Market Talk
– The U.S. dollar hovered near 20-year highs on Friday morning in Asia, as investors continued to digest worries about persistently high inflation and tightening central bank policy and supported by safe haven demand as Russia stand up to Finland’s plan to apply for NATO membership, with Sweden potentially following suit.
– Treasury yields slid as the bond market weighs the odds that the Federal Reserve can keep the economy from lurching into recession as it slams the brakes on a rising, albeit moderating, pace of inflation. US PPI increased 0.5% month-on-month in April, moderating from March when the growth of 1.6% was recorded.
– The yen held most of its overnight gains on Friday, after falling U.S. Treasury yields and market jitters propped up the Japanese currency, helping the Japanese yen to 1.2% overnight gain.
– The European single currency was at $1.0380, approaching its 2017 low of $1.0340. A decline below $1.0340 would be its lowest in nearly 20 years. Sterling hunkered down at $1.2206; weighed down by the a soaring dollar and a stand-off over post-Brexit trade rules for Northern Ireland
– Gold was down on Friday morning in Asia, holding near a three-month low as investors flocked to the dollar driven by bets the U.S. Federal Reserve will stick to aggressive rate hikes which had been driven to a three-month low.
Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation.
2. Sell EUR/USD at 1.0460. Stop at 1.0490 and profit target at 1.0360
3. Rate hikes anticipation and safety concerns are both aiding the U.S. dollar.
4. Price is likely to be capped by the 20EMA with MACD hinting at a bearish price trend.
Fundamental Comments
1. As Russia stand up to Finland’s plan to join NATO, investors sought safety in the safe haven U.S. dollar.
2. Further tightening by the Federal Reserve is likely to aid the U.S. dollar.
Technical Comments
1. Price is likely to be capped by the 20EMA and a previous support turned resistance line.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1.0390 | 1.0355 | 1.0335 |
| Resistance | 1.0425 | 1.0470 | 1.0515 |
Technical Overview
USD/JPY – Price was capped by the 20EMA at 129.35 after rising from the low of 127.51 on Thursday. Stochastic is rising from the oversold zone and hinting at a price rally. However, MACD and 20EMA remain bearish and are hinting at a bearish price trend. We are likely to see another test of the low at 127.51 in the next couple of days. A move above 129.35 would negate our bearish view.
| Support | 128.55 | 128.10 | 127.50 |
| Resistance | 128.95 | 129.35 | 129.80 |
USD/CAD – Price reached a high of 1.3076 overnight and this high was accompanied by a divergence warning from the MACD indicator as well as the Stochastic indicator. This is a hint that price could have reached a high and a reversal is likely. On the 4-hourly chart, a Shooting Star is also hinting at a price high and reversal. If price fails to move above 1.3070 today, we are likely to move lower to 1.2915 in the next 24 hours.
| Support | 1.2990 | 1.2950 | 1.2905 |
| Resistance | 1.3020 | 1.3045 | 1.3075 |
GBP/USD – Price reached a fresh low of 1.2164 overnight and this low was accompanied by a bullish divergence warning from the MACD indicator, hinting at a potential price low. Stochastic is also in the oversold zone. However, 20EMA remains bearish and is hinting at a bearish price trend. We think price may have reached a low and a corrective rally to 1.2405 is likely in the next few days. A move below 1.2160 would negate our bullish view.
| Support | 1.2195 | 1.2160 | 1.2120 |
| Resistance | 1.2250 | 1.2290 | 1.2330 |
XAU/USD – We had a sell call at $1852, yesterday, which was filled when price rallied to a high of $1853.90. Price declined later in the night to a low of $1810.50, filling our profit order. We are out of this position with a $21 profit. Stochastic is in the oversold zone and is forming a divergence with price, warning of a potential price low. However, both MACD and 20EMA remains bearish and are hinting at a bearish price trend.
| Support | 1821.60 | 1810.50 | 1797.20 |
| Resistance | 1831.60 | 1842.95 | 1858.60 |
AUD/USD – Price reached a fresh low of 0.6828 overnight and this low was accompanied by a divergence warning from the MACD indicator, hinting at a potential price low. Stochastic is also in the oversold zone and is hinting at a price rally. However 20EMA remains bearish and is hinting at a bearish price trend. Price will need to move above 0.6925 to confirm the low at 0.6828 and a price rally to 0.7020.
| Support | 0.6870 | 0.6830 | 0.6775 |
| Resistance | 0.6910 | 0.6955 | 0.7000 |