Market Talk
– The U.S. dollar recovered from its overnight slide on Tuesday morning as Fed Governor Christopher Waller threw doubts on the potential for a pause in rate hikes after two half-point increases in June and July 2022.
– The euro was at $1.0745, down 0.3%, having hit a five-week high of $1.0786 overnight, as German inflation rose to its highest level in nearly half a century in May on the back of soaring energy and food prices, strengthening the case for an outsized European Central Bank interest rate hike in July.
– The greenback traded on Tuesday at 128.16 yen. Sterling was at $1.2630 and is set for a monthly gain of 0.5% versus the dollar, its first monthly rise in 2022. The Canadian dollar touched 1.2653 per dollar, near a one-month high struck overnight.
– The trade-sensitive Australian and New Zealand dollars fell, with the Aussie last down 0.2% at $0.7180 and the kiwi down 0.4% at $0.6530. A contraction in China’s May PMI, albeit at a slower pace than April figure, added to the gloom for the Aussie and Kiwi.
– Gold was down on Tuesday morning in Asia. A strengthening U.S. dollar and rising U.S. Treasury yields impacted demand for the U.S. currency-priced yellow metal, which is set for a second consecutive monthly loss for the first time since March 2021.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.2610. Stop at 1.2640 and profit target at 1.2500.
3. Doubt of a pause in aggressive rate path and a rising yields are both weighing on the British pound.
4. Price has moved below the 20EMA and Stochastic is also hinting at a bearish price trend.
Fundamental Comments
1. A rising U.S. Treasury yields is aiding the U.S. dollar.
2. Doubt of a pause in the Federal Reserve aggressive rate hike is aiding the U.S. dollar.
Technical Comments
1. Price has moved below the 20EMA, hinting at a bearish price trend.
2. Stochastic has a bearish crossover and is moving lower, hinting at a bearish price trend.
Key Levels
| Support | 1.2580 | 1.2530 | 1.2490 |
| Resistance | 1.2620 | 1.2665 | 1.2700 |
Technical Overview
USD/JPY – Price broke above the recent range high and moved to a high of 128.34 this morning. The break out of the range could be a hint that price could be moving upwards in the next few days. The target is at the previous high at 129.60. However, stochastic is in the overbought zone and is hinting at a limited upside. Both MACD and 20EMA are hinting at a bullish price trend.
| Support | 127.50 | 127.15 | 126.80 |
| Resistance | 127.95 | 128.35 | 128.80 |
EUR/USD – Price made a fresh new high at 1.0786 overnight but this high was accompanied by a divergence warning from the MACD indicator, hinting at a possible high in the making. Stochastic is also turning down and is hinting at a price decline. Price is currently supported by the 20EMA but a break of this line is likely to send price lower to 1.0640 in the next 2-3 days. A move above 1.0786 would hint at a continuation of the rally to 1.0825.
| Support | 1.0735 | 1.0695 | 1.0640 |
| Resistance | 1.0785 | 1.0820 | 1.0850 |
USD/CAD – Price hit a one-month low of 1.2649 overnight. We think price could have reached a low as there is a divergence warning from the MACD indicator. Stochastic is also in the oversold zone hinting at a limited price downside. However, 20EMA is pointing down with a steep slope, hinting at a strong bearish price trend. A move above 1.2685 would confirm a low at 1.2649 in place and hint at a price rally to 1.2765 in the next 2-3 days.
| Support | 1.2645 | 1.2605 | 1.2565 |
| Resistance | 1.2685 | 1.2730 | 1.2765 |
XAU/USD – We had a buy call yesterday at $1857 but our stop was also triggered after price dropped to a low of $1845.70. We lost $11.30 on this trade. Stochastic is declining and is hinting at a price decline. MACD and 20EMA are both flat and neutral. The price consolidation may not have ended with a test of $1838 likely in the next 1-2 days. The uptrend should be intact as long as price stays above the Fibonacci 62% correction point at 1830.80.
| Support | 1840.90 | 1830.95 | 1819.15 |
| Resistance | 1856.55 | 1869.55 | 1877.90 |
NZD/USD – Price reached a high of 0.6563 accompanied by a divergence warning from the MACD indicator. This is a hint that price could have reached a price high and a reversal is likely. Stochastic is also hinting at a price decline but 20EMA is currently supporting price at 0.6515. Price will need to move below 0.6515 to confirm a top is in place and a decline to 0.6420 in the next few days. A move above 0.6565 would negate our bearish view.
| Support | 0.6515 | 0.6485 | 0.6440 |
| Resistance | 0.6565 | 0.6595 | 0.6645 |