FX Commentary – US Dollar Gained On Toxic Cocktail Of Rising Interest Rates And Lower Economic Growth

Market Talk
– The U.S. dollar was down on Tuesday morning in Asia after rising overnight as investors fretted about the toxic cocktail of rising interest rates and lower economic growth. Growing fears of recession and a slowdown in China dragged commodity-linked currencies lower.

– The Aussie dollar dropped as low as $0.6920, its weakest since July 2020, having fallen 1.7% overnight, which analysts attributed to falling commodity prices. The Kiwi inched higher on Tuesday morning but remained close to a 22-month low against the greenback.

– Lower oil prices also hurt the Canadian dollar, which touched C$1.3037 per dollar, its weakest since November 2020. The Japanese yen recover a little from a fresh 20-year low of $131.34 hit overnight, aided by a decline in US Treasury yields.

– The beaten down euro was a fraction higher at $1.0561. The euro has managed to stay above its low of $1.0470 for the past 8 days and hopes are rising it could have found a bottom. The British pound was little changed at $1.2329.

– Gold was up on Tuesday morning in Asia aided by a weakening U.S. dollar and declining US Treasury yield as investors now await inflation data due later tonight for clues to the next Federal Reserve policy action.

Chart Focus AUD/JPY

Key Points

1. Sell AUD/JPY recommendation.

2. Sell AUD/JPY recommendation at 91.55. Stop at 91.95 and profit target at 90.50

3. Fear of a slowdown in China and falling commodity prices are both weighing on the Aussie dollar.

4. Price is likely to be capped by a strong resistance with MACD hinting at a bearish price trend.

Fundamental Comments

1. Fear of a slowdown in China is aiding the safe haven Japanese yen.

2. Fall in commodity prices is weighing on the Aussie dollar.

Technical Comments

1. Price is likely to be capped by the 20EMA as well as a support turned resistance line.

2. MACD remains bearish and is hinting at a bearish price trend.

Key Levels


Technical Overview

USD/JPY – Price breached the previous high of 131.25 to reach a high of 131.35. However, this high was accompanied by a bearish divergence warning from the MACD indicator. This could be a hint of a market top. Price has declined to 129.79 this morning and we are expecting the decline to continue lower to 128.60 in the next few days. Stochastic is declining. MACD remains bearish while 20EMA is neutral at the moment.


EUR/USD – Price managed to move away from its 5-year low at 1.0471, giving hopes that price could have found a low. Stochastic is rising and is hinting at a price rally. MACD has turned bullish and 20EMA has also turned bullish. However, we think price is likely to be capped by the previous high at 1.0641. If price can move above this resistance, it will confirm the low at 1.0471 but failure is likely to send price back to test the low of 1.0471 again in the next few days.


GBP/USD – Price moved to a low of 1.2260 overnight and this move was accompanied by a divergence warning from the MACD indicator, hinting at a possible price low. Price has moved higher this morning but is capped by the 20EMA. A move above the 20EMA will confirm the low in place and a likely move to 1.2635. Stochastic is rising from the oversold zone, hinting at a price rally. However, both 20EMA and MACD remain bearish.


XAU/USD – We had a sell call on this pair yesterday at $1872.50 fortunately, price reached a high of $1872.89, filling our entry order. However, price only reached a low of $1851.51, missing our profit order at $1851.00. Our view remains unchanged and we would recommend bringing stop lower to cost and keeping profit order unchanged at $1851.00. Both MACD and 20EMA remains bearish. Stochastic is in the oversold zone.


NZD/USD – The kiwi reached a low of 0.6282 overnight but a bullish Engulfing candlestick price pattern on the 4-hourly chart is hinting at a possible price low and a reversal. Stochastic is also in the oversold zone and is supporting the theory of a possible price low. However, 20EMA and MACD remain bearish and is hinting at a bearish price trend. If price can stay above 0.6282, we are expecting a move to 0.6410 in the next few days.


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