Market Talk
– The U.S. dollar was down on Thursday morning in Asia, after U.S. Treasury yields steadied and the greenback retreated, as latest U.S. data raised hopes that inflation may be close to peaking, though several major central banks raised rates aggressively to fight inflation.
– The greenback weakened 0.6% against its Canadian counterpart on Wednesday after BoC also raised rates by 50bps, making its biggest single move in more than two decades and flagging more hikes to come. New Zealand’s central bank raised interest rates by a hefty 50 basis points on Wednesday, the biggest hike in over two decades.
– The pound rose to its highest point in a week against the dollar, gaining 0.9% on Wednesday after U.K. producer price index input grew 19.2% year-on-year, and 5.2% month-on-month, while the consumer price index grew 7% year-on-year and 1.1% month-on-month, in March 2022, hinting at more rate hikes ahead.
– The euro gained ground on the dollar, rising 0.54% on Wednesday, although it was not too far away from its 1-month low on concerns about Ukraine. The pause in yields meant the Japanese yen managed a small recovery in to $125.37, having fallen to a 20 year low of $`78126.31 on Wednesday.
– Gold prices hit a one-month high as rising consumer prices boosted its appeal as an inflation hedge and a safe haven as Ukraine situation worsen with investors seeming to look past an impending interest rate hike by the Federal Reserve.
Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.7450. Stop at 0.7420 and target at 0.7520.
3. A pause in the US Treasury yields rally and hopes that US inflation may have peaked are both likely to weigh on the U.S. dollar.
4. Price may have formed a Double Bottom chart pattern with MACD and stochastic are both hinting with divergence of a possible price low.
Fundamental Comments
1. A pause in the US Treasury yields rally is likely to weigh on the U.S. dollar.
2. Hopes that US inflation may have peaked are also likely to weigh on the U.S. dollar.
Technical Comments
1. Price may have formed a Double Bottom chart pattern which is a reversal pattern.
2. MACD and stochastic are both hinting with divergence of a possible price low.
Key Levels
| Support | 0.7445 | 0.7410 | 0.7390 |
| Resistance | 0.7495 | 0.7525 | 0.7555 |
Technical Overview
USD/JPY – Price reached a high of 126.31 overnight just shy of its resistance at 126.40. The high was also accompanied by a divergence warning from the MACD indicator as well as the stochastic indicator. Price has moved below the 20EMA and has also broken below a rising trendline on the 4-hourly chart. The signs are point to a price decline. We think the decline could send price lower to 124.00 in the next couple of days.
| Support | 125.10 | 124.70 | 124.35 |
| Resistance | 125.50 | 125.80 | 126.30 |
EUR/USD – We had a buy recommendation at 1.0825 which was filled when price declined to a low of 1.0808 yesterday. Price has rallied to a high of 1.0916 this morning and we think price is likely to exceed the previous high of 1.0935. We would recommend keeping profit target at 1.0930 while lifting stop higher to 1.0880. MACD and 20EMA are both hinting at a strong bullish price trend but stochastic is in the overbought zone.
| Support | 1.0895 | 1.0845 | 1.0805 |
| Resistance | 1.0935 | 1.0980 | 1.1025 |
GBP/USD – Price made a new low at 1.2971 overnight but a strong UK inflation data send price higher to above 1.3100 this morning. We think price is likely to higher to 1.3180 in the next couple of days. Stochastic continues to rise and both MACD and 20EMA are bullish and hinting at a strong bullish price trend. Stochastic and MACD had also given divergence warnings of a possible low prior to the reversal.
| Support | 1.3100 | 1.3055 | 1.3025 |
| Resistance | 1.3145 | 1.3180 | 1.3225 |
XAU/USD – Price has broken above the resistance at $1970 and rose to a high of $1981.35 overnight. We think price could be heading towards $1990 to $2000 in the next few days but a Hanging Man and a possible bearish Engulfing pattern could be forming on the 4-hourly chart, hinting at a possible price high. Stochastic is also in the overbought zone but both MACD and 20EMA are hinting at a strong bullish price trend. A move below $1970 would hint at a top in place and a decline to $1931.
| Support | 1971.75 | 1960.70 | 1946.40 |
| Resistance | 1981.35 | 1991.45 | 2002.40 |
USD/CAD – We had a sell recommendation at 1.2650 on Tuesday which was filled and yesterday we had recommended lowering stop to 1.2665 and keeping profit order at 1.2560. Price declined to a low of 1.2542 overnight but unfortunately our stop was triggered at 1.2665 when price reached a high of 1.2675 before the decline. We lost 15 pips on this trade. We are expecting the decline to continue lower to 1.2480 in the next couple of days.
| Support | 1.2535 | 1.2480 | 1.2450 |
| Resistance | 1.2570 | 1.2610 | 1.2660 |