Market Talk
– The U.S. dollar was down on Monday morning in Asia, after having risen on Friday night against a basket of currencies after a better-than expected U.S. employment report pointed to a tight labour market that could keep the Federal Reserve on an aggressive path of interest rate hikes.
– Data on Friday showed that employers added 390,000 jobs in May, which is higher than forecast. The upbeat jobs report added to investors’ bets that the U.S. Federal Reserve remains assertive on inflation.
– The dollar climbed to 130.99 yen in early trade, a fresh one-month high, and not far from last month’s 20-year peak of 131.34, on the back of rising U.S. Treasury yields.
– The euro was steady at $1.0725 on Monday morning, helped by expectations of a European Central Bank meeting this coming Thursday, which is expected to prepare the ground for an interest rate hike at its July meeting.
– Gold was up on Monday morning in Asia after falling on Friday’s solid jobs report which ate in to hopes for a pause in the Federal Reserve’s aggressive policy-tightening which is needed to cool decades-high inflation.
Chart Focus AUD/USD
Key Points
1. Sell AUD/USD recommendation.
2. Sell AUD/USD at 0.7210. Stop at 0.7245 and profit target at 0.7145
3. A better-than expected U.S. employment report and rising U.S. Treasury bond yields are both aiding the U.S. dollar.
4. Price is capped by the 20EMA with 20EMA and Stochastic both hinting at a price decline.
Fundamental Comments
1. A better-than expected U.S. employment report is likely to keep the Federal Reserve on an aggressive path of interest rate hikes, aiding the greenback.
2. A rising U.S. Treasury bond yields is also aiding the U.S. dollar.
Technical Comments
1. Price is capped by the 20EMA which is hinting at a price decline as well.
2. Stochastic is declining and is hinting at a bearish price trend.
Key Levels
| Support | 0.7185 | 0.7140 | 0.7105 |
| Resistance | 0.7230 | 0.7280 | 0.7340 |
Technical Overview
USD/JPY – Price broke above a range high last Tuesday at 127.50 and the breakout rally has reached a high at 130.97 this morning. This is also close to the 20-year peak at 131.34. But MACD has given a divergence warning of a possible price high and we could see a price pullback to the 20EMA at 129.90 in the next 48 hours. 20EMA is hinting at a strong bullish price trend and we may have a test of 131.34 before the decline.
| Support | 130.40 | 129.90 | 129.50 |
| Resistance | 130.95 | 131.35 | 131.85 |
EUR/USD – Price was supported by a previous resistance turned support line as well as the 20EMA. If price is supported above this level, we are likely to see another test of the previous high at 1.0786. A price decline below this support is likely to open the way to the previous week’s low at 1.0625. MACD and 20EMA are both neutral at the moment, hinting that price can go either way. Stochastic is hinting at a price decline.
| Support | 1.0700 | 1.0660 | 1.0610 |
| Resistance | 1.0735 | 1.0785 | 1.0815 |
GBP/USD – Price declined to a low of 1.2660 on Friday. While it was short of our decline target at 1.2410, we think this could be the correction that ends the corrective decline. From this low, we are seeing a price move higher to 1.2590. However, a break below 1.2660 will negate our bullish view and sent price lower to 1.2325. Both MACD and 20EMA are bearish while Stochastic is hinting at a price rally.
| Support | 1.2495 | 1.2450 | 1.2390 |
| Resistance | 1.2535 | 1.2590 | 1.2630 |
XAU/USD – We have a buy call on this pair on Friday at $1865.80 but our call was wrong. We lost US$9 on this trade. MACD has remained above the zero line, hinting at a bullish price trend while 20EMA remains neutral at the moment. Stochastic continues to decline from the overbought zone after a bearish crossover and is hinting at a price decline. We see price staying within the range of $1874 to $1848.
| Support | 1847.10 | 1837.35 | 1828.25 |
| Resistance | 1856.70 | 1865.15 | 1874.05 |
USD/CAD – Price made a low of 1.2550 last Friday but the rally has been capped by the 20EMA at 1.2600. The low on Friday was also accompanied with a divergence warning, hinting at a possible price low. Stochastic is also in the oversold zone and is hinting at a limited downside. However, price will need to move above 1.2600 to end the bear trend and turns the trend bullish.
| Support | 1.2550 | 1.2515 | 1.2490 |
| Resistance | 1.2600 | 1.2640 | 1.2685 |