Market Talk
– The U.S. dollar was up on Thursday morning in Asia, nearing heights not seen in two decades. A brewing energy crisis in Europe slammed the euro while BOJ effect to keep yield near zero percent hurt the Japanese yen.
– Bank of Japan kept its interest rate steady at -0.10% as it handed down its policy decision earlier in the day. The central bank is no closer to tightening its monetary policy as it continues to keep yields near zero, sending the USD/JPY rate above 130.
– The euro also slid to a five-year low of $1.0510, bringing its losses for the month to 5%, which would be its worst pummelling since early 2015. The currency is now perilously close to huge chart support levels stretching from $1.0500 down to a trough from 2017 at $1.0344.
– U.S. growth data is due later on Thursday and could halt the dollar’s advance, especially since overnight data showed a blowout in the U.S. trade deficit and prompted forecast downgrades.
– Gold was down on Thursday morning in Asia, falling to a two-month low, after a strong U.S. dollar and an imminent U.S. interest rate hike hurting demand and sentiment for the safe-have yellow metal.
Chart Focus AUD/JPY
Key Points
1. Buy AUD/JPY recommendation.
2. Buy AUD/JPY at 92.60. Stop at 92.15 and profit target at 93.70
3. Rising commodity prices due to inflation and interest rate differential are both aiding the Aussie dollar.
4. A confirm Double Bottom chart pattern and bullish MACD are both hinting at a price rally.
Fundamental Comments
1. Commodity inflation is likely to aid the Aussie while weighing on the yen.
2. Interest rate differential is in the Aussie dollar favour.
Technical Comments
1. Price has broken above a Double Bottom chart pattern, hinting a reversal.
2. MACD has a divergence warning and is currently moving up and hinting at a bullish price trend.
Key Levels
| Support | 92.55 | 92.15 | 91.65 |
| Resistance | 93.05 | 93.50 | 93.90 |
Technical Overview
USD/JPY – Yesterday, we had a buy recommendation at 127.65 but price only reached a low of 127.79, missing our entry order price. Price has since moved up to 130.27, which is a 20-year high. There is no divergence warning from MACD and 20EMA is hinting at a strong bullish price trend. Stochastic is in the overbought zone but given the strong trend, we think price can continue to move higher to 131.00.
| Support | 129.75 | 129.35 | 128.85 |
| Resistance | 130.25 | 131.00 | 131.50 |
EUR/USD – Price continues its decline, reaching a low of 1.0479 this morning, breaching last night 5-year low at 1.0510. MACD is starting to show a bullish divergence, which is a hint of a possible price low at 1.0479. However, 20EMA is hinting at a strong bearish price trend. We think price may have reached a temporary bottom and we are likely to see a corrective rally to 1.0570 in the next couple of days.
| Support | 1.0510 | 1.0475 | 1.0450 |
| Resistance | 1.0545 | 1.0580 | 1.0620 |
GBP/USD – Price declined to a fresh new low at $1.2490 this morning and we think price may have reached a temporary low. Stochastic is starting to turn up from the oversold zone and the decline of the 20EMA is also slowing down, hinting at a possible price low. MACD has also started to turn up from the low, hinting at a price bottom. We think price is likely to move higher to the 20EMA resistance point at 1.2620 in the next couple of days in a corrective rally.
| Support | 1.2515 | 1.2490 | 1.2445 |
| Resistance | 1.2545 | 1.2600 | 1.2670 |
XAU/USD – Price declined to a fresh new low at $1871.80 this morning and MACD is starting to warn with divergence of a potential price low in the making. Stochastic is also turning up from the oversold zone and is hinting at a price rally ahead. However, 20EMA is still hinting at a strong bearish price trend. We think price may have reached a temporary bottom and we are likely to see a bounce to $1890 in the next couple of days.
| Support | 1871.80 | 1867.75 | 1853.75 |
| Resistance | 1881.20 | 1891.05 | 1901.70 |
USD/CAD – Price has moved higher to 1.2857 this morning but MACD is showing a divergence, hinting at a possible price high. Stochastic is also in the overbought zone, hinting at a price decline. However, 20EMA remains bullish and hinting at a strong bullish price trend. We think price may have reached a low and a correction back to 1.2685 is likely within the next few days. Above 1.2857 would negate our bearish price view.
| Support | 1.2810 | 1.2775 | 1.2735 |
| Resistance | 1.2860 | 1.2900 | 1.2945 |