Market Talk
– The U.S. dollar extended a rebound versus major peers on Friday and also resumed its rally against the yen, ahead of a key U.S. jobs report that could cement the potential for a 50 basis-point Federal Reserve interest rate hike next month.
– Economists predict tonight non-farm payroll report will show close to half a million U.S. jobs were added last month, with the unemployment rate ticking lower while wage growth accelerated. The figures could also provide a clue to the U.S. Federal Reserve’s future monetary policy.
– The dollar rose to 122.18 yen, its first gain in four days as the currency pair tracked moves in long-term U.S. Treasury yields. Sterling slipped 0.07% to $1.3136, bringing its loss for the week to 0.36%.
– The euro was little changed at $1.1069, following its sharp retreat the previous session from a one-month high of $1.1185 as peace talks between Russia and Ukraine stumbled, though they are set to resume later on Friday.
– Gold was down on Friday morning in Asia, widening its weekly losses. A stronger US dollar outweighed safe-haven demand driven by the little progress made in peace talks between Russia and Ukraine, as investors await the latest U.S. jobs report for clues on U.S. monetary policy moving forward.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 122.05. Stop at 121.70 and 123.80.
3. Little progress in peace talk and yield differential are both in the U.S. dollar favour.
4. Price has moved above the 20EMA while stochastic and MACD are both warning with divergences of a possible price low.
Fundamental Comments
1. Little progress in peace talk between Russia and Ukraine is aiding the U.S. dollar.
2. Yield differential is in the US dollar favour.
Technical Comments
1. Price has moved above the 20EMA as well as a previous resistance point, changing the outlook to bullish.
2. Stochastic and MACD are showing divergence warnings of a possible price low.
Key Levels
| Support | 122.05 | 121.60 | 121.25 |
| Resistance | 122.70 | 123.20 | 123.80 |
Technical Overview
EUR/AUD – Price is currently supported by the 20EMA at 1.4790. We view this decline as part of a correction and after this decline; we are likely to see a rally to 1.5120 in the next few days. Stochastic is still declining, hinting that the decline may not be over as yet. MACD remains bullish and is hinting at a bullish price trend. 20EMA is also bullish. Only a move below 1.4680 would negate our bullish view.
| Support | 1.4780 | 1.4750 | 1.4695 |
| Resistance | 1.4825 | 1.4870 | 1.4915 |
EUR/USD – Price moved below 1.1135 overnight, negating our bullish view. Price has moved below the 20EMA, which is currently hinting at a bearish price trend. However, MACD remains bullish. Stochastic is declining and is near to the oversold zone. The next support level comes in at 1.0945 and we see price heading towards this level in the next 48 hours.
| Support | 1.1040 | 1.1000 | 1.0965 |
| Resistance | 1.1070 | 1.1105 | 1.1140 |
GBP/USD – Price broke above the declining trend channel on Wednesday but moved in a narrow range yesterday. A lack of follow through is hinting at a decline to the previous low at 1.3050. Stochastic has a bearish crossover and is hinting at a price decline. MACD has turned bearish and is hinting at a bearish price trend. 20EMA is also hinting at a bearish price trend. A move above 1.3180 would negate our bearish view.
| Support | 1.3105 | 1.3050 | 1.2995 |
| Resistance | 1.3140 | 1.3195 | 1.3220 |
XAU/USD – Price moved to a high of $1949.50 but has turned down and is currently sitting on the 20EMA at $1933. Stochastic is in the overbought zone and is hinting at a bearish price trend. MACD is also turning bearish but 20EMA remains bullish. If price were to move below the 20EMA support at $1933, we are likely to see a decline to $1918.00 in the next 48 hours.
| Support | 1927.75 | 1916.30 | 1906.65 |
| Resistance | 1939.50 | 1949.50 | 1967.70 |
USD/CAD – Our buy call at 1.2510 was stopped out at 1.2470 when price reached a low of 1.2463. Our view remains the same as yesterday. We think price had hit a low at 1.2428 on Wednesday and we are likely to see a price correction that could bring price up to 1.2610. MACD has turned bullish while 20EMA is flat and neutral. Stochastic is rising towards the overbought zone. Only a break below 1.2428 would negate our bullish view.
| Support | 1.2485 | 1.2430 | 1.2400 |
| Resistance | 1.2530 | 1.2585 | 1.2620 |