Market Talk
– The U.S. dollar was up on Monday morning in Asia, helped by rising U.S. Treasury yields, while the Euro was helped by Emmanuel Macron winning the first round of the French Presidential election as investors await central bank policy decisions in Europe, Canada and New Zealand later in the week.
– The 10-year benchmark U.S. Treasury yield hit 2.73% on Friday; its highest since March 2019. The benchmark 10-year yield added another seven basis points to top 2.77% on Monday as the Federal Reserve readies to cut its asset holdings and move interest rates sharply higher.
– The Japanese yen suffered the most selling, briefly touching as low as 125 per dollar and last sitting 0.5% weaker at 124.86. Investors saw little reason to exit bets against the yen with the Bank of Japan holding yields near zero while the US Treasury yield keeps rising.
– The euro flickered as high as $1.0913 amid thin trading at the Asian session open on Monday, before settling about 0.15% higher than Friday’s close at $1.0890 aided by Macron victory in the French election. Sterling slipped 0.15% to $1.3015, falling fallen to a low of 1.2982 last Friday.
– Gold was down on Monday morning in Asia, with the greenback and U.S. Treasury yields rising as the U.S. Federal Reserve maintains its hawkish stance. However, concerns that Russia could launch fresh attacks in eastern Ukraine limited the safe-haven yellow metal’s losses.
Chart Focus CAD/JPY
Key Points
1. Buy CAD/JPY recommendation.
2. Buy CAD/JPY at 99.10. Stop at 98.80 and profit target at 100.10
3. Higher crude oil price and interest rate differential are both aiding the Canadian dollar.
4. Price is supported by both the 20EMA and Fibonacci 50% correction point with Stochastic hinting at a price rally.
Fundamental Comments
1. Higher crude oil price is aiding the Canadian dollar but is weighing on the yen.
2. Interest rate differential is in the Canadian dollar.
Technical Comments
1. Price was supported by the 20EMA as well as the Fibonacci 50% correction point.
2. Stochastic is hinting at a bullish price trend.
Key Levels
| Support | 99.10 | 98.65 | 98.15 |
| Resistance | 99.80 | 100.15 | 100.65 |
Technical Overview
USD/JPY – Price broke above the previous high at 125.10 to reach a high at 125.45. The rally is likely to continue towards the next resistance at 125.85 in the next 24 hours. Stochastic is in the overbought zone. However 20EMA is pointing up with a steep slope, hinting at a strong bullish price trend. MACD is also hinting at a bullish price trend. A price move below the 20EMA line at 123.80 would negate our bullish view.
| Support | 125.10 | 124.60 | 124.10 |
| Resistance | 125.50 | 125.85 | 126.40 |
EUR/USD – We were looking for test to the low at 1.0805 last Friday but price only reached a low of 1.0835. The low was also accompanied by a divergence warning from the MACD as well as the stochastic indicator. This morning, price has moved as high as 1.0913 but is currently lower at 1.0880. We are likely to see a test of 1.0945 and the reaction at this level is likely to determine the next price direction.
| Support | 1.0870 | 1.0835 | 1.0800 |
| Resistance | 1.0915 | 1.0945 | 1.0990 |
GBP/USD – Price reached a low of 1.2982 last Friday, breaking below the previous low at 1.2999. While there was a divergence warning from the stochastic indicator, there was no divergence warning from the MACD indicator. We prefer to follow the MACD indicator. 20EMA is also hinting at a strong bearish price trend. The next support level lies at 1.2900, while a move above 1.3050 would confirm 1.2982 as the low and rally in progress.
| Support | 1.2975 | 1.2925 | 1.2885 |
| Resistance | 1.3015 | 1.3050 | 1.3090 |
XAU/USD – Our view remains the same as last Friday. 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. Price moved to a high of $1949.40 this morning and a move above this level is likely to send price towards $1970. Watch the breakout at $1970 for clues to the next direction. Inability to break above $1970 is likely to keep price within the range.
| Support | 1937.55 | 1929.20 | 1915.40 |
| Resistance | 1949.50 | 1965.55 | 1980.90 |
NZD/USD – We had a sell call at 0.6885 on Friday but price only reached a high of 0.6880 and our entry order was not filled. Price has declined to a low of 0.6812 this morning and this low was accompanied by a divergence warning from the MACD indicator as well as the stochastic indicator. If price can move above 0.6855, it could be a sign of a reversal and a confirmation of a low in place.
| Support | 0.6810 | 0.6770 | 0.6725 |
| Resistance | 0.6855 | 0.6895 | 0.6935 |