Market Talk
– The U.S. dollar rebounded after digesting slightly softer-than-expected U.S. inflation data after Federal Reserve Governor Lael Brainard said that there were some signs of “welcome” cooling in the latest inflation readout, but emphasized that the central bank is still proceeding with a series of interest rate hikes, as well as an effort to trim its balance sheet.
– Although data released on Tuesday showed CPI rose by 8.5% y-o-y, which is the highest since 1981, there was a small glimmer of hope that price pressures may have peaked, sending US benchmark 10-year Treasury yield into its first decline in 8 sessions.
– The Kiwi whipsawed after the Reserve Bank of New Zealand announced its sharpest rate hike in two decades to curb inflation. While the 50 basis point hike by the Reserve Bank of New Zealand was larger than many economists had expected, it was within traders’ expectations, and policymakers tempered the move by not lifting their projected peak for rates.
– The euro was pinned to a five-week low on Wednesday $1.0820 as prospects for peace in Ukraine seemed to darken. Sterling, which has been pegged near $1.30, held at $1.3001.
– Gold was down on Wednesday morning in Asia, after gaining as much as 1% during the previous session aided by the latest U.S. inflation data. While gold is considered an inflation hedge, rising interest rates is likely to push up bond yields and increase the opportunity cost of holding zero-yield bullion.
Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation.
2. Buy EUR/USD at 1.0825. Stop at 1.0795 and profit target at 1.0930
3. ECB meeting later tonight may boost the Euro if ECB hints at a hike later in the year.
4. Price has managed to hold above a previous low while MACD is also hinting at a bottom.
Fundamental Comments
1. ECB meeting later tonight could boost the Euro.
2. Interest rate differential may have peaked if ECB hints at a hike later in the year.
Technical Comments
1. Price has managed to hold above a previous important low, hinting at a Double Bottom possibility.
2. MACD is hinting at a bottom with a divergence warning.
Key Levels
| Support | 1.0805 | 1.0765 | 1.0725 |
| Resistance | 1.0845 | 1.0885 | 1.0930 |
Technical Overview
USD/JPY – Price broke above the previous high at 125.85 this morning and we are likely to see price heading towards 126.40 in the next 24 hours. While stochastic is in the overbought zone, MACD remains bullish. 20EMA is pointing up with a steep slope, hinting at a strong bullish price trend ahead. A move below 124.70 would negate our bullish view.
| Support | 126.00 | 125.75 | 125.30 |
| Resistance | 126.40 | 126.85 | 127.20 |
USD/CAD – We had a sell recommendation at 1.2650 which was filled when price reached a high of 1.2661. Overnight, price declined to a low of 1.2580 before recovering this morning above 1.2600. We remain bearish as MACD is showing a bearish divergence. However, Stochastic is hinting at a price rally while 20EMA is still bullish. We would recommend lowering stop to 1.2665 and keeping profit order at 1.2560.
| Support | 1.2590 | 1.2540 | 1.2505 |
| Resistance | 1.2635 | 1.2665 | 1.2700 |
GBP/USD – The decline overnight managed to move one pip below last Friday low of 1.2982. The possibility of a break below this support is still strong although price has managed to repel three attempted breaks. Stochastic is still moving lower. 20EMA and MACD are both hinting at a bearish price trend. A break below this low is likely to send price lower to 1.2855 in the next few days.
| Support | 1.2980 | 1.2925 | 1.2885 |
| Resistance | 1.3035 | 1.3075 | 1.3110 |
XAU/USD – Price has broken above the resistance at $1970 overnight and could be heading towards $1990 to $2000 in the next few days. Stochastic is rising and is not yet in the overbought zone. MACD remains bullish and is hinting at a bullish price trend. 20EMA is pointing up with a steep slope, hinting at a strong bullish price trend. However, a price move below $1940 would negate this bullish price trend.
| Support | 1966.30 | 1957.95 | 1946.40 |
| Resistance | 1978.50 | 1987.45 | 1998.75 |
CAD/JPY – We had a buy recommendation on this pair at 99.10 from Monday and yesterday. we had recommended placing stop at 98.90 and profit order at 99.80. Price has moved higher to 99.91, filling our profit order. We are out of this position with a profit of 70 pips. Price is likely to test the previous high at 100.15 in the next 24 hours as Stochastic is moving higher and MACD remains bullish. 20EMA is also hinting at a bullish price trend.
| Support | 99.80 | 99.40 | 98.95 |
| Resistance | 100.15 | 100.70 | 101.15 |