Market Talk
– The U.S. dollar was down on Wednesday morning in Asia, after hitting a fresh two-decade peak against the yen as U.S. Federal Reserve policymakers pushed for sizeable interest rate hikes while the Bank of Japan maintained its dovish stance as it intervened in the market again.
– U.S. Treasury yields also continued to climb towards multi-year highs with 10-year yields touching 2.981%. Investors are bracing for the U.S. Federal Reserve to hike its interest rates aggressively in the coming months, keeping the greenback strong against its peers.
– The greenback was down 0.28% against the yen to 128.54 after the surging to a 20-year high at $129.43, underpinned by the divergence in monetary policy between a Federal Reserve determined to keep a lid on soaring inflation and a Bank of Japan that has kept interest rates ultra-low.
– China surprisingly kept its benchmark lending rates for corporates and households steady on Wednesday, going against the global trend of monetary tightening as major economies battle inflation. The CNH weakened to its weakest level since October 2021 at 6.4389 to the dollar.
– Gold was down on Wednesday morning in Asia, hitting a more than one-week low as a stronger U.S. dollar and a rising U.S. Treasury yields continued to weigh on demand for the yellow metal offsetting safe haven inflows for bullion.
Chart Focus Gold -XAU/USD
Key Points
1. Sell Gold recommendation.
2. Sell Gold at $1961. Stop at $1973 and profit target at $1930.
3. A stronger U.S. dollar and rise in 10-year Treasury yields are both weighing on the yellow metal.
4. A strong resistance at the Fibonacci 50% correction point and 20EMA, couples with a bearish MACD, is hinting at a price decline.
Fundamental Comments
1. A stronger U.S. dollar as U.S. Fed’s policymakers pushed for sizeable interest rate hikes to fight inflation is likely to aid the U.S. dollar.
2. Rise in 10-year U.S. Treasury yields to multi-year high is increasing the opportunity cost of hold the yellow metal.
Technical Comments
1. Price is likely to be capped by the Fibonacci 50% correction point and 20EMA.
2. MACD has turned bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1932.15 | 1920.25 | 1905.40 |
| Resistance | 1945.15 | 1955.75 | 1965.95 |
Technical Overview
USD/JPY – Price reached a fresh 20-year high at 129.40 this morning and this high was accompanied by a bearish divergence warning form the MACD indicator. This is a warning of a potential price high. There was also a bearish Engulfing candlestick price pattern on the 4-hourly chart, hinting at a price high as well. Stochastic is into the overbought zone and turning down. We see price going lower to 126.70 in the next few days.
| Support | 128.40 | 128.00 | 127.60 |
| Resistance | 128.85 | 129.35 | 129.65 |
EUR/USD – Price managed to hold above the previous week’s low at 1.0756 in overnight trading. There is also a divergence warning from the MACD indicator, hinting at a possible price low. Stochastic is moving up from the oversold zone while 20EMA has turned bullish. We think a low is close and a reversal is likely. If price can hold above 1.0755 we could be see a rally to 1.0935 in the next few days.
| Support | 1.0790 | 1.0755 | 1.0725 |
| Resistance | 1.0835 | 1.0870 | 1.0920 |
GBP/USD – Price managed to hold above the previous low of 1.2971, reaching a low of 1.2980 overnight and bouncing up to 1.3050. Stochastic is moving higher but MACD remains bearish. 20EMA is flat at the moment. Another test of 1.2971 cannot be ruled out at the moment but if price can hold above the overnight low at 1.2980, we could see a corrective rally to 1.3100 in the next couple of days.
| Support | 1.3010 | 1.2970 | 1.2930 |
| Resistance | 1.3045 | 1.3095 | 1.3145 |
XAG/USD – We had sell recommendation yesterday at $25.85 which was filled when price rallied to a high of $25.99. Price has since declined to a low of $24.97 and we would recommend keeping profit target at $24.90 while lowering stop to $25.30 to protect our profit. Stochastic is near to the oversold zone but both MACD and 20EMA are hinting at a bearish price trend.
| Support | 24.90 | 24.65 | 24.35 |
| Resistance | 25.25 | 25.65 | 26.00 |
USD/CAD – We had buy recommendation on Monday at 1.2605 and yesterday we had recommended keeping stop at 1.2570 and profit target at 1.2675. Unfortunately, Price reached a low of 1.2567. Our stop was triggered and we are out of this position with a 35 pips loss. A divergence warning was given by both the stochastic indicator and the MACD indicator. Price may be heading lower to 1.2515 again in the next few days.
| Support | 1.2565 | 1.2515 | 1.2475 |
| Resistance | 1.2605 | 1.2645 | 1.2675 |