Market Talk
– The U.S. dollar extended its relentless upward move on Friday, reaching a new near two-year peak against a basket of peers and a one-month high versus the euro, supported by the prospect of a more aggressive pace of Federal Reserve interest rates hikes.
– The euro dropped 0.18% to a new one-month low of $1.0855 on Friday, hurt by new Western sanctions on Russia, with the European Union moving towards a ban on Russian coal set to take effect from August.
– The greenback extended its gains against the Japanese yen, rising a little to as much as 124.23, its highest in over a week and approaching last month’s near seven-year high of 125.1 supported by a rise in U.S. 10-year Treasury yield hitting a three-year high during the previous session.
– Slightly lower oil and other commodity prices this week saw commodity currencies like the Australian and Canadian dollars take a breather after gaining strongly in recent weeks. Sterling was at the low end of its recent range at $1.3067.
– Gold was down on Friday morning in Asia but was trading within a tight range. A strong greenback on the back of the U.S. Federal Reserve tightening its monetary policy quicker than expected partially offset the safe-haven demand from the ongoing war in Ukraine.
Chart Focus NZD/USD
Key Points
1. Sell NZD/USD recommendation.
2. Sell NZD at 0.6885. Stop at 0.6925 and profit target at 0.6760
3. Expectations of more aggressive U.S. interest rate hikes and a decline in commodity prices are weighing on the Kiwi
4. A confirm Double Top chart pattern, MACD and 20EMA are hinting at a price decline.
Fundamental Comments
1. Expectations of more aggressive U.S. interest rate hike is likely to aid the weigh on the Kiwi
2. A decline in commodity prices is also weighing on the Kiwi.
Technical Comments
1. A Double Tops chart pattern’s breakout is hinting at a price decline.
2. Both MACD and 20EMA are hinting at a bearish price trend.
Key Levels
| Support | 0.6865 | 0.6820 | 0.6790 |
| Resistance | 0.6895 | 0.6935 | 0.6970 |
Technical Overview
USD/JPY – We had a buy recommendation at 123.30 yesterday but price only reached a low of 123.58 and our entry order was not filled. Price reached a high of 124.22 this morning but the rally looks weak with MACD developing a divergence warning. Stochastic is also in the overbought zone. We think this morning high could be a short term top and a correction to 122.30 is likely in the next couple of days.
| Support | 123.65 | 123.25 | 122.75 |
| Resistance | 124.05 | 124.65 | 125.10 |
EUR/USD – Our view remains the same as yesterday. We think that 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. Price has declined below the previous low of 1.0873 and is heading towards 1.0850 before testing 1.0805. However MACD is starting to develop a divergence and Stochastic is already in the oversold zone. Price may reverse before 1.0805.
| Support | 1.0850 | 1.0805 | 1.0770 |
| Resistance | 1.0880 | 1.0935 | 1.0990 |
GBP/USD – Price has managed to hold above the support at 1.3050 but the rally is getting weaker and a Descending Triangle could be forming on the 4-hourly chart. This is a sign that there is likely to be another decline to a low below 1.3050. Stochastic is close to the oversold zone and MACD is flat at the moment. Both are hinting at a limited downside while 20EMA is hinting at a bearish price trend.
| Support | 1.3045 | 1.2995 | 1.2930 |
| Resistance | 1.3090 | 1.3140 | 1.3185 |
XAU/USD – Our view remains the same as yesterday. We see price moving within a range of $1915 to $1970 in the next 48 hours or until there is a breakout of this range. A break of the support at $1915.40 is likely to send price lower to the recent low at $1889.85. An unlikely move above $1970 will target the $2000 handle. Stochastic is rising but MACD and 20EMA are both hinting at a sideways movement.
| Support | 1929.20 | 1915.40 | 1905.40 |
| Resistance | 1937.55 | 1949.50 | 1965.55 |
USD/CAD – Price had 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. We have seen price moved higher to reach 1.2610 this morning and we are expecting the rally to continue towards 1.2645 in the next 24 hours. Stochastic is in the overbought zone but both MACD and 20EMA are hinting at a bullish price trend.
| Support | 1.2570 | 1.2535 | 1.2500 |
| Resistance | 1.2610 | 1.2645 | 1.2695 |