Market Talk
– The U.S. dollar was up on Tuesday morning in Asia as it continues its fight for a footing with the global economy in focus after weak economic data from China and a steep drop in New York State’s factory activity highlighted worries about the prospects for a global slowdown.
– The benchmark treasury yields eased as traders calculate that aggressive near-term interest rate hikes from the U.S. Federal Reserve will drag on long-term U.S. growth and global growth concerns deepened after unexpectedly weak economic data from China.
– The Chinese yuan was steady at 6.7953 per dollar in offshore trade and looked like it was finding a base after falling more than 6% in a month. The riskier Australian and New Zealand dollars both inched up around 0.1% and are off multi-year lows.
The euro rose about 0.1% on the dollar to $1.0446. Sterling bounced about 1.5% from a two-year low and was steady at $1.2328 on Tuesday morning. The yen is holding above a two-decade low at $129.30.
Gold was up on Tuesday morning in Asia, even as the dollar slowly resumed an upward trend and U.S. Treasury yields resumed their climb. Gold prices had declined in the previous day to a more than three-and-a-half month low at $1786.57.
Chart Focus USD/CHF
Key Points
1. Sell USD/CHF recommendation.
2. Sell USD/CHF at 1.0025. Stop at 1.0065 and profit target at 0.9910.
3. A steep drop in New York State’s factory activity and a decline in benchmark treasury yields are both likely to weigh on the US dollar
4. An Evening Doji Star and a bearish divergence from the MACD indicator are both hinting at a price high and a reversal.
Fundamental Comments
1. A steep drop in New York State’s factory activity highlighted worries about the US economy and is likely to weigh on the US dollar.
2. A decline in benchmark treasury yields is likely to weigh on the US dollar.
Technical Comments
1. An Evening Doji Star candlestick price pattern is hinting at a price high and a reversal.
2. A bearish divergence warning from the MACD indicator is hinting at a possible price high.
Key Levels
| Support | 0.9980 | 0.9940 | 0.9905 |
| Resistance | 1.0025 | 1.0065 | 1.0095 |
Technical Overview
USD/JPY – Price is currently capped by the 20EMA at 129.60 and if price is unable to move above the 20EMA, there could be another decline lower to 127.60. Stochastic is near to the oversold zone and is hinting at a price decline. MACD is also bearish and hinting at a price decline. We favour a move lower to 127.60. However, if price move above 129.60, we are likely to see a test of the previous high at 130.80 in the next few days.
| Support | 129.10 | 128.70 | 128.45 |
| Resistance | 129.60 | 130.05 | 130.55 |
EUR/USD – In our previous update on Friday, we had a sell recommendation at 1.0460. However, this order was not filled. Our view remains unchanged. We think price is likely to be capped at 1.0470 and a decline back to 1.0350 is likely in the next few days. Stochastic continues to rise, hinting at a price rally. 20EMA is neutral but MACD remains bearish and is hinting at a bearish price trend. A move above 1.0535 would negate our bearish view.
| Support | 1.0420 | 1.0380 | 1.0350 |
| Resistance | 1.0455 | 1.0500 | 1.0535 |
GBP/USD – Price continues to move higher after hitting a low at 1.2155 last Friday. There is a strong resistance at 1.2415 and price will need to move above this resistance to proceed higher to 1.2600. If price is unable to move above 1.2415, we are likely to see another test of the previous low at 1.2155. Stochastic is in the overbought zone and is hinting at a price decline. MACD remains bearish but 20EMA is hinting at a bullish price trend. We would advise watching 1.2415 for clue to the next price direction.
| Support | 1.2345 | 1.2295 | 1.2235 |
| Resistance | 1.2415 | 1.2465 | 1.2515 |
XAU/USD – Price continues to move higher after hitting a low at $1786.57 this morning. There is a strong resistance at $1831.15 and price will need to move above this resistance point to proceed higher to $1858. Failure to breach this resistance is likely to send price back to $1786.57. MACD remains bearish but Stochastic is rising and hinting at a price rally. 20EMA is neutral at the moment.
| Support | 1821.15 | 1810.50 | 1797.20 |
| Resistance | 1831.15 | 1842.95 | 1858.60 |
AUD/USD – Price continues to move higher after hitting a low at 0.6828 last week. We are expecting this rally to continue higher towards 0.7050 in the next 24 hours. A move above this resistance is likely to send price higher to 0.7135 in the next few days. Stochastic is rising and hinting at a bullish price trend but is inside the overbought zone. Both MACD and 20EMA are hinting at a bullish price trend.
| Support | 0.6990 | 0.6940 | 0.6895 |
| Resistance | 0.7030 | 0.7075 | 0.7105 |