Market Talk
– The U.S. dollar held near a two-decade high on Thursday after economic data overnight showed inflation remained high but was unlikely to lead the Federal Reserve to shift to a more aggressive path of monetary policy.
– The consumer price index climbed 8.3%, higher than the 8.1% estimate but below 8.5% in the prior month. The data suggested inflation may have peaked, but was unlikely to cool quickly and derail the Fed’s current monetary policy plans.
– The euro rose to $1.0526 as European Central Bank has firmed up expectations that it will raise its benchmark interest rate in July for the first time in more than a decade to fight record-high inflation, with some policymakers even hinting at further hikes after the first.
– Sterling was at a two-year low of $1.2230 as a stand-off over post-Brexit trade rules for Northern Ireland deepens. The Japanese yen strengthened 0.48% versus the greenback at 129.79 per dollar, garnering support from a decline in US Treasury yields.
– Gold resumed its climb on Wednesday after a knee-jerk retreat tied to the release of U.S. inflation data, as the dollar slipped with investors latching on to a slight cooling of consumer prices.
Chart Focus Gold
Key Points
1. Sell Gold recommendation.
2. Sell Gold at $1852. Stop at $1860 and profit target at $1831.
3. A strong U.S. dollar and expectations of rising interest rates are both likely to weigh on Gold.
4. Price is capped by the 20EMA and MACD is hinting at a bearish price trend.
Fundamental Comments
1. A strong U.S. dollar is also weighing on Gold
2. Expectations of rising interest rates are likely to weigh on Gold.
Technical Comments
1. Price is capped by the 20EMA which is hinting at a bearish price trend.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1846.20 | 1830.90 | 1820.15 |
| Resistance | 1858.60 | 1871.50 | 1889.45 |
Technical Overview
USD/JPY -We saw price reached a high of 131.35 on Monday with a bearish divergence warning from the MACD indicator. Price has since declined below 129.80 and could be on its way to 128.60 in the next couple of days. Both MACD and 20EMA are hinting at a bearish price trend. Stochastic is rising and is hinting at a price rally. We prefer to follow the trend indicators and favour a decline to 128.60.
| Support | 129.40 | 129.05 | 128.60 |
| Resistance | 129.80 | 130.15 | 130.60 |
EUR/USD – Price has been moving in a narrow range; caught in last Friday’s range of 1.0484 to 1.0598. Last night inflation data failed to jolt price out of this range and we likely to see price moves inside this range until there is a breakout. Both MACD and 20EMA are flat and neutral at the moment. Stochastic is currently on a declining path towards the oversold zone.
| Support | 1.0470 | 1.0420 | 1.0390 |
| Resistance | 1.0525 | 1.0560 | 1.0595 |
GBP/USD – Price was capped by the high at 1.2400 overnight and we have seen price declined below the previous low of 1.2260 to a fresh 2-year low at 1.2190 at the point of this writing. The decline is showing no sign of abating at the moment. Stochastic is in the oversold zone but 20EMA is hinting at a strong bearish price trend. MACD is also hinting at a strong bearish price trend.
| Support | 1.2160 | 1.2130 | 1.2085 |
| Resistance | 1.2205 | 1.2245 | 1.2290 |
XAG/USD – Price was capped by the 20EMA at $21.95 and we have seen a decline to $21.30 at the point of this writing. We are expecting price to decline further. There is likely to be a test of the previous low at $21.17 and a further decline to $20.70. MACD is starting to show divergence, hinting at a possible price low but Stochastic is still declining and has yet to reach the oversold level. 20EMA is also hinting at a bearish price trend.
| Support | 21.15 | 20.70 | 20.25 |
| Resistance | 21.40 | 21.70 | 22.10 |
EUR/AUD – We had a buy call at 1.5080 yesterday but our call was wrong. We lost 40 pips on this trade. Our view remains unchanged from yesterday. We think price is likely to test the high at 1.5275 initially and eventually 1.5330 in the next few days. Price had declined to 1.4981 on inflation data news yesterday but has bounced up again. Both MACD and 20EMA remain bullish. Stochastic is also turning up after a bullish crossover.
| Support | 1.5240 | 1.5190 | 1.5140 |
| Resistance | 1.5275 | 1.5325 | 1.5355 |