band to 1.0900 to 1.1045. Watch these two points for breakout clue and follow in the direction of the breakout. MACD and 20EMA are both neutral while Stochastic is hinting at a bearish price trend.


GBP/USD – Price stayed within a narrow range overnight. The breakout of this narrow range is likely to provide the next directional move. Watch the low at 1.2990 and the topside at 1.3090. We prefer the topside as MACD has given a bullish divergence warning earlier and Stochastic is rising from the oversold zone. Caution is advised as a U.S. rate hike could send price crashing below 1.2990.


XAU/USD – Price declined to a low of $1906.85 overnight and with Stochastic in the oversold zone and hinting at a price rally, we may see a corrective rally to $1945 in the next 24 hours. If price is capped below this resistance, we are likely to see another decline to $1879 in the next few days ahead. MACD is turning up from the bearish extreme


NZD/USD – We had a sell call at 0.6790 on Monday which was filled and yesterday we had lowered stop to 0.6760 and profit order to 0.6700. Price rose to a high of 0.6792 last night and we are out of this position with a profit of 30 pips. The overnight rally was capped on two occasions by the 20EMA and if price move above the 20EMA, we are likely to see a rally to 0.6875. Stochastic is rising from the oversold zone. Stochastic and MACD are both hinting of a price rally.


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