Market Talk
– The U.S. dollar was up on Tuesday morning in Asia, while the yen fell through the 120 mark for the first time since 2016. Investors continued to digest a hawkish speech from U.S. Federal Reserve Chair Jerome Powell that raised bets on higher U.S. interest rates.
– Powell’s comments indicated the U.S. central bank would raise interest rates by bigger-than usual amounts if necessary to bring down inflation that was running “much too high” caught market participants off guard as they seemed more hawkish than his remarks after last Wednesday’s FOMC meeting.
– The yen fell about 0.4% to briefly hit 120.08 per dollar earlier in the session. It is down about 4% this month as soaring U.S. yields lured flows from Japan, depressing the yen. The greenback is likely to climb further against the yen in the coming months as a hawkish Fed contrast with dovish Bank of Japan.
– The euro was down 0.2% against the greenback to 1.0992. Sterling eased 0.2% to $1.3144 after failing to surpass the resistance at 1.3210 for a second time. The Australian dollar was softer at $0.7386.
– Gold was up on Tuesday morning in Asia, as U.S. Treasury yields hit multi-year highs and fighting in Ukraine boosted demand for safe-haven bullion, while investors kept a close tab on Moscow-Kyiv peace talks.
Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.7365. Stop at 0.7335 and profit target at 0.7440.
3. Rising commodities prices and expectation of an Aussie rate hike are both likely to aid the Aussie dollar.
4. Price is likely to be supported by strong support and MACD is hinting at a bullish price trend.
Fundamental Comments
1. Rising commodities prices are likely to aid the Aussie dollar.
2. Expectations of a hike in Aussie interest rate, which will narrow the interest rate differential gap, are likely to aid the Aussie dollar.
Technical Comments
1. Price is likely to be supported by the 20EMA line as well as a previous resistance turned support line.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 0.7360 | 0.7320 | 0.7285 |
| Resistance | 0.7400 | 0.7440 | 0.7470 |
Technical Overview
USD/JPY – The rally continues and price broke above 120 handle this morning to a high of 120.46. Stochastic is into the overbought zone but 20EMA is point higher with a steep slope and is hinting at a strong bullish price trend. MACD is also bullish and hinting at a bullish price trend. The next higher resistance lies at 121.50. A decline below 119.00 would hint at a price high and a decline to 117.70.
| Support | 120.20 | 119.80 | 119.40 |
| Resistance | 120.75 | 121.00 | 121.50 |
EUR/USD – Price failed to hold the 20EMA overnight at 1.1000 and we have seen a decline to a low of 1.0985 at the point of this writing. Stochastic is declining but is close to the oversold zone. MACD and 20EMA have turned bearish and is hinting at bearish price trend. We see price moving lower to first 1.0895 and later to 1.0805 again in the next few days. A move above 1.1137 would negate our bearish view.
| Support | 1.0950 | 1.0900 | 1.0870 |
| Resistance | 1.0995 | 1.1030 | 1.1065 |
GBP/USD – Price tested the resistance at 1.3210 again for a second time overnight but was unable to break above this resistance. We are likely to see a decline to 1.3090 again and if this support fails to halt the decline, price is likely to decline to 1.2991 again in the next few days. Stochastic and 20EMA are both hinting at a bearish price trend. MACD could be turning bearish soon.
| Support | 1.3090 | 1.3040 | 1.2990 |
| Resistance | 1.3135 | 1.3175 | 1.3210 |
XAU/USD – Price has stayed within the previous week’s range of $1895.10 to $1980.95. There is a nearer resistance level at $1949.65, which needs to break to trigger a rally to $1980.95. Stochastic is rising but MACD is flat and neutral at the moment. 20EMA is also flat and neutral. We see price moving within the range of $1949.65 to $1895.10 in the next couple of days until there is a breakout of this range.
| Support | 1929.30 | 1918.10 | 1906.85 |
| Resistance | 1940.85 | 1949.65 | 1958.30 |
USD/CHF – We had a buy recommendation at 0.9305 yesterday which was filled when price declined to a low of 0.9293. Our view remains unchanged and we would recommend placing moving stop higher to 0.9290 while keeping profit target unchanged at 0.9395. Stochastic is rising and hinting at a bullish price trend. Both MACD and 20EMA are also hinting at a bullish price trend.
| Support | 0.9340 | 0.9295 | 0.9265 |
| Resistance | 0.9380 | 0.9415 | 0.9460 |