Market Talk
– The U.S. dollar fell across the board on Thursday, ceding ground gained in recent sessions as firmer risk sentiment prompted investors to reach for higher-yielding currencies. News that Saudi Arabia may boost crude production cooled oil prices, helping balance concerns over surging inflation and monetary policy tightening.
– U.S. data on Thursday showed U.S. private payrolls increased far less than expected in May, which would suggest demand for labour was starting to slow amid higher interest rates and tightening financial conditions, though job openings remain extremely high.
– Riskier currencies, including the Australian and the New Zealand dollars, advanced against their U.S. counterpart, rising to 0.7260 and 0.6560 respectively. The euro inched up to $1.0760 early in an Asia session while the yen was steady at 129.80.
– The Canadian dollar rose about 0.6% against the greenback; a day after the Bank of Canada raised rates and opened the door to an even faster pace of interest rate hikes.
– Gold held steady on Thursday 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 XAU/USD – Gold
Key Points
1. Buy Gold recommendation.
2. Buy Gold at $1865.80. Stop at $1856.80 and profit target at $1890.00
3. A weak US private payrolls and a decline in US bond yield are both likely to weigh on the US dollar.
4. A break above the previous high and a bullish MACD are both hinting at a price rally.
Fundamental Comments
1. A weak US private payrolls data is likely to weigh on the US dollar.
2. A decline in US bond yields is favourable for gold.
Technical Comments
1. Price has moved above a previous high, hinting at a movement to the Fibonacci 50% correction point.
2. MACD has turned bullish and is hinting at a price rally ahead.
Key Levels
| Support | 1868.80 | 1858.90 | 1846.25 |
| Resistance | 1874.05 | 1890.35 | 1906.90 |
Technical Overview
USD/JPY – Price broke above a range high on Tuesday at 127.50 and the breakout rally has reached a high at 130.23 yesterday. A corrective decline has sent price lower to 129.50. Stochastic is in the overbought zone but 20EMA is hinting at a strong bullish price trend. MACD has remained bullish and is also hinting at a bullish price trend. We see price moving higher towards 103.75 in the next few days after this corrective decline.
| Support | 129.50 | 129.15 | 128.85 |
| Resistance | 129.85 | 130.25 | 130.75 |
EUR/USD – We had a sell recommendation yesterday at 1.0700 but we were wrong on this call. We are out of this position with a loss of 40 pips. Price has moved up to 1.0762 and looks likely to continue higher to test the previous high of 1.0786. Stochastic has yet to reach the overbought zone, hinting at more upsides. 20EMA is bullish while MACD could be about to turn bullish. Only a move below the previous low at 1.0625 would negate this bullish view.
| Support | 1.0740 | 1.0695 | 1.0660 |
| Resistance | 1.0785 | 1.0815 | 1.0850 |
GBP/USD – Price has moved above the 20EMA and stochastic continues to move higher. This could be a sign that the rally is likely to move higher to 1.2665 again. However, MACD remains bearish and is hinting at a bearish price trend ahead. However, we think that the 3-week rally to 1.2665 is in need of a correction and a decline to 1.2410 is more likely to complete the correction before the rally resumes.
| Support | 1.2555 | 1.2525 | 1.2470 |
| Resistance | 1.2590 | 1.2630 | 1.2665 |
XAG/USD – The corrective decline was able to hold above the previous low at $21.27 and we have seen the resumption of the rally. The rally is likely to push through the previous week high at $22.44 with $23.25 a likely target for the rally. Stochastic is near to the overbought zone but 20EMA has turned bullish and is hinting at a bullish price trend. MACD is also about to turn bullish and is hinting at a price rally.
| Support | 22.30 | 21.95 | 21.60 |
| Resistance | 22.65 | 22.95 | 23.30 |
USD/CHF – 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. However, the 20EMA had failed to support price and we are now likely to see price test or break below the previous low at 0.9542. The next support level is at 0.9480. Stochastic is in the oversold zone and is hinting at a limited downside but both 20EMA and MACD are hinting at a strong bearish price trend.
| Support | 0.9540 | 0.9485 | 0.9455 |
| Resistance | 0.9585 | 0.9620 | 0.9665 |