Market Talk
– The U.S. dollar hit a three-week high against the yen in early trade on Thursday and was holding firm against other majors, supported by rising U.S. Treasury yields, which hit two-week peaks of 2.951% overnight. Wednesday data showed U.S. manufacturing activity had picked up in May as demand for goods remained strong, which could allay fears of an imminent recession.
– The greenback, supported by rising Treasury yields, rose as far as $130.23 yen on Thursday morning, its highest since May 11, extending Wednesday’s 1.1% gain and heading back towards its 20-year peak of $131.34 hit in May.
– The euro was at $1.0654, having fallen 0.81% to a 10-day low overnight, and sterling was at $1.2485 after losing 0.96% on Wednesday. The Australian dollar and the kiwi were little changed at $0.7170 and $0.6475 respectively.
– The Canadian dollar strengthened to its highest level in nearly six weeks against the greenback after the Bank of Canada on Wednesday raised its benchmark interest rate to 1.5% from 1.0%, its second consecutive 50-basis-point hike. It also said it was prepared to act “more forcefully if needed” to bring inflation back to target.
– Gold prices rose as investors looked toward the safe-haven metal amid worries over an increase in inflation primarily due to rising fuel prices, although a stronger dollar and higher U.S. yields kept gains in check.
Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation
2. Sell EUR/USD at 1.0700. Stop at 1.0740 and profit target at 1.0605.
3. A rising U.S. Treasury yields and interest rate differential are both in the greenback’s favour.
4. A Double Tops chart pattern and bearish MACD are both hinting at a price decline.
Fundamental Comments
1. A rising U.S. Treasury yields, which hit a two-week peaks of 2.951%, is aiding the greenback.
2. Interest rate differential is in the greenback’s favour.
Technical Comments
1. A Double Tops chart pattern is hinting at a price decline.
2. MACD and 20EMA are both bearish and hinting at a price decline.
Key Levels
| Support | 1.0625 | 1.0585 | 1.0535 |
| Resistance | 1.0660 | 1.0695 | 1.0745 |
Technical Overview
USD/JPY – Price broke above a range high on Tuesday at 127.50 and the breakout rally has reached a high this morning at 130.23. There is a possibility that price may have reached a high and a corrective decline to 128.90 is possible. However, both MACD and 20EMA are hinting at a strong bullish price trend. Stochastic is in the overbought zone, hinting at a limited upside. We think price has the potential to move higher to the next resistance point at 130.80 in the next 1-2 days.
| Support | 129.85 | 129.30 | 128.90 |
| Resistance | 130.25 | 130.80 | 131.25 |
NZD/USD – After reaching a high at 0.6563 on Tuesday morning, we have seen a price decline to 0.6435 this morning. We are likely to see price decline lower to 0.6407 in the next 24 hours. The decline may even extend lower 0.6375. Stochastic is near to the oversold zone but both MACD and 20EMA are hinting at a strong bearish price trend. Only a move above 0.6540 would negate our bearish view.
| Support | 0.6445 | 0.6405 | 0.6370 |
| Resistance | 0.6495 | 0.6540 | 0.6565 |
GBP/USD – We had a sell recommendation at 1.2610 from Tuesday and yesterday, we had left stop order at 1.2640 and profit target at 1.2500. Price declined to a low of 1.2458 overnight and we are out of our position with a profit of 110 pips. Stochastic is near to the oversold zone, hinting at a limited downside. However, both MACD and 20EMA are hinting at a bearish price trend. The next price support lies at 1.2425.
| Support | 1.2455 | 1.2425 | 1.2390 |
| Resistance | 1.2500 | 1.2560 | 1.2600 |
XAU/USD – Price reached a low of $1828.25, which was just below the Fibonacci 62% correction point of the rally from $1806.82 to $1869.55 at $1829.45. Price managed to stay above the 62% correction point and has bounced up to $1849.65. We are expecting this rally to continue towards the previous high at $1864 in the next few days. Stochastic is rising and hinting at a price rally. Both MACD and 20EMA are neutral at the moment.
| Support | 1837.60 | 1828.25 | 1812.05 |
| Resistance | 1849.85 | 1863.95 | 1869.55 |
USD/CHF – We had a buy recommendation yesterday at 0.9580, but price declined to a low of 0.9588, missing our entry price. Price has since moved higher overnight to a high of 0.9658. We are expecting price to be supported by the 20EMA at 0.9620 and from this level, we are forecasting another rally to 0.9658. MACD remains bullish and is hinting at a bullish price trend. Stochastic is neutral. A move below 0.9600 would negate our bullish view.
| Support | 0.9620 | 0.9585 | 0.9540 |
| Resistance | 0.9665 | 0.9690 | 0.9730 |