Market Talk
– The U.S. dollar sank to a one-month low versus major peers on Friday in Asia as traders lowered Federal Reserve rate hike expectations amid signs the central bank might slow or even pause its tightening cycle in the second half of the year.
– Economic data released on Thursday supported this view with jobless claims, pending home sales and GDP, bring good news wrapped in bad, suggesting the economy is showing just enough softness to prompt a dovish pivot from the Fed by autumn.
– The U.S. currency fell against the euro to its weakest level since April 25 at $1.0765. The dollar weakened against the yen to 126.80, falling gradually over the space of three weeks from a two-decade high of 131.35.
– The risk-sensitive Australian dollar rallied 0.51% to $0.7136, while the New Zealand dollar jumped 0.49% to $0.6510. The British pound reached a new 3-week high against the greenback at 1.2665.
– Gold was up on Friday morning in Asia and was set for a second weekly gain after the dollar retreated from 20-year highs. Gold fell on Thursday, with the U.S. Federal Reserve’s aggressive monetary policy tightening plan dimming bullion’s appeal and a rebound in equities also adding pressure.
Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.7125. Stop at 0.7095 and profit target at 0.7185.
3. Lower expectations of an aggressive rate hike and an improvement in risk appetite are both likely to weigh on the US dollar.
4. A breakout above a recent high and a bullish stochastic are both hinting at a price rally.
Fundamental Comments
1. Lower expectations of an aggressive rate hike by the Fed is likely to weigh on the US dollar.
2. An improvement in investors’ risk appetite is weighing on the US dollar.
Technical Comments
1. Price has broken above a recent consolidation high with 20EMA hinting at a bullish price trend.
2. Stochastic is rising and is hinting at a price rally.
Key Levels
| Support | 0.7120 | 0.7080 | 0.7035 |
| Resistance | 0.7150 | 0.7185 | 0.7225 |
Technical Overview
USD/JPY – Price was capped by the 20EMA for the past two days and despite the MACD bullish divergence, we are likely to see a decline back to the low of 126.35 in the next 24 hours. MACD is starting to turn down and 20EMA is hinting at a bearish price trend. Stochastic is also hinting at a bearish price trend. Only a move above 127.60 would negate our bearish price trend for the next 24 hours.
| Support | 126.65 | 126.35 | 125.75 |
| Resistance | 127.00 | 127.55 | 127.85 |
EUR/USD – We had a buy call at 1.0660 yesterday but price only reached a low of 1.0662 and our entry order was not filled. Price has rallied to a high of 1.0765 this morning. MACD is forming a divergence, which could be a hint that price has reached a possible high. Stochastic is also inside the overbought zone, hinting at a limited upside. However, 20EMA is still hinting at a bullish price trend.
| Support | 1.0730 | 1.0685 | 1.0640 |
| Resistance | 1.0765 | 1.0815 | 1.0850 |
GBP/USD – Price broke above Thursday’s high at 1.2612 to break a fresh high at 1.2658 on Friday’s morning. Again there was a divergence waning from the MACD indicator, hinting at a possible price high. Stochastic is also into the overbought zone and is hinting at a price decline. However, 20EMA remains bullish and is hinting at a bullish price trend. A bearish Engulfing candlestick price pattern is hinting at a possible price high.
| Support | 1.2610 | 1.2555 | 1.2500 |
| Resistance | 1.2665 | 1.2700 | 1.2740 |
XAU/USD – We saw a rally to a high of $1869.55 on Tuesday but this high was accompanied by a divergence warning from the MACD indicator on the 4-hourly chart. Price has declined to a low of $1848.90 overnight and we are looking at the decline to continue lower to $1832.15 in the next 24 hours. However, stochastic is starting to turn up from the oversold zone and MACD is about to turn bullish. A move above $1870 would negate our bearish view.
| Support | 1840.90 | 1832.15 | 1819.05 |
| Resistance | 1857.80 | 1869.55 | 1882.20 |
USD/CHF – Price reached a fresh low of 0.9564 this morning. However, this low was accompanied by a divergence warning from the MACD indicator, warning of a possible price low. Stochastic is also close to the oversold zone and is hinting at a price rally but 20EMA is hinting at a bearish price trend. We think that price is likely to move above the 20EMA to 0.9685 in the next couple of days.
| Support | 0.9565 | 0.9530 | 0.9485 |
| Resistance | 0.9600 | 0.9640 | 0.9690 |