Market Talk
– The U.S. dollar nursed last week’s losses on Monday morning in Asian trading and was headed for its first monthly drop in five months as investors scaled back bets that rising U.S. rates will spur further gains in the greenback and as fears of a global recession have receded a little.
– The week ahead is full of data that could provide clues on the outlook for global growth as well as U.S. interest rates but trading is likely to be light through Monday as U.S. stock and bond markets close for the Memorial Day public holiday.
– Early in the Asia session, the dollar was a fraction weaker on the euro at $1.0728, just above a five-week low, having dropped about 1.5% on the common currency last week while the yen was a fraction weaker at 127.28 per dollar.
– The risk-sensitive Australian and New Zealand dollars were firm after a Friday rally, while the Chinese yuan held steady at 6.7210 per dollar in offshore trade, buoyed by progress out of virus lockdowns.
– Gold was up on Monday morning in Asia, firming in volatile trading with prices little changed as investors scaled back bets that rising U.S. rates will spur further gains in the greenback but gains were limited by receding fears of a global recession.
Chart Focus XAU/USD
Key Points
1. Buy Gold recommendation.
2. Buy Gold at $1857.00. Stop at $1845.70 and profit target at $1886.00
3. Lowered Fed rate hikes expectations and lower US Treasury yields are both likely to benefit gold.
4. Price is supported by the 20EMA with Stochastic hinting at a price rally.
Fundamental Comments
1. Investors have scaled back bets on the Federal Reserve’s aggressive monetary policy tightening plan, weighing on the U.S. dollar.
2. A decline in US Treasury yield is also weighing on the US dollar.
Technical Comments
1. Price is supported by the 20EMA and 20EMA is hinting at a bullish price trend.
2. Stochastic is rising and is hinting at a price rally.
Key Levels
| Support | 1856.55 | 1847.85 | 1840.90 |
| Resistance | 1869.55 | 1877.90 | 1886.15 |
Technical Overview
USD/JPY – Since reaching a low of 126.35 on 24 May, price has been consolidating within a 120 pips range for the past 6 calendar days. Despite a bullish divergence warning from the MACD as well as the stochastic indicators, price has not been able to rally. We are likely to see this range continues until there is a breakout. Both MACD and 20EMA are hinting at a bullish price trend. Stochastic is not giving any hint of direction at the moment.
| Support | 126.95 | 126.65 | 126.35 |
| Resistance | 127.25 | 127.55 | 127.85 |
EUR/USD – Price is trying to break above the previous week high at 1.0764 at the point of this writing. 20EMA is hinting at a continuation of this price rally. However, both stochastic and MACD indicators are hinting at a limited upside or a weak trend. The next resistance level is at 1.0825 and if price can hold above the 20EMA line, we have a chance to see price moving towards this resistance level.
| Support | 1.0745 | 1.0695 | 1.0640 |
| Resistance | 1.0770 | 1.0820 | 1.0850 |
GBP/USD – Price broke above last Thursday’s high at 1.2612 to make a fresh high at 1.2658 on Friday’s morning despite a divergence waning from the MACD indicator, hinting at a possible price high. We are likely to see an attempt to break above last Friday’s high later today. However, if price is unable to move above, we are likely to see a decline back to 1.2470 in the next few days.
| Support | 1.2610 | 1.2560 | 1.2500 |
| Resistance | 1.2665 | 1.2700 | 1.2740 |
XAG/USD – Since price made a low at $20.35 on 12 May, price has been moving higher. The movement higher could be in the form of a Rising Wedge chart pattern. Price could be making one last attempt to reach $22.70 in the next few days before the big correction starts. 20EMA and MACD are both bullish but are not showing a strong bullish trend. Stochastic is also close to the overbought zone, hinting at a limited upside ahead.
| Support | 21.95 | 21.65 | 21.25 |
| Resistance | 22.30 | 22.45 | 22.70 |
AUD/USD – We had a buy call at 0.7125 last Friday and this entry order was filled when price declined to a low of 0.7123. Price has rallied to a high of 0.7187 this morning and our profit order is also filled. We are out of this position with a 60 pips profit. Stochastic is in the overbought zone but 20EMA is hinting at a strong bullish price trend. MACD is also bullish. We think price can continue to move higher to the next resistance point at 0.7260 in the 1-2 days.
| Support | 0.7160 | 0.7120 | 0.7080 |
| Resistance | 0.7190 | 0.7225 | 0.7265 |