Market Talk
– The U.S. dollar stayed close to a two-year high versus the euro, supported by the unremitting hawkish comments from Fed officials, with the Easter holiday dulling trading activity. The yen won a brief reprieve after hitting fresh two-decade lows from Japanese policymakers’ comments on Monday.
– The yen fell to a two-decade low of 126.79 in early Asian trading, before both Bank of Japan Governor Haruhiko Kuroda and Finance Minister Shunichi Suzuki voiced concerns and caused it to bounce as far as 126.25.
– The euro was flat around $1.08, just off last Thursday’s low of $1.0758, a level unseen since April 2020. Last week, the ECB confirmed plans to end its hallmark stimulus scheme in the third quarter, but stressed there was no clear time frame for when ECB rates would start to rise, sending the Euro weaker against the greenback.
– China’s economic activity slowed in March, with weakness in consumption, property and exports eclipsing faster-than-expected first-quarter GDP growth, suggesting a worsening in the outlook as sweeping COVID-19 curbs and the Ukraine war take a toll.
– Gold prices rose on Monday to their highest since mid-March, as the Russia-Ukraine crisis soured risk sentiment and drove investors to the safety of bullion offsetting a rise in U.S. benchmark 10-year Treasury yields.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2605. Stop at 1.2570 and profit target at 1.2675
3. Risk sentiment and a likely U.S. rate hike are both likely to aid the U.S. dollar.
4. Price is supported by the 20EMA with Stochastic hinting at a bullish price trend.
Fundamental Comments
1. Ukraine development is sending traders into the greenback for its safe haven status.
2. Expectations of a U.S. interest rate hike in early May is likely to narrow the interest rate differential aiding the U.S. dollar.
Technical Comments
1. Price is supported by the 20EMA which is also hinting at a bullish price trend.
2. Stochastic is moving higher and hinting at a bullish price trend ahead.
Key Levels
| Support | 1.2620 | 1.2590 | 1.2545 |
| Resistance | 1.2650 | 1.2695 | 1.2730 |
Technical Overview
USD/JPY – Price reached a high of 126.79 this morning before comments from BOJ governor and Japan Finance Minister sent traders buying the yen. However the rally proved to be short-lived and we are likely to see the greenback continue its climb higher due to the interest rate differential. 20EMA and MACD remain bullish but the stochastic indicator is near to the overbought zone hinting at a limited upside. The next resistance lies at 127.60.
| Support | 126.50 | 126.10 | 125.85 |
| Resistance | 126.80 | 127.20 | 127.60 |
EUR/USD – We had a buy call which was filled at 1.0825 last Wednesday. Last Thursday, we had left profit order at 1.0930 and stop at 1.0880. Price only reached a high of 1.0923 on Thursday before declining to 1.0756. We are out of this position with a 55 pips profit. This morning, MACD is starting to develop a divergence warning of a low but both stochastic indicator and 20EMA are still pointing to a bearish price trend.
| Support | 1.0785 | 1.0755 | 1.0725 |
| Resistance | 1.0835 | 1.0865 | 1.0895 |
GBP/USD – Price failed to reach 1.3180, reaching a high of 1.3147 on Thursday before declining to a low of 1.3018 this morning. We are likely to price moving back to the previous week low of 1.2971 in the next couple of days. Stochastic is still declining, which is a hint of further price decline. 20EMA is also hinting at a bearish price trend ahead. MACD is still declining and hinting at a bearish price movement.
| Support | 1.3010 | 1.2970 | 1.2930 |
| Resistance | 1.3050 | 1.3095 | 1.3145 |
XAU/USD – Price has broken above the resistance at $1981.30 and rose to a high of $1990.20 this morning. We think price could be heading towards $2000 in the next few days. MACD is starting to show divergence, hinting at a possible price high. However 20EMA is pointing up with a steep slope, hinting at a strong bullish price trend. Stochastic is also not in the overbought zone as yet, hinting that price can move higher.
| Support | 1981.30 | 1971.75 | 1960.70 |
| Resistance | 1996.55 | 2009.05 | 2020.50 |
AUD/USD – We had a buy call at 0.7450 last Thursday but our call was wrong and we lost 30 pips on this trade. Price has declined to a low of 0.7350 this morning and the stochastic indicator has reached the oversold zone. MACD is also developing a potential divergence warning. Both MACD and the stochastic indicator are hinting at a possible price low but 20EMA is hinting at a strong bearish price trend.
| Support | 0.7350 | 0.7320 | 0.7285 |
| Resistance | 0.7380 | 0.7410 | 0.7445 |