Market Talk
– The U.S. dollar extended its losses on Thursday from a day earlier, but the pain isn’t expected to last very long because wobbles in the global economy and a Federal Reserve leaning more hawkish will push investors into the safe arms of the greenback.
– The Swiss franc soared against the dollar after the SNB joined other central banks in tightening monetary policy in its first rate hike in 15 years. Bank of Japan kept its rates on hold sending the Japanese yen lower after its policy meeting earlier today.
– Sterling had a volatile day, initially dropping after the Bank of England raised interest rates by 25 basis points, confounding some forecasts of a bigger hike to fight soaring inflation, before the British currency reversed course to trade up 1.42% at $1.235, its highest against the greenback since June 10.
– The euro slipped to $1.0537 as it garnered support from the European Central Bank’s decision mid-week on fresh support to contain borrowing costs among southern nations while the risk sensitive Aussie dollar fell to $0.7025.
– Gold prices rose in volatile trade as the dollar pulled back sharply on the U.S. central bank’s aggressive policy outlook, bringing some of the safe-haven lure back to the metal. A decline in benchmark 10-year Treasury yields also helps the bullion.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.2345. Stop at 1.2385 and profit target at 1.2225.
3. Fed hawkishness, interest rate different and a wobble in the global economy are all likely to support the US dollar.
4. A strong resistance and an overbought stochastic are both hinting at a price decline.
Fundamental Comments
1. Fed hawkishness and a wobble in the global economy are both likely to support the greenback.
2. Interest rate differential is in the greenback’s favour.
Technical Comments
1. Price is correcting after hitting a high and resistance near to the previous support turned resistance line.
2. Stochastic is in the overbought zone and hinting at a price decline.
Key Levels
| Support | 1.2300 | 1.2245 | 1.2205 |
| Resistance | 1.2350 | 1.2405 | 1.2455 |
Technical Overview
USD/JPY – The yen tumbled and is moving towards its 24-year low after the Bank of Japan chooses to kept its rate on hold and stick with its ultra-loose monetary policy. Stochastic has a bullish crossover near to the oversold zone and is hinting at a bullish price trend. MACD and 20EMA are also turning bullish and are hinting at a bullish price trend. We see price moving up to test its 24-year peak in the next few days.
| Support | 133.65 | 133.20 | 132.75 |
| Resistance | 134.20 | 134.65 | 135.05 |
EUR/USD – Price is correcting back to the previous resistance turned support line after a rally to a high of 1.0605 overnight. Price needs to stay above this support, in order to keep the bullish price trend intact. A failure will send price lower to the previous low at 1.0358. Ability to stay above this support line can lead to another test of the high at 1.0645. All 3 indictors, 20EMA, MACD and stochastic are hinting at a bullish price trend.
| Support | 1.0505 | 1.0470 | 1.0430 |
| Resistance | 1.0550 | 1.0605 | 1.0660 |
AUD/USD – Price continues its advance, after reaching a low on 14 June at 0.6849. Price has reached a high of 0.7068 this morning and we are expecting price to move higher to 0.7130 in the next couple of days, if price can stay above the 20EMA. However, stochastic is in the overbought zone and is hinting at a limited upside. Both MACD and 20EMA are hinting at a bullish price trend ahead.
| Support | 0.6995 | 0.6950 | 0.6910 |
| Resistance | 0.7035 | 0.7070 | 0.7105 |
XAU/USD – Our view remains the same as yesterday. We are looking for a price rally to $1865 in the next couple of days. Price has moved to a high of $1857.40 and we are expecting another rally to $1865. Stochastic is close to the overbought zone but should be able to support the rally to $1865. MACD is neutral but 20EMA is bullish and hinting at a bullish price trend. A price movement below $1825 would negate our short term bullish view.
| Support | 1841.60 | 1827.25 | 1815.75 |
| Resistance | 1857.40 | 1866.85 | 1876.90 |
USD/CAD – We had a recommendation yesterday at 1.2880 but price only reached a low of 1.2888 and our entry order was not filled. Overnight price has moved higher to a high of 1.2969 and we are expecting price to move higher to 1.3000 in the next couple of days. Stochastic is rising and MACD remains bullish. 20EMA is also hinting at a bullish price trend. A move below 12855 would negate our bullish view.
| Support | 1.2925 | 1.2885 | 1.2845 |
| Resistance | 1.2970 | 1.3000 | 1.3045 |