Market Talk
– The U.S. dollar rose to a fresh two-year high in thin and choppy trading on Monday, in line with higher U.S. Treasury yields, as investors braced for multiple half a percentage-point rate hikes from the Federal Reserve.
– The greenback rose against the yen to hit a 20-year high on Tuesday morning, supported by high U.S. Treasury yields and likely comparatively good U.S. economic data this week. Japanese Finance Minister Shunichi Suzuki reiterated on Tuesday that sharp currency moves were undesirable but failed to halt the USD/JPY rally.
– The euro was at $1.0776, testing last week’s two-year low of $1.0756, precipitated by the Russian fresh offensive in the eastern Ukrainian region of Donbas. The British pound was also soft at $1.3006 in sight of its 18 month low against the dollar of $1.2973, also hit last week.
– The Australian dollar edged up from Monday’s one-month low and was at $0.7350 as the Reserve Bank of Australia released the minutes from its latest meeting, which suggested the central bank was edging closer to raising interest rates for the first time in more than a decade due to accelerating inflation.
– Gold was down on Tuesday morning in Asia, after rising to a one month high and close to the $2,000 mark during the previous session as concerns around the Russia-Ukraine conflict and rising inflationary pressures increased safe-haven bids for the precious metal.
Chart Focus XAG/USD- Silver
Key Points
1. Sell Silver recommendation.
2. Sell Silver at $25.85. Stop at $26.15 and profit target at 24.90.
3. An IMF downgrade and a rise in Treasury yield are both weighing on Silver.
4. A bearish Engulfing pattern and divergence warnings are pointing to a bearish price trend.
Fundamental Comments
1. A rise in U.S. Treasury yield is increasing the opportunity cost of Silver carry.
2. An IMF downgrade of global economy is likely to weigh on Silver.
Technical Comments
1. A bearish Engulfing candlestick pattern on the 4-hourly chart is hinting at a price decline.
2. A bearish divergence from the stochastic and MACD indicator is hinting at a price decline.
Key Levels
| Support | 25.65 | 25.30 | 24.90 |
| Resistance | 25.90 | 26.30 | 26.75 |
Technical Overview
USD/JPY – Price reached a high of 128.32 this morning and both MACD and 20EMA are still hinting at a bullish price trend. Stochastic is in the overbought zone and MACD continues to rise. MACD is also not forming any divergence with price hinting at a price high as yet. We think the bullish trend can continue to bring price higher to 129.20 in the next few days ahead. Only a move below 125.85 would negate this bullish view.
| Support | 128.00 | 127.60 | 127.20 |
| Resistance | 128.40 | 128.80 | 129.20 |
EUR/USD – Price managed to hold above the previous week’s low at 1.0756 in thin holiday trade overnight. There is also a divergence warning from the MACD indicator, hinting at a possible price low. Stochastic is inside the oversold zone, hinting at a limited downside. However, 20EMA remains bearish. We think a low is close and a reversal is likely. If price can hold above 1.0755 or just below, we could be see a corrective rally to 1.0935 again in the next few days.
| Support | 1.0755 | 1.0725 | 1.0655 |
| Resistance | 1.0790 | 1.0835 | 1.0865 |
GBP/USD – Price reached a high of 1.3147 on Thursday and has been declining since that high. We think the decline is likely to test the previous low of 1.2971 in the next 24 hours. A break of this support is likely to send price lower to 1.2855. If price is able to hold above 1.2971, we can see a bounce to 1.3080. Stochastic is in the oversold zone but both MACD and 20EMA are hinting at a bearish price trend.
| Support | 1.2970 | 1.2930 | 1.2880 |
| Resistance | 1.3015 | 1.3050 | 1.3080 |
XAU/USD – Price moved to a high at $1998.10 overnight and the high was accompanied by divergence warnings from the MACD and Stochastic indicators. There was also a Evening Doji Star candlestick price pattern on the 4-hourly chart. This is a price reversal pattern, hinting at a possible price high. Currently 20EMA is supporting price at $1974 and if price fails to hold above this support, we are likely to see a decline to $1945 in the next few days.
| Support | 1970.90 | 1960.20 | 1950.10 |
| Resistance | 1982.40 | 1998.10 | 2009.05 |
USD/CAD – We had buy recommendation yesterday at 1.2605 which was filled when price declined to a low of 1.2590 overnight. Stochastic is still declining after reaching the overbought zone while MACD remains flat near to the zero line and neutral at the moment. 20EMA has turned bearish. We remain bullish and would recommend keeping stop at 1.2570 and profit target at 1.2675.
| Support | 1.2570 | 1.2540 | 1.2515 |
| Resistance | 1.2615 | 1.2650 | 1.2695 |