Market Talk
– The U.S. dollar hovered near a two-decade high against major peers on Wednesday, ahead of a key reading on inflation that should provide clues on how aggressive the Federal Reserve will be in tightening monetary policy.
– Investors will be closely watching the April U.S. consumer price index reading later on Wednesday for any signs inflation may be starting to cool, with expectations calling for an 8.1% annual increase compared with an 8.5% rise recorded in March.
– The euro languished at 1.0530, continuing to trade mostly sideways since plumbing a more than five-year low at 1.0469 at the end of last month. Sterling also struggled near a 22-month low at $1.2262 from the start of the week, last trading flat at $1.2323.
– The yen continued to get some respite from a pause in the recent relentless rise in benchmark U.S. Treasury yields, trading little changed at 130.40 per dollar, after dipping to a more than two-decade low of 131.35 on Monday.
– Gold was down on Wednesday morning in Asia, hitting its lowest level since February 11 as the greenback strengthened and as investors fretted about rising interest rates ahead of a key reading on inflation for cues on the Federal Reserve’s monetary policy strategy.
Chart Focus EUR/AUD
Key Points
1. Buy EUR/AUD recommendation.
2. Buy EUR/AUD at 1.5080. Stop at 1.5040 and profit target at 1.5250.
3. A slowdown in China and fall in commodity prices are both likely to weigh on the Aussie dollar.
4. Price is likely to be supported by a strong support with MACD hinting at a bullish price trend.
Fundamental Comments
1. A slowdown in China induced by COVID-19 lockdown is likely to weigh on the Aussie dollar.
2. Fall in commodity prices is likely to weigh on the Aussie dollar.
Technical Comments
1. Price is likely to be supported by the 20EMA as well as a resistance turned support line.
2. MACD is bullish and could be turning up again, hinting at a bullish price trend.
Key Levels
| Support | 1.5120 | 1.5070 | 1.5040 |
| Resistance | 1.5175 | 1.5230 | 1.5275 |
Technical Overview
USD/JPY – Yesterday, we saw price reached a high of 131.35. However, this high was accompanied by a bearish divergence warning from the MACD indicator. Price was capped by the 20EMA resistance and we are likely to see a decline to 129.80 in the next 24 hours. A break of this low is likely to send price lower to our target at 128.60. Tonight inflation data could alter our technical view.
| Support | 129.95 | 129.65 | 129.25 |
| Resistance | 130.40 | 130.90 | 131.35 |
EUR/USD – Price has been moving in a narrow range; caught in last Friday’s range of 1.0484 to 1.0598. We are likely to see price moves inside this range until there is a breakout. As there is an inflation data tonight, we might see price break out of its range. We would recommend following in the breakout direction. We prefer the upside as Stochastic is rising from the oversold zone. Both MACD and 20EMA are also starting to turn bullish, hinting at a bullish price trend.
| Support | 1.0515 | 1.0470 | 1.0430 |
| Resistance | 1.0550 | 1.0595 | 1.0640 |
GBP/USD – Price moved to a low of 1.2260 on Monday and this low was accompanied by a divergence warning from the MACD indicator, hinting at a possible price low. We have since seen price move higher to 1.2340 at the point of this writing. We are likely to see a continuation of the price rally to 1.2410 in the next 48 hours. Stochastic is hinting at a price rally but both MACD and 20EMA are hinting at a bearish price trend.
| Support | 1.2350 | 1.2315 | 1.2280 |
| Resistance | 1.2410 | 1.2460 | 1.2515 |
XAU/USD – We had a sell call on this pair at $1872.50 on Monday which was filled. Yesterday, we had recommended bringing stop lower to cost at $1872.50 and keeping profit order unchanged at $1851.00. Our profit order was filled when price declined to a low of $1831.60 overnight. We are out of this position with a $21.50 profit. Stochastic is hinting at a possible reversal but both MACD and 20EMA are bearish.
| Support | 1831.60 | 1820.60 | 1807.10 |
| Resistance | 1846.20 | 1856.95 | 1866.15 |
AUD/JPY – Yesterday, we had a sell call at 91.55 but price only reached a low of 91.15 and our entry order was not filled. Stochastic is rising from the oversold zone and is hinting at a bullish price trend but both MACD and 20EMA are hinting at a strong bearish price trend. We think price is likely to be capped by the 20EMA at 91.15 and another decline to 89.75 is likely in the next few days.
| Support | 90.40 | 89.95 | 89.70 |
| Resistance | 90.90 | 91.50 | 92.10 |