Market Talk
– The U.S. dollar was up on Tuesday morning in Asia continuing its overnight rally into Asian trading hours after hitting fresh two-decade highs versus the yen, over expectations that the U.S. Federal Reserve will deliver more interest rate hikes.
– The Australian dollar surged after the country’s central bank hiked interest rates more than expected. The Aussie reversed a small loss to be up 0.56% at $0.7234 after the central bank raised its key rate by a half point and committed to doing “what is necessary” to cool inflation.
– The greenback gained 0.74% to 132.85 yen and at one point hit its strongest since April 2002 at 132.88, as the 10-year Treasury yield rose as high as 3.064% in Tokyo trading for the first time in nearly four weeks.
– The euro slipped to $1.0686 ahead of the ECB rate-setting meeting on Thursday. Traders have already priced in several hikes and the end of bond-buying stimulus but want more clarity on what comes after. Sterling slipped to $1.2523, having gained 0.29% in the previous session, as Prime Minister Boris Johnson survived a vote of no confidence but was left weakened.
– Gold prices were up on Tuesday morning in Asia, after slipping overnight due to an uptick in the U.S. dollar and Treasury yields amid expectations of an aggressive interest rate hikes by the Federal Reserve as well as the ECB.
Chart Focus NZD/USD
Key Points
1. Sell NZD/USD recommendation.
2. Sell NZD/USD at 0.6455. Stop at 0.6490 and profit target at 0.6365.
3. Expectations of more U.S. rate hikes and rising U.S. Treasury bond yields are both aiding the U.S. dollar.
4. A Double Top chart pattern and bearish MACD are both hinting at a price decline.
Fundamental Comments
1. Expectations that the U.S. Federal Reserve will deliver more interest rate hikes are aiding the U.S. dollar.
2. A rise in the benchmark US 10-year Treasury yield to 3.064% is aiding the U.S. dollar.
Technical Comments
1. A confirmed Double Top chart pattern is hinting at a price decline.
2. MACD is bearish and is hinting at a bearish price trend.
Key Levels
| Support | 0.6425 | 0.6395 | 0.6355 |
| Resistance | 0.6465 | 0.6500 | 0.6540 |
Technical Overview
USD/JPY – Last night, price broke above a 20-year high at 131.34 to reach a fresh high at 132.95 this morning. The rally looks likely to continue higher to 133.85, which is a previous high as well as the Fibonacci 200% price projection of the rally from 126.60 to 130.20. Stochastic is in the overbought zone but both MACD and 20EMA are hinting at a strong bullish price trend.
| Support | 132.50 | 132.00 | 131.65 |
| Resistance | 133.05 | 133.65 | 134.00 |
EUR/USD – Price declined below a strong support and a re-test of the support turned resistance was not successful and this is likely to open the way for a test to the previous week’s low at 1.0625. We have seen a decline to 1.0673 this morning and we are likely to see a test of 1.0625 in the next 24 hours. 20EMA and MACD are both hinting at a bearish price trend. Stochastic is declining and hinting at a price decline.
| Support | 1.0660 | 1.0625 | 1.0585 |
| Resistance | 1.0700 | 1.0735 | 1.0785 |
GBP/USD – Price broke below the previous low of 1.2460 and we could be on the way to 1.2325 in the next few days. Stochastic is in the oversold zone and is hinting at a price rally but 20EMA is pointing lower with a steep slope, hinting at a strong bearish price trend. MACD is also bearish and hinting at a bearish price trend. The resistance is now at 1.2510 and as long as price is below this resistance, we are likely to see a decline to 1.2325.
| Support | 1.2460 | 1.2425 | 1.2385 |
| Resistance | 1.2495 | 1.2535 | 1.2580 |
XAU/USD – The decline continues to a low of $1840.45 overnight and we are likely to see this decline continues lower to $1820.15 in the next couple of days ahead. Both MACD and 20EMA are bearish and are both hinting at a bearish price trend. However, stochastic is in the oversold zone and is hinting at a limited downside. We prefer the downside. As long as price stays below $1847, we see price going to $1820.15.
| Support | 1836.85 | 1820.15 | 1810.65 |
| Resistance | 1847.10 | 1857.50 | 1865.15 |
AUD/USD – We had a sell recommendation on this pair yesterday at 0.7210 which was filled. Our stop was triggered this morning when the RBA raised interest rate which sends the Aussie to a high of 0.7249, taking out our stop at 0.7245. We lost 35 pips on this trade. Our view remains unchanged. MACD and 20EMA are hinting at a bearish trend. Stochastic is also declining and hinting at a price decline.
| Support | 0.7160 | 0.7125 | 0.7090 |
| Resistance | 0.7200 | 0.7245 | 0.7280 |