Market Talk
– The safe-haven US dollar recovered some of its overnight losses on Tuesday morning. The U.S. currency has been falling broadly alongside a decline in Treasury yields from multi-year peaks, with aggressive easing by the Federal Reserve already priced in.
– There are small positive signs for the global economy, with the Chinese city of Shanghai expected to lift its lockdown soon and U.S. President Joe Biden’s comments earlier in the week about a possible easing of the trade war with China lifting risk sentiment at the greenback’s expense.
– The euro retreated 0.21% to $1.0672, although it barely dented Monday’s 1.17% surge, after European Central Bank President Christine Lagarde said policymakers were likely to lift the euro area deposit rate out of negative territory by the end of September 2022.
– The risk-sensitive Aussie dollar sank 0.41% to $0.7081, while New Zealand’s kiwi slid 0.46% to $0.6438, a day before the Reserve Bank of New Zealand is widely expected to raise the key rate by half a point.
– The pullback in the greenback helped gold regain some ground to $1,855 an ounce as weakness in the dollar and growth concerns in the global economy lifted the metal, although the non-yielding bullion pared some gains after U.S. Treasury yields rose as U.S. stock futures sank after market close following a profit warning from Snapchat.
Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation.
2. Buy NZD/USD at 0.6415. Stop at 0.6385 and profit target at 0.6495.
3. With aggressive easing by the Fed already priced in and expectations of a rate hike by RBNZ the next day, the kiwi is likely to be stronger.
4. Price is likely to be supported by the 20EMA and a previous resistance turned support line with MACD hinting at a bullish price trend.
Fundamental Comments
1. Belief that aggressive easing by the Federal Reserve already priced in is likely to weigh on the US dollar.
2. The kiwi is likely to be aided by expectations of a rate hike by the RBNZ.
Technical Comments
1. Price is likely to be supported by the 20EMA as well as a previous resistance turned support line.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 0.6415 | 0.6375 | 0.6345 |
| Resistance | 0.6450 | 0.6495 | 0.6520 |
Technical Overview
USD/JPY – We have a buy call yesterday at 127.70 which was filled when price declined to a low of 127.35. The rally seems weak but our view remains unchanged from yesterday. We would recommend keeping stop order at 127.30 and profit order at 129.50. MACD and 20EMA continues to hint at a bearish price trend. Stochastic is rising and is hinting at a price rally.
| Support | 127.40 | 127.00 | 126.70 |
| Resistance | 127.80 | 128.30 | 128.80 |
EUR/USD – The price rally moved to a high of 1.0697 overnight and we are expecting the rally to continue higher to 1.0750 in the next couple of days ahead. Stochastic continues to move higher and is hinting at a price rally. MACD had given a bullish divergence warning earlier, hinting at a price low. 20EMA has turned bullish and is hinting at a bullish price trend. If price can stay above 1.0640, we are likely to see a rally to the V-shaped price projection target at 1.0750.
| Support | 1.0645 | 1.0595 | 1.0535 |
| Resistance | 1.0695 | 1.0740 | 1.0770 |
GBP/USD – Price moved to a high of 1.2600 overnight and has been consolidating near the high. If price is supported above 1.2525 we are likely to see a test of the previous high at 1.2640 in the next 24 hours. Stochastic is the overbought zone, hinting at a limited upside. MACD has given a divergence warning of a possible price high but 20EMA is hinting at a strong bullish price trend. We think price is likely to be capped at 1.2640 and a decline is likely from this resistance high.
| Support | 1.2550 | 1.2515 | 1.2475 |
| Resistance | 1.2600 | 1.2640 | 1.2675 |
XAU/USD – Price reached a high of $1865.05, just shy of the Fibonacci 161.8% price projection target at $1866.50 on Monday. While Stochastic is declining from the overbought zone, MACD and 20EMA remain bullish and are hinting at a bullish price trend. If price is supported by the 20EMA at $1845, we may see another test of $1866.50. A move below $1845 is likely to send price lower to $1810 in the next few days.
| 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 yesterday we had recommended keeping stop order at 0.9680 and profit order at 0.9830. Price declined to a low of 0.9626 overnight and we are out of this position with a low of 30 pips. Stochastic remains near to the oversold zone but both MACD and 20EMA are bearish and are hinting at a bearish price trend.
| Support | 0.9625 | 0.9595 | 0.9560 |
| Resistance | 0.9670 | 0.9700 | 0.9735 |