Market Talk
– The U.S. dollar was up on Wednesday morning in Asia while the yen hit a fresh 20-year low versus the dollar and slipped to a seven-year trough against the euro as traders awaited a European Central Bank meeting likely to leave Japan alone among peers in sticking to ultra-easy monetary policy.
– The yen continued its loss after sliding to a fresh 20-year low at 133.29 as the Bank of Japan has given no indication of giving up ultra-easy monetary policies. Yield differentials continue to favour the U.S. dollar.
– The euro eased marginally to $1.0689 ahead of a ECB meeting on Thursday aided by expectation of a tightening. Markets are expecting the ECB to at least lay the groundwork for rapid rate rises, if not begin them with a small hike.
– The risk-sensitive Australian was trading at 0.7210; a day after the RBA raised interest rate by a surprising 0.5%. The New Zealand dollar was at 0.6455 while sterling hovered at $1.2575, recovering from a civil war within the Conservative party which had sent it down to 1.2429 overnight.
– Gold was down on Wednesday morning in Asia as central banks globally are expected to brace for tightening policies to tame inflation weighing on the yellow metal. A higher interest rate will increase the holding cost of gold which has a zero yield.
Chart Focus Gold
Key Points
1. Sell Gold recommendation.
2. Sell Gold at $1849.80. Stop at $1855 and profit target at $1837.
3. As central banks globally tightened monetary policy and with rising treasury yield, gold is likely to be weighed down.
4. Price is capped by the 20EMA and Fibonacci 50% correction point with MACD also hinting at a bearish price trend.
Fundamental Comments
1. As central banks globally are expected to tighten monetary policy, this could weigh on gold.
2. An increasing US Treasury yield is also weighing on gold as it increases the cost of holding gold.
Technical Comments
1. Price is capped by the 20EMA as well as the Fibonacci 50% correction point, hinting at a bearish price trend.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1845.50 | 1836.85 | 1820.15 |
| Resistance | 1855.45 | 1865.15 | 1873.95 |
Technical Overview
USD/JPY – Price again made a fresh 20-year high at 133.29 this morning and we are expecting this rally 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. Only a move below 131.80 would negate this bullish price trend.
| Support | 133.05 | 132.55 | 132.00 |
| Resistance | 133.65 | 134.00 | 134.70 |
EUR/USD – Price declined below a strong support at 1.0695 and a re-test of the support turned resistance ended in a failure and this is likely to open the way for a test to the previous week’s low at 1.0625. However, price failed to move lower and instead hover around this support turned resistance area and the 20EMA, aided by expectation of a ECB tightening. Both MACD and 20EMA remain neutral but stochastic is hinting at a price rally. We see a tight range till Thursday.
| Support | 1.0675 | 1.0620 | 1.0585 |
| Resistance | 1.0715 | 1.0750 | 1.0785 |
GBP/USD – We saw a rally to 1.2600 overnight and there was a correction this morning to 1.2555. We are expecting the decline to continue lower to 1.2460 again in the next few days as we see price staying in a sideways consolidation. MACD is flat and neutral. 20EMA is also flat and neutral. Stochastic is rising but is close to the overbought zone and is hinting at a limited upside.
| Support | 1.2550 | 1.2495 | 1.2460 |
| Resistance | 1.2600 | 1.2660 | 1.2700 |
XAG/USD – Price has been moving within last Friday range of $24.50 to $21.78 for the past 3 days. Both MACD and 20EMA are hinting at a sideways price movement. Stochastic is rising and hinting a mild price rally. However, we think price is likely to stay within this range until there is a breakout of this range. The breakout can go in either direction. We would recommend waiting for the breakout and following in the direction of the break.
| Support | 22.10 | 21.85 | 21.45 |
| Resistance | 22.35 | 22.55 | 22.95 |
NZD/USD – We had a sell recommendation of this pair yesterday of 0.6455. Overnight price went up to a high at 0.6498, filling our entry as well as our stop at 0.6495. We lost 35 pips on this trade. MACD remains bearish and is hinting at a bearish price trend. 20EMA is also hinting at a bearish price trend. Stochastic is rising from the oversold zone and is hinting at a price rally. We remain bearish for 0.6350.
| Support | 0.6450 | 0.6410 | 0.6375 |
| Resistance | 0.6495 | 0.6535 | 0.6575 |