Market Talk
– The U. S. dollar was down on Tuesday morning in Asia after the yen fought for a footing after its worst session in 16 months, as the Bank of Japan (BOJ) keeps bond yields down while U.S. Treasury yields soared to new multi-year highs
– The greenback hit a six-year high versus the yen after the Bank of Japan moved to contain rising bond yields. The U.S. dollar surged as much as 2.5% to its highest level since August 2015 at 125.09 before recovering to 124.24 in volatile morning trade in Tokyo.
– The BOJ vowed to keep monetary policy ultra-loose, offering to buy unlimited government bonds for the first four days of this week, to prevent yields in Japan from rising as they are doing elsewhere following U.S. Federal Reserve’s moves to hike interest rates in the face of mounting inflationary pressures.
– The greenback was broadly steady elsewhere, keeping the euro at $1.0988 and capping a recent rally in the Australian dollar to hold it at $0.7483. Among other majors, the New Zealand dollar was a fraction weaker at $0.6889 and sterling was under pressure at $1.3081
– Gold was down on Tuesday morning in Asia as a declining US Treasury yield was offset by Russia and Ukraine peace talks that are expected to take place on Tuesday in Turkey
Chart Focus USD/CHF
Key Points
1. Buy USD/CHF recommendation.
2. Buy USD/CHF at 0.9325. Stop at 0.9295 and profit target at 0.9450.
3. Peace talk and interest rate differential are both against the safe haven Swiss franc.
4. Price is likely to be supported by the 20EMA and MACD hinting at a bullish price trend.
Fundamental Comments
1. Peace talk between Russia and Ukraine is likely to weigh on the safe haven Swiss franc.
2. Interest rate differential is in the U.S. dollar favour.
Technical Comments
1. Price is likely to be supported by the 20EMA as well as the Fibonacci 50% correction point, keeping the uptrend intact.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 0.9325 | 0.9295 | 0.9255 |
| Resistance | 0.9360 | 0.9390 | 0.9430 |
Technical Overview
USD/JPY – Price surged as much as 2.5% to its highest level since August 2015 at 125.09 in yesterday Asian morning trade but that turned out to be the high and we have seen a decline to 123.09 last night and again this morning. Stochastic is declining from the overbought zone but both MACD and 20EMA remain bullish. We think the decline should be supported around 122.50 and from this support, we are likely to see the rally resumes again for 125.09.
| Support | 123.05 | 122.45 | 122.00 |
| Resistance | 123.65 | 123.95 | 124.30 |
EUR/USD – Price has been flat and caught in a range for the past few days. MACD is also flat and neutral around the zero line. 20EMA is also neutral but Stochastic is rising from the oversold zone resulting in a rally to 1.1000. However, we think price is likely to be capped around this resistance point and from here, we are likely to see a decline to 1.0945 initially and later to 1.0900 over the next few days.
| Support | 1.0975 | 1.0945 | 1.0900 |
| Resistance | 1.1005 | 1.1045 | 1.1095 |
GBP/USD – Price was capped at 1.3180 yesterday and we saw a decline to low of 1.3066 overnight. We think price is likely to continue towards our target at 1.3000 in next 24 hours. Stochastic is already inside the oversold zone but 20EMA is pointing down with a steep slope, hinting at a strong bearish price trend. MACD is also hinting at a bearish price trend. Only a move above 1.3165 would negate our bearish view over the next 24 hours.
| Support | 1.3065 | 1.3030 | 1.2995 |
| Resistance | 1.3105 | 1.3145 | 1.3195 |
XAU/USD – Our view remains the same as yesterday. We think price had 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. We are expecting the decline off this high to reach $1895.10 in the next 1-2 days. There is also a possibility that the previous low at $1910.70 could end this decline as Stochastic is near to the oversold zone. MACD is also turning flat.
| Support | 1915.90 | 1904.60 | 1895.10 |
| Resistance | 1928.80 | 1937.25 | 1949.40 |
NZD/USD – We had a sell recommendation at 0.6940 yesterday which was filled when price reached a high of 0.6953. Price had reached a low of 0.6888 overnight and Stochastic is rising after a bullish crossover in the oversold zone. However, 20EMA and MACD are both bearish. We are bearish and would recommend lowering stop to 0.6925 while keeping profit target at 0.6860.
| Support | 0.6885 | 0.6855 | 0.6815 |
| Resistance | 0.6910 | 0.6945 | 0.6990 |