Market Talk
– The U.S. dollar edged up to its highest in nearly two years on Wednesday after jumping overnight on hawkish comments from a more dovish Federal Reserve official, while the euro was hurt by the prospect of new Western sanctions on Russia.
– Fed Governor Lael Brainard, seen as a more dovish policymaker, said she expects a combination of interest rate increases and a rapid balance sheet runoff to bring U.S. monetary policy to a “more neutral position” later this year, with further tightening to follow as needed .
– The euro was at $1.0894, its lowest in nearly a month after the European Union proposed sanctions banning buying Russian coal and prevent Russian ships from entering EU ports, over its nearly six-week invasion of Ukraine.
– The greenback was up 0.17% against the Japanese yen to $123.84, while Sterling was at $1.3075, heading back in the direction of previous month’s low at $1.3000. The Aussie dollar was holding firm at $0.7574, near Tuesday’s near 10-month peak after the Reserve Bank of Australia signalled higher interest rates were approaching.
– Gold was down on Wednesday morning in Asia, easing after the greenback was boosted by hawkish comments from U.S. Federal Reserve officials as well as U.S. Treasury yields. The benchmark 10-year yield rose to 2.6144%, its highest since March 2019, offsetting the yellow metal gains from Ukraine conflict.
Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.7560. Stop at 0.7525 and profit target at 0.7660.
3. Rising commodities prices and a narrowing of interest rate differential are both likely to aid the Aussie dollar.
4. Price is likely to find support at the 20EMA line with MACD hinting at a bullish price trend.
Fundamental Comments
1. Interest rate differential is likely to narrow after RBA signalled higher rates in the near future.
2. Rising commodities prices are likely are likely to aid the Aussie dollar.
Technical Comments
1. Price is likely to find support at the 20EMA line.
2. MACD is hinting at a bullish price trend.
Key Levels
| Support | 0.7555 | 0.7510 | 0.7470 |
| Resistance | 0.7600 | 0.7660 | 0.7715 |
Technical Overview
USD/JPY – Price was supported by the 20EMA in the beginning of the week. Last night we saw a rally that has moved price past the resistance at 123.80. The rally is likely to continue towards the previous high at 125.09 in the next few days. Stochastic is inside the overbought zone but 20EMA is hinting at a strong bullish uptrend. MACD is also hinting at a bullish price trend. A price move below 122.30 would negate our bullish view.
| Support | 123.50 | 123.05 | 122.75 |
| Resistance | 124.05 | 124.70 | 125.10 |
EUR/USD – Price broke the support at 1.0945 support point overnight and the 1.0900 support point this morning. The break below 1.0900 is likely to send price towards the previous low at 1.0850 in the next couples of days. Stochastic is in the oversold zone but 20EMA is pointing lower with a steep slope, hinting at a strong bearish price trend. MACD is also bearish. Price would need to move above 1.0945 to negate our bearish view.
| Support | 1.0850 | 1.0805 | 1.0770 |
| Resistance | 1.0900 | 1.0945 | 1.0990 |
GBP/USD – We had a buy call at 1.3100 yesterday, which was filled when price fell to a low of 1.3056 this morning. For today, we would recommend keeping stop at 1.3050 and profit order at 1.3260. Stochastic is continuing its decline towards the oversold zone. MACD remains bearish and 20EMA is hinting at a bearish price trend. A break of 1.3050 would hint at a test of the previous month’s low at 1.3000.
| Support | 1.2995 | 1.2930 | 1.2880 |
| Resistance | 1.3050 | 1.3095 | 1.3135 |
XAU/USD – Our view was wrong in the past 2 days. We were looking at price moving higher to $1970 but price moved to a high of $1944 and is currently moving towards this week’s low at $1915.40. A break of this support is likely to send price lower to $1895 in the next few days. Stochastic is declining but MACD is neutral and flat. 20EMA is bearish at the moment.
| Support | 1915.40 | 1905.40 | 1895.10 |
| Resistance | 1925.20 | 1936.80 | 1949.50 |
USD/CAD – Price reached a low of 1.2401 last night and this low was accompanied by a divergence warning from the MACD indicator. This is a warning of a potential price low in the making. Stochastic is also rising from the oversold zone after a bullish crossover. We think the low could have been made and we see a rally to the previous high at 1.2595 in the next couple of days.
| Support | 1.2480 | 1.2445 | 1.2400 |
| Resistance | 1.2520 | 1.2550 | 1.2595 |