Market Talk
– The U.S. dollar hovered near a two-year high against a basket of currencies on Thursday morning. The greenback surged after FOMC meeting minutes showed the Federal Reserve preparing to move aggressively to tackle inflation in the coming months.
– Minutes from the Federal Reserve’s March meeting showed “many” participants prepared to raise interest rates in 50-basis-point increments at coming meetings and general agreement about cutting $95 billion a month from asset holdings which had ballooned during the pandemic.
– The euro touched a one-month trough of $1.0873 overnight before recovering to $1.0911 in Thursday’s morning trade. The single currency is reeling from a double threat; from the economic impact of new sanctions on Russia and uncertainty about the outcome of the French election.
– Sterling was pinned at $1.3076 while commodity currencies retreated from recent highs as oil prices dipped. Aussie dollar fell to 0.7474 while the Canadian dollar was at $1.2561. The yen was hovering near a one-week low at 123.64 against the dollar.
– Gold was little changed after release of the minutes of the Federal Reserve meeting in March, as the metal’s appeal as a safe haven and inflation hedge offset an expected 50 basis point rate hike by the U.S. central bank.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 123.30. Stop at 122.95 and profit target at 125.00
3. Expectations of more aggressive U.S. interest rate hike and a widening interest differential are both likely to aid the US dollar
4. Price is likely to be supported by the 20EMA line and MACD is hinting at a bullish price trend.
Fundamental Comments
1. Expectations of a more aggressive Federal Reserve in hiking interest rate to tackle inflation is likely to aid the U.S. dollar.
2. Interest rate differential is in the U.S. dollar favour and is likely to aid the U.S. dollar.
Technical Comments
1. Price is likely to find support at 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 | 123.55 | 123.05 | 122.75 |
| Resistance | 124.05 | 124.70 | 125.10 |
Technical Overview
USD/CAD – Price reached a low of 1.2401 on Tuesday and that low was accompanied by a divergence warning from the MACD indicator. This is a warning of a potential price low. This morning price moved higher to reach 1.2567. We are expecting the rally to continue towards 1.2620 in the next 1-2 days ahead. Stochastic is in the overbought zone now but both MACD and 20EMA are hinting at a bullish price trend.
| Support | 1.2535 | 1.2500 | 1.2465 |
| Resistance | 1.2580 | 1.2620 | 1.2650 |
EUR/USD – Price reached a low of 1.0873 overnight and has recovered higher to 1.0935. The overnight rally is likely a result of the oversold stochastic and we think price is likely to be capped at 1.0945 and from there, we see a decline to 1.0850 initially and eventually to 1.0805 in the next few days. Both MACD and 20EMA are hinting at a bearish price trend. Only a move above 1.0990 would negate our bearish view.
| Support | 1.0895 | 1.0850 | 1.0805 |
| Resistance | 1.0935 | 1.0990 | 1.1035 |
GBP/USD – We had a buy call at 1.3100 on Tuesday and yesterday, we had placed stop at 1.3050 and profit order at 1.3260. Price fell to a low of 1.3044 overnight and we are out of this position with a 50 pips loss. Stochastic is near to the oversold zone and MACD is flat near the zero line. Both these indicators are hinting at a limited downside but 20EMA remains bearish. We think price could be near to a low.
| Support | 1.3045 | 1.2995 | 1.2930 |
| Resistance | 1.3095 | 1.3140 | 1.3185 |
XAU/USD – Price tested the support at $1915.40 overnight and managed to hold above this support. Stochastic is close to the oversold zone while MACD is flat. Both indicators are hinting at a limited downside. 20EMA is flat and is hinting at a sideways movement. We see price moving within a range of $1915 to $1970 in the next 48 hours. However, a break of the support at $1915.40 is likely to send price lower to the recent low at $1889.85.
| Support | 1915.40 | 1905.40 | 1895.10 |
| Resistance | 1925.40 | 1936.80 | 1949.50 |
AUD/USD – We had a buy call at 0.7560 but price declined to a low of 0.7474 this morning taking out our stop at 0.7525. We are out of this position with a loss of 35 pips. 20EMA has turned bearish and price has broken below a rising channel. Both are hinting at a bearish price trend ahead. MACD is about to move below the zero line as well, hinting at a bearish price trend. We see price moving lower to 0.7380 in the next 1-2 days.
| Support | 0.7460 | 0.7415 | 0.7375 |
| Resistance | 0.7505 | 0.7555 | 0.7600 |