Market Talk
– The U.S. dollar began the week on a strong footing, aided by sharply rising U.S. yields and by investors’ tilt toward safety as lockdowns in China, war on the edge of Europe and fear about higher interest rates sent a nervous jolt through the financial markets.
– The benchmark 10-year Treasury yield stood at its highest since 2018 at 3.1464%, sending the Japanese yen towards it weakest level in 20 years at 131.25. The greenback changed hand against the Japanese yen at 130.90 in Monday’s morning trades.
– The euro was at $1.0529, which is close to a five-year low at $1.0481 made two weeks ago. Sterling hovered just below two-year lows made last week after the Bank of England warned that Britain’s economy was facing recession.
– The greenback made a 22-month high on the growth-sensitive New Zealand dollar in early trade and rose more than 0.5% on the Aussie to a three-month peak on Monday. Both currencies declined against the greenback on worries that a lockdown in Shanghai could lead to a global recession.
– Gold was idling at $1,872 an ounce, having struggled to gain any traction as a safe haven recently as an elevated dollar pressured demand for greenback-priced bullion, with rising U.S. Treasury yields further weighing on prices.
Chart Focus Gold
Key Points
1. Sell Gold recommendation.
2. Sell Gold at $1872.50. Stop at $1882 and profit target at $1851.
3. A strong US dollar and rising US Treasury yields are both weighing on Gold.
4. Price is capped by the 20EMA with MACD hinting at a bearish price trend.
Fundamental Comments
1. A rising U.S. Treasury yields is weighing on Gold prices.
2. A strong U.S. dollar is also weighing on Gold
Technical Comments
1. Price is capped by the 20EMA which is also hinting at a bearish price trend.
2. MACD line has turned below the zero line, hinting at a bearish price trend.
Key Levels
| Support | 1865.80 | 1850.35 | 1841.85 |
| Resistance | 1877.90 | 1892.25 | 1903.35 |
USD/JPY – Price was supported by the 20EMA and managed to stay above 130 last Friday and we have seen a rally that has brought price close to the previous high at 131.25. 20EMA is rising and is hinting at a bullish price trend. MACD is also bullish and is hinting at a bullish price trend. Stochastic is in the overbought zone. We think price is likely to test the 131.25 high point in the next 24 hours.
| Support | 130.80 | 130.40 | 130.05 |
| Resistance | 131.25 | 131.70 | 132.10 |
EUR/USD – Price is close to a five-year low at $1.0481 made two weeks ago and a break of this low is likely to send price lower to $1.0340 in the next few days. 20EMA is declining and is hinting at a bearish price trend. MACD is also hinting at a bearish price trend. Stochastic is also turning lower and is hinting at a bearish price trend. A move above $1.0645 would negate our bearish view.
| Support | 1.0495 | 1.0465 | 1.0420 |
| Resistance | 1.0525 | 1.0555 | 1.0595 |
GBP/USD – Price has broken below last Friday’s low at 1.2275 at the point of this writing and could be heading lower to the next support point at 1.2205. We think the downside should be limited as MACD is starting to warn with a divergence of a possible price low. Stochastic is in to the oversold zone but 20EMA is hinting at a strong bearish price trend. Watch the support at 1.2205 for confirmation of a low.
| Support | 1.2250 | 1.2205 | 1.2170 |
| Resistance | 1.2280 | 1.2320 | 1.2360 |
AUD/JPY – We had a buy call on this pair last Friday but our call was wrong. We lost 35 pips on this trade. Price has continued its decline after breaking below a downtrend line. We are expecting the decline to continue lower to 91.45 initially and eventually to 90.30 in the next few days. Both MACD and 20EMA are hinting at a bearish price trend. Stochastic is near to the oversold zone but is likely to continue its decline and stay in the oversold zone.
| Support | 91.60 | 91.30 | 90.95 |
| Resistance | 92.00 | 92.35 | 92.70 |
NZD/USD – The Kiwi is at a 22-month low at 0.6347 at the point of this writing. Price could be close to a low as MACD is starting to warn with a divergence of a possible price low. Stochastic is in the oversold zone but MACD is hinting at a strong bearish price trend. 20EMA is also hinting at a strong bearish price trend. Price would need to move above 0.6440 to confirm the reversal; else we are likely to see a continuation of the decline to 0.6195.
| Support | 0.6310 | 0.6270 | 0.6250 |
| Resistance | 0.6355 | 0.6390 | 0.6420 |