Market Talk
– The Australian dollar rose on Tuesday morning after the central bank flagged more rate hikes were on the way, but the uptick was restrained by lower commodity prices, while the Japanese yen languished near a 24-year low in holiday thinned trades.
– The Aussie was higher at $0.6967, extending the previous day’s small gains, after RBA Governor Philip Lowe signaled a lot more policy tightening ahead. The offshore CNH was at 6.6885 as China saw COVID-19 flares up in cities such as Shenzhen, sparking worries about the second-largest country’s uncertain recovery path.
– The Japanese yen remained under pressure at 135.07 yen per dollar, not far off a 24-year low of 135.58 yen hit early last week. The Bank of Japan on Friday dashed any mild expectations of a change in policy and renewed its commitment to ultra-easy monetary settings.
– The euro was at $1.0519 as Monday’s remarks from ECB President Christine Lagarde about the need to nip the risk of financial fragmentation between euro countries in the bud, eclipsed the negative drag of French President Emmanuel Macron losing his parliamentary majority.
– Gold was down on Tuesday morning in Asia but little changed in overnight holiday thinned trading as an easing dollar and economic worries countered concerns around aggressive monetary tightening by the U.S. Federal Reserve, with the focus on several central bankers’ views this week
Chart Focus AUD/USD
Key Points
1. Sell AUD/USD recommendation.
2. Sell AUD/USD at 0.6980. Stop at 0.7010 and profit target at 0.6860.
3. The Fed is likely to outpace the RBA in rate hikes and current Interest rate differential is currently in the US dollar favour.
4. Price is capped by the Fibonacci 50% correction point as well as the 20EMA with MACD and 20EMA both hinting at a bearish price trend.
Fundamental Comments
1. The Federal Reserve is likely to outpace the RBA in terms of rate hikes in the next 1 year.
2. Interest rate differential is currently in the US dollar favour.
Technical Comments
1. Price is capped by the Fibonacci 50% correction point as well as the 20EMA.
2. MACD and 20EMA are starting to hint at a bearish price trend.
Technical Overview
USD/JPY – The yen is languishing near a 24-year low after the Bank of Japan chooses to kept its rate on hold and stick with its ultra-loose monetary policy last Friday. MACD and 20EMA are bullish and are hinting at a bullish price trend. Stochastic is in the overbought zone. We think price is likely to move above its 24-year high at 135.59 in the next few days to another new high. There is a previous high resistance 137.25.
| Support | 134.85 | 134.40 | 133.80 |
| Resistance | 135.20 | 135.60 | 136.00 |
EUR/USD – We had a buy recommendation at 1.0505 yesterday which was filled when price dipped to a low of 1.0497. Our view remains unchanged. We would recommend keeping stop at 1.0475 and profit order at 1.0605. Both MACD and 20EMA remain bullish and are hinting at a bullish price trend. Stochastic is in the middle of its range. A price movement below 1.0450 would hint at a decline to 1.0358.
| Support | 1.0495 | 1.0440 | 1.0395 |
| Resistance | 1.0545 | 1.0595 | 1.0635 |
GBP/USD – Price has declined on Friday to a low of 1.2172, which is also the Fibonacci 50% correction point of the rally from 1.1933 to 1.2407. If price can stay above this Fibonacci 50% correction point, we are likely to see a test of 1.2407 again in the next few days. However, a break of this support is likely to send price lower to 1.1982. MACD and 20EMA remain bullish while stochastic is hinting at a price decline.
| Support | 1.2225 | 1.2170 | 1.2115 |
| Resistance | 1.2280 | 1.2335 | 1.2380 |
XAU/USD – We saw a price decline to a low of $1832.80 on Monday morning, which is also the Fibonacci 50% correction point of the price rally from $1804.95 to $1857.40. If price can stay above this Fibonacci point, we are likely to see another rally to test the previous high of $1857.40 in the next couple of days. If price decline below this point, it is a hint of a price move to $1804. MACD remained bullish but 20EMA is flat and neutral.
| Support | 1832.80 | 1815.75 | 1804.95 |
| Resistance | 1846.20 | 1857.45 | 1866.85 |
USD/CAD – Price reached a high of 1.3078 last Friday but that high was accompanied by a bearish divergence warning from the MACD indicator. Price has since declined to a low of 1.2938 on Tuesday morning. Stochastic is also hinting at a bearish price trend. 20EMA has turned bearish. We think price has reached a peak and we see a correction back to the Fibonacci 38% correction point of the rally from 1.2516 to 1.3078, which is at 1.2865 in the next few days.
| Support | 1.2925 | 1.2885 | 1.2840 |
| Resistance | 1.2965 | 1.3010 | 1.3050 |