Market Talk
– The yen dropped to a fresh 20-year low on the dollar on Thursday, though most major currency pairs traded cautiously ahead of a highly-anticipated meeting by the European Central Bank, which should offer insights into its monetary policy tightening plans.
– The yen extended its slide, falling to a fresh 20-year low of 134.56 yen per dollar in early trade on Thursday morning weighed down by rising interest rates around the world at a time when the Bank of Japan remains wedded to keeping policy highly stimulatory.
– The euro was little changed at $1.0713 on Thursday ahead of a highly-anticipated meeting by the European Central Bank. The ECB is all but certain to take a hawkish stance, with interest rate hikes to begin in July as traders priced in 75 basis points of hikes by September.
– Sterling was steady at $1.2534, and the risk-friendly Australian dollar was a touch softer at $0.7178. The Canadian dollar was stronger as Crude oil prices extended gains, rising to their highest levels in three months on hopes for strong U.S. demand and a recovery in China as COVID-19 curbs are eased.
– Gold was down on Thursday morning in Asia with an advance in U.S. Treasuries yields denting bullion demand ahead of U.S. jobs and U.S. inflation data. Expectations of rising interest rate globally are also weighing on the yellow metal.
Chart Focus AUD/JPY
Key Points
1. Buy AUD/JPY recommendation.
2. Buy AUD/JPY at 95.70. Stop at 95.35 and profit target at 96.85
3. BOJ monetary policy and yield differentials are both weighing on the yen.
4. Price is supported with both 20EMA and MACD hinting at a strong bullish price trend.
Fundamental Comments
1. BOJ monetary policy is weighing on the yen.
2. Yield differentials continue to favour the Aussie dollar.
Technical Comments
1. Price is supported by the 20EMA which is hinting at a strong bullish price trend.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 96.05 | 95.65 | 95.30 |
| Resistance | 96.45 | 96.90 | 97.30 |
Technical Overview
USD/JPY – Price again made a fresh 20-year high at 134.56 this morning and we are expecting this rally to continue higher to 135.05. Stochastic is in the overbought zone and MACD is starting to warn with divergence of a possible price high. However, 20EMA is hinting at a strong bullish price trend. We think this rally could pause at 135.05 for a correction. Long term, the bullish trend is likely to persist as yield differentials continue to favour the U.S. dollar.
| Support | 134.05 | 133.60 | 133.20 |
| Resistance | 134.60 | 135.05 | 135.50 |
EUR/USD – Price remained within a range of 1.0750 to 1.0650 for the past 4 days and we are likely to see this range until later tonight when the European Central Bank announced its monetary policy decision. Stochastic is rising and is hinting at a price rally but MACD is flat and neutral at the moment. 20EMA is also rising but is rather flat and is neutral at the moment. Wait for a breakout of this range and follows in the direction of the breakout.
| Support | 1.0705 | 1.0660 | 1.0620 |
| Resistance | 1.0750 | 1.0785 | 1.0830 |
GBP/USD – The rally was unable to move above the resistance 1.2600 and we are expecting price to test the support at 1.2480. Price may also stay within the range. MACD is also hinting at a range with its flat line. 20EMA is also hinting at a sideways movement. We prefer the downside and see a test of 1.2480 to 1.2460. Only a move above 1.2600 would negate our bearish view.
| Support | 1.2510 | 1.2460 | 1.2425 |
| Resistance | 1.2550 | 1.2600 | 1.2660 |
XAU/USD – We had a sell recommendation at $1849.80 yesterday which was filled. Price rose to a high of $1859.45 and our stop was triggered at $1855. We lost $5.20 on this trade. Price has been moving sideways for the past 48 hours and we think price is likely to stay within the range of $1850 to $1836 until there is a breakout. MACD and 20EMA are both flat and hinting at a sideways trend while stochastic is close to the overbought zone.
| Support | 1848.85 | 1836.85 | 1820.15 |
| Resistance | 1859.45 | 1873.95 | 1885.70 |
USD/CAD – Price reached a low of 1.2516 overnight but this low was accompanied by divergence warnings from the MACD as well as the stochastic indicator about a potential price low. There is a possibility that the 4-week decline could be near to its end. A move above 1.2575 would be the first hint of a low and a corrective rally to 1.2690 in the next few days ahead.
| Support | 1.2550 | 1.2515 | 1.2475 |
| Resistance | 1.2590 | 1.2635 | 1.2685 |