Market Talk
– The U.S. dollar was little changed against a basket of major currencies but gained against the Japanese yen to a six-year high on Monday, after the Bank of Japan stepped into the market to stop government bond yields from rising above its key target at 0.25%.
– The BOJ on Monday morning offered to buy unlimited amounts of 10-year Japanese government bonds (JGBs) at 0.25% after the 10-year JGB yield crept up to a six-year high of 0.245%, sending the Japanese yen to a six-year low at 123.25.
– With the market positioned for an aggressive pace of U.S. rate hikes this year, yields on benchmark 10-year Treasuries jumped 33 basis points last week and are up a staggering 71 basis points on the month at 2.53%, aiding the US dollar against its peer.
– High commodity prices are aiding the Aussie dollar which was at $0.7520, holding near last week’s four-month high, while the Canadian dollar was at 1.2490 per dollar, just off Friday’s two month peak, aiding by a higher crude oil price.
– Gold was down on Monday morning in Asia, with the resumption of peace talks between Ukraine and Russia denting the yellow metal’s safe-haven appeal. A stronger U.S. dollar and higher US Treasury yields also weighed on gold.
Chart Focus NZD/USD
Key Points
1. Sell NZD/USD recommendation.
2. Sell NZD/USD at 0.6940. Stop at 0.6970 and profit target at 0.6860.
3. War in Ukraine and a more aggressive Fed are both likely to aid the U.S. dollar.
4. A Double Top chart pattern and divergence in MACD are both warning of a possible price high.
Fundamental Comments
1. Ongoing war in Ukraine is likely to aid the safe-haven U.S. dollar.
2. Expectation of a more aggressive Fed in hiking rate is likely to aid the U.S. dollar.
Technical Comments
1. Price may have formed a Double Top chart pattern hinting at a possible price high.
2. MACD has given a divergence warning of a potential price high.
Key Levels
| Support | 0.6920 | 0.6885 | 0.6855 |
| Resistance | 0.6960 | 0.6990 | 0.7020 |
Technical Overview
USD/JPY – The price rally continues and we saw price reached a six-year high at 123.25 this morning. The rally is likely to continue towards 123.75 which is a high in November 2015. Stochastic is in the overbought zone but the 20EMA is bullish and is hinting at a bullish price trend. MACD remains bullish but could be developing a bearish divergence. We would prefer to wait for a dip to get into a long position.
| Support | 123.00 | 122.70 | 122.40 |
| Resistance | 123.40 | 123.75 | 124.15 |
EUR/USD – Price was capped below 1.1045 on Friday and we saw a decline to 1.0975 on Friday night. This morning, price declined below our target at 1.0965 to a low of 1.0944. This low may just be temporary. We are likely to see a price correction as the stochastic indicator is deep in the oversold zone. Price is likely to be capped by the 20EMA line at 1.0975. We are likely to see a decline from this level to 1.0900 in the next 48 hours.
| Support | 1.0945 | 1.0900 | 1.0870 |
| Resistance | 1.0975 | 1.1015 | 1.1045 |
GBP/USD – We had a buy call on this pair last Friday at 1.3205. But price declined to a low of 1.3156 this morning, triggering our stop at 1.3175. We are out of this position with a loss of 30 pips. Stochastic is in the oversold zone but 20EMA remains bearish. MACD is flat and near to the zero line. MACD remains neutral at the moment. We think price is likely to be capped at 1.3180 and a decline to 1.3000 in the next 48 hours.
| Support | 1.3110 | 1.3070 | 1.3030 |
| Resistance | 1.3160 | 1.3195 | 1.3240 |
XAU/USD – Price reached a high of $1965.55 on Thursday which was also the Fibonacci 127% of the previous rally from the low of $1895.10 to $1949.65. As price is unable to move above this resistance high, it could mean we have seen a price high at $1965.55 and a decline back to $1895.10 is likely over the next few days. Stochastic is declining from the overbought zone after a bearish crossover while MACD and 20EMA have turned bearish.
| Support | 1928.80 | 1915.90 | 1901.50 |
| Resistance | 1937.25 | 1949.40 | 1965.55 |
USD/CAD – Price had declined to a low of 1.2664 on Friday night but this low was accompanied by a divergence warning from both the MACD indicator as well as the stochastic indicator. This could be a potential low in the making. However, 20EMA remains bearish and is hinting at a strong bearish price trend. We think price could have made a low and a corrective rally to 1.2560 is likely in the next 24 hours before the decline resumes again.
| Support | 1.2460 | 1.2425 | 1.2385 |
| Resistance | 1.2500 | 1.2535 | 1.2585 |