Market Talk
– The U.S. dollar edged up on Thursday supported by expectations for aggressive Federal Reserve monetary tightening, but was well off the previous day’s peak amid nervousness about what a gathering of finance ministers might say about its rapid appreciation.
– San Francisco Fed President Mary Daly said on Wednesday she believed the case for a half-percentage-point rate hike next month is “complete” and “solid”, adding to recent comments from other Fed officials backing bigger rate increases.
– The greenback gained 0.38% on the yen to $128.30 in early trading on Thursday, after an overnight decline to a low of $127.45. The U.S. dollar had hit a two-decade high of $129.43 against the yen on Wednesday, after the BOJ stepped into the bond market for the third time in three months to defend its zero-percent yield target.
– The euro eased 0.11% to $1.0842, after reaching an overnight high of $1.0865. The British pound slipped 0.14% to $1.3055. The Australian dollar retreated 0.20% to $0.7436 while the Kiwi sank 0.40% to $0.6775, hurt by softer-than-forecast consumer price data.
– Gold was down on Thursday morning in Asia, with a rebounding US Treasury yields countering safe haven demand from the ongoing war in Ukraine. Worries over inflation and slowing economic growth due to the war in Ukraine had lifted the yellow metal from the low at $1939 to an overnight high at $1958.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 128.05. Stop at 127.70 and profit target at 129.35
3. Divergent monetary policy and interest rate differential are weighing on the Japanese yen.
4. Price is supported by the 20EMA and MACD hinting at a bullish price trend.
Fundamental Comments
1. Divergent monetary policy between the two countries is weighing on the yen.
2. Interest rate differential is weighing on the yen.
Technical Comments
1. Price is likely to find support provided by the 20EMA line.
2. MACD is turning up again and is hinting at a bullish price trend.
Key Levels
| Support | 128.00 | 127.65 | 127.30 |
| Resistance | 128.40 | 128.85 | 129.35 |
Technical Overview
USD/CAD – Price had broken below the neckline of a Double Tops chart pattern and is near to the target projection level. Stochastic is also in the oversold zone and could be turning up again. However, both MACD and 20EMA are both hinting at a strong bearish price trend. If price continues to decline, the next strong support level comes in at 1.2400, which is the low from two weeks ago.
| Support | 1.2740 | 1.2430 | 1.2400 |
| Resistance | 1.2510 | 1.2565 | 1.2590 |
EUR/USD – Price managed to hold above the previous week’s low at 1.0756 and we have seen a rally above the 20EMA to a high of 1.0865. We think the correction rally is likely to continue towards the previous high of 1.0935 in the next few days before the decline resume again. MACD and 20EMA are hinting at a bullish price trend. Stochastic is into the overbought zone.
| Support | 1.0825 | 1.0790 | 1.0755 |
| Resistance | 1.0865 | 1.0895 | 1.0925 |
GBP/USD – Price managed to hold above the previous low of 1.2971 and bouncing up to 1.3073. We think the rally can continue higher to 1.3145 in the next few days. MACD and 20EMA are both hinting at a bullish price trend. Stochastic is inside the overbought zone and hinting at a limited upside. A move below 1.3000 would negate our bullish view for the next few days.
| Support | 1.3040 | 1.3000 | 1.2970 |
| Resistance | 1.3080 | 1.3115 | 1.3145 |
XAG/USD – We had a sell recommendation on Tuesday at $25.85 and yesterday, we had left stop at $25.30 and profit target at $24.90. Yesterday, price declined below our profit order to a low of $24.87 and we are out of this position with a profit of $0.95. Price has bounced up $25.28 but we are looking at another decline to test the previous day’s low at 24.87. MACD and 20EMA are both bullish but stochastic is near to the oversold zone and is hinting at a limited downside.
| Support | 24.90 | 24.50 | 24.15 |
| Resistance | 25.20 | 25.50 | 25.90 |
XAU/USD – Yesterday, we had a sell recommendation at $1961. However, price only reached a high $1958.20 and our entry order was not filled. Our view remains the same as yesterday. We are looking at another decline below the previous low of $1939.25 in the next few days. We think the correction could have been completed at the overnight high and a decline is likely to start soon. MACD and 20EMA are both hinting at a price decline but stochastic is in the oversold zone.
| Support | 1948.50 | 1939.30 | 1927.70 |
| Resistance | 1958.20 | 1965.95 | 1981.50 |