Market Talk
– The U.S. dollar scaled two-year peaks aided by a potential increase in U.S. interest rates and a wave of risk aversion that hit global markets while the Chinese yuan posted its largest three-day losing streak in nearly four years on growing worries of an economic slowdown in the world’s second-largest economy.
– The euro was at $1.0723, a fraction above the overnight low of $1.0697, its weakest since March 2020, as market nerves trumped any optimism from the re-election of French President Emmanuel Macron.
– The pound was at $1.2744, having hit its lowest since September 2020 overnight. U.S. futures market data show that funds have amassed their biggest wager against the pound since October 2019, a bet now worth close to $5 billion.
– The Australian dollar was at $0.7177, and hit a two-month low overnight, suffering particularly because the China lockdowns have weighed on commodity prices. Crude oil price fell on reduced demand, dragging the Canadian dollar lower to $1.2777.
– Gold rose on risk aversion as concerns over global growth due to COVID lockdowns in China lifted prices from the low of $1891.40 in the previous session to above $1900 in Tuesday Asian trades.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2655. Stop at 1.2620 and profit target at 1.2780
3. An increase in risk aversion and a decline in crude oil price are both likely to weigh on the Canadian dollar.
4. Price is likely to be supported by the Fibonacci 38% and 20EMA with MACD hinting at a bullish price trend.
Fundamental Comments
1. An increase in risk aversion is aiding the US dollar.
2. A decline in crude oil price due to reduced demand as a result of lockdown in China is likely to weigh on the Canadian dollar
Technical Comments
1. Price is likely to be support by the Fibonacci 38% correction point and the 20EMA.
2. MACD remains bullish and a turnaround would hint at a bullish price trend.
Key Levels
| Support | 1.2650 | 1.2615 | 1.2580 |
| Resistance | 1.2695 | 1.2730 | 1.2780 |
Technical Overview
USD/JPY – We had a buy recommendation at 128.05 which was filled on Thursday and yesterday, we had recommended lifting stop order higher to cost at 128.05 and keeping profit order unchanged at 129.35. Last night, our stop was triggered and we are out of this position at break even. MACD and Stochastic are both hinting that price could be turning up again but 20EMA is hinting at a bearish price trend.
| Support | 127.75 | 127.35 | 126.95 |
| Resistance | 128.20 | 128.65 | 128.95 |
EUR/USD – Price declined to a low of $1.0696 overnight and Stochastic is deep in the oversold zone. However, both MACD and 20EMA are hinting at a strong bearish price trend. We think the downtrend is likely to persist. There may be a pullback to the previous support turned resistance line at 1.0758 and this could offer a good opportunity to get into the downtrend. Only a move above 1.0820 would negate this bearish price trend.
| Support | 1.0695 | 1.0635 | 1.0570 |
| Resistance | 1.0735 | 1.0775 | 1.0815 |
GBP/USD – Price declined to a low of $1.2696 overnight and we think price may have reached a low. A Hammer candlestick price pattern has appeared on the 4-hourly chart, hinting at a possible price low. However, 20EMA is hinting at a strong bearish price trend. MACD is also hinting at a bearish price trend. We think the corrective rally is likely to be halted by the 20EMA at 1.2845 and the downtrend is likely to resume again from this resistance point.
| Support | 1.2730 | 1.2695 | 1.2645 |
| Resistance | 1.2770 | 1.2820 | 1.2880 |
XAU/USD – Price reached a low of $1891.40 overnight and has moved above $1900 this morning but we think the price rally is likely to be halted by 20EMA line at $1921.10. From here, we are likely to see another decline to test the low of $1889. Stochastic is deep in the oversold zone but both 20EMA and MACD are hinting at a strong bearish price trend. A break of $1889 could send price lower to $1847 in the next few days ahead.
| Support | 1899.70 | 1889.10 | 1877.90 |
| Resistance | 1907.35 | 1918.20 | 1931.25 |
EUR/GBP – We had a sell call yesterday at 0.8420 but price went up to a high of 0.8419, missing our entry order. Stochastic is in the overbought zone and moving lower. Price remains above the 20EMA and MACD has also remained bullish. There is a chance that price may continue to move higher to test 0.8440 again especially is price can stay above the 20EMA line at 0.8335.
| Support | 0.8400 | 0.8365 | 0.8335 |
| Resistance | 0.8440 | 0.8465 | 0.8510 |