Market Talk
– The U.S. dollar strengthened across the board on Wednesday as Treasury yields climbed and worries over a further acceleration in global inflation depressed investors’ risk appetite as euro zone inflation climbed to a record high this month.
– Treasury yields rose sharply as investors re-focused on inflation risks after upbeat U.S. economic data. Tuesday’s reports on housing and factory activity in the Midwest showed generally strong results, putting upward pressure on yields. 10-year benchmark bond yields rose to 2.8658%.
– The euro remained near a 5-week high at 1.0715 as pressure is building on the European Central Bank to take its most aggressive stance on rate hikes in its history as its battle against record inflation led by rising energy and food costs from the ongoing Russian-Ukrainian crisis.
– The dollar rose to a two-week high versus the yen on Wednesday, lifted by higher Treasury yields as global inflation worries flared anew. The greenback climbed 0.28% to 129.07 yen, and earlier touched 129.185 for the first time since May 18
– Gold prices fell on Wednesday in Asian trading to a low of $1829.45, pressured by a stronger dollar and as rising U.S. Treasury yields dented the metal’s appeal despite concerns over surging inflation.
Chart Focus USD/CHF
Key Points
1. Buy USD/CHF recommendation.
2. Buy USD/CHF at 0.9580. Stop at 0.9540 and profit target at 0.9680
3. Interest rate differential and an increase in US Treasury yields are both aiding the US dollar.
4. A Rounding Bottom chart pattern and bullish MACD are both hinting at a price rally ahead.
Fundamental Comments
1. An increase in US Treasury yields is aiding the US dollar.
2. Interest rate differential is also in the US dollar favour.
Technical Comments
1. A Rounding Bottom chart pattern is hinting at a price rally ahead.
2. MACD had earlier given a bullish divergence warning of a price bottom and a reversal.
Key Levels
| Support | 0.9585 | 0.9540 | 0.9510 |
| Resistance | 0.9620 | 0.9660 | 0.9690 |
Technical Overview
USD/JPY – Price broke above the recent range high at 127.50 yesterday and moved to a high of 129.29 this morning. We are likely to see a continuation of this rally to test the previous high at 1.2977 in the next few days. However, stochastic is in the overbought zone and is hinting at a limited upside but both MACD and 20EMA are hinting at a bullish price trend. A move below 127.90 would negate our bullish view.
| Support | 128.85 | 128.45 | 128.05 |
| Resistance | 129.30 | 129.75 | 130.10 |
EUR/USD – After reaching a high of 1.0786, price has been declining. We are expecting this decline to continue lower to 1.0640 in the next couple of days. This is likely to be a corrective decline and not likely to be a bearish trend. Price has been moving higher for 3 weeks after reaching a low of 1.0397. While MACD is bullish, 20EMA is hinting at a bearish price trend. Stochastic is hinting at a bullish price trend.
| Support | 1.0695 | 1.0640 | 1.0605 |
| Resistance | 1.0745 | 1.0785 | 1.0820 |
GBP/USD – We had a sell recommendation at 1.2610 yesterday. Price rose to a high of 1.2630 overnight, filling our entry order recommendation at 1.2610. Our view remains unchanged. We would recommend keeping stop at 1.2640 and profit order at 1.2500. While 20EMA has turned bearish, MACD has remained bullish. Stochastic has a bullish crossover and is hinting at a bullish price trend.
| Support | 1.2560 | 1.2525 | 1.2470 |
| Resistance | 1.2600 | 1.2630 | 1.2665 |
XAU/USD – Price reached a low of $1829.44, which is the Fibonacci 62% correction point of the rally from $1806.82 to $1869.55. We will need to watch this price point for clue to the next direction. We think price can hold above this support for another rally to $1870. However if price declines below this support, it is likely to go lower to $1806 in the next few days. Both MACD and 20EMA remains bearish but Stochastic is hinting at a limited downside.
| Support | 1829.45 | 1817.50 | 1806.80 |
| Resistance | 1840.90 | 1856.55 | 1869.55 |
NZD/USD – After reaching a high at 0.6563 overnight, we have seen a price decline to 0.6477. We are likely to see price decline lower to 0.6417 in the next few days ahead. Price has now fallen below the 20EMA which is a hint of a price reversal. However, MACD remains bullish and Stochastic is about to have a bullish crossover, hinting at a bullish price trend ahead. A move above 0.6535 would negate our bearish view.
| Support | 0.6475 | 0.6440 | 0.6405 |
| Resistance | 0.6510 | 0.6540 | 0.6565 |