Market Talk
– The U.S. dollar slipped on Monday as investors kept up selling pressure, cutting bets on further dollar gains from rising U.S. interest rates, while turning hopeful that loosening lockdowns in China can help global growth and exporters’ currencies.
– Shanghai is edging out of lockdown and an unexpectedly big rate cut in China last week pulled the risk-sensitive Australian dollar up by 3.8% in a week and half to $0.7080 while the New Zealand dollar rose to $0.6450, a three-week high.
– The yen was up 0.1% to $127.83 while the euro was up 0.2% at $1.0586 following last week’s 1.5% gain on the dollar. The Canadian dollar rose for a third straight week last week and was a touch higher at C$1.2814 early on Monday.
Sterling leapt nearly 2% last week on the back of stronger-than-expected retail data and markets’ broader re-think on whether global central banks are really lagging much behind the Federal Reserve. The British pound was last up 0.3% at $1.2527.
Gold was up on Monday morning in Asia, hitting a more than one-week high against a declining greenback. The concerns over global economic growth also prompted renewed support for the yellow metal.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 127.70. Stop at 127.30 and profit target 129.50
3. An improvement in risk sentiment and interest rate differential are both likely to weigh on the safe haven yen.
4. Price could be forming a base and MACD is also warning of a low with a divergence.
Fundamental Comments
1. Easing worries about a global economic slowdown is likely to weigh on the Japanese yen.
2. Interest rate differential is in the US dollar favour.
Technical Comments
1. Price could be forming a base with a lower low acting as evidence.
2. MACD is warning with divergence of a possible price low.
Key Levels
| Support | 127.40 | 127.00 | 126.70 |
| Resistance | 127.90 | 128.30 | 128.80 |
Technical Overview
AUD/USD – Price moved above last Friday’s high at 0.7073 this morning after finding support from the 20EMA line at 0.7015. We are likely to see a continuation of the rally to the Fibonacci 161.8% price projection target at 0.7180 in the next couple of days. Stochastic is inside the overbought zone and is hinting at a limited upside. However, both MACD and 20EMA are bullish and hinting at a strong bullish price trend.
| Support | 0.7085 | 0.7040 | 0.7005 |
| Resistance | 0.7135 | 0.7175 | 0.7205 |
EUR/USD – A price correction last Friday was halted by the 20EMA at 1.0535 and price has since moved higher to 1.0613 this morning. We are likely to see a continuation of the rally to 1.0640 in the next 24 hours. However, MACD is warning with a divergence of a possible price high. Stochastic is also hinting of a limited upside but 20EMA remains bullish and is hinting at a bullish price trend.
| Support | 1.0580 | 1.0550 | 1.0505 |
| Resistance | 1.0615 | 1.0640 | 1.0705 |
GBP/USD – Price moved above 1.2525 this morning after finding support from the 20EMA line at 1.2450, negating our bearish view. We are likely to see a continuation of the rally to the previous high at 1.2637 in the next 24-48 hours. While 20EMA continues to hint at a bullish price trend, both MACD and stochastic are starting to show signs of a reversal.
| Support | 1.2525 | 1.2495 | 1.2435 |
| Resistance | 1.2580 | 1.2610 | 1.2640 |
XAU/USD – Price moved above $1849.15 this morning to a high of $1858.10. We are likely to see a continuation of the rally to $1866.50, which is also the Fibonacci 161.8 price projection target, in the next 24 hours. Stochastic is in the overbought zone and is hinting at a limited upside. However, both MACD and 20EMA are hinting at a strong bullish price trend ahead.
| Support | 1849.10 | 1839.45 | 1829.60 |
| Resistance | 1858.10 | 1871.45 | 1885.70 |
USD/CHF – We had a buy recommendation at 0.9710 last Friday and our entry order was filled when price declined to a low of 0.9692. Our view remains unchanged and we would recommend keeping stop at 0.9680 and profit order at 0.9830. Stochastic is in the oversold zone and is hinting at a limited downside. However, both MACD and 20EMA remain bearish and are hinting at a bearish price trend.
| Support | 0.9685 | 0.9650 | 0.9615 |
| Resistance | 0.9735 | 0.9775 | 0.9825 |