Market Talk
– The U.S. dollar was up on Wednesday morning in Asia while the yen hit a fresh 24-year low against the dollar on Wednesday. Investors now await cues on monetary policies from the U.S. Federal Reserve Chair’s testimonies to the Congress.
– Fed Chair Jerome Powell will start a two-day testimony to Congress later in the day, with investors looking to seek more clues on whether the Fed will deliver another interest rate hike of 75 basis points.
– The yen was at $136.4, having hit 136.71 in early trade, the lowest since October 1998. Analysts see no immediate end to a sell-off that has seen the yen weaken 18% so far this year. Japanese Finance Minister Shunichi Suzuki said on Tuesday that he was concerned about the sharp yen weakening and would respond to exchange market moves if necessary.
– The euro was at $1.0530, continuing to climb cautiously from its low of 1.0357 after ECB chief economist Philip Lane said the ECB will raise interest rates by 25 basis points at its July meeting while the size of its September hike remains to be seen, signaling a possibility of a larger 50 basis points hike.
– Gold was down on Wednesday morning in Asia as the U.S. dollar firmed ahead of U.S. Federal Reserve Chair’s two-day testimony where investors are expecting to seek more clues on monetary policies.
Chart Focus USD/CAD
Key Points
1. Sell USD/CAD recommendation.
2. Sell USD/CAD at 1.2990. Stop at 1.3020 and profit target at 1.2860.
3. A decline in Treasury yields and a correction after a 10-day rally are both likely to weigh on the greenback.
4. Price is likely to be capped by the Fibonacci 50% correction point with MACD divergence is hinting at a price correction.
Fundamental Comments
1. A decline in Treasury yields is weighing on the US dollar.
2. A price correction after a 10-day rally is likely to weigh on the US dollar.
Technical Comments
1. Price is likely to be capped by the Fibonacci 50% correction point in the corrective rally.
2. A MACD divergence is hinting at a price correction.
Key Levels
| Support | 1.2940 | 1.2905 | 1.2860 |
| Resistance | 1.2990 | 1.3015 | 1.3070 |
Technical Overview
USD/JPY – Price has reached a new 24-year high at 136.71 this morning. There is no divergence warning and we are expecting price to advanced higher to 137.25 in the next few days. However, stochastic is in the overbought zone but both MACD and 20EMA are hinting at a bullish price trend. A move below the previous high of 135.59 would hint at a possible high at 136.71 and a decline to 131.75.
| Support | 136.00 | 135.60 | 135.20 |
| Resistance | 136.40 | 136.70 | 137.25 |
EUR/USD – We had a buy recommendation at 1.0505 on Monday which was filled and yesterday we had left stop at 1.0475 and profit order at 1.0605. Price had rallied to a high of 1.0581 on Tuesday but has declined to a low of 1.0501 this morning. We would recommend keeping stop and profit order unchanged for today. MACD remains bullish but 20EMA has turned bearish. Stochastic is hinting at a price decline.
| Support | 1.0495 | 1.0440 | 1.0395 |
| Resistance | 1.0545 | 1.0595 | 1.0635 |
GBP/USD – Price had declined last 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 has turned bearish. Stochastic is hinting at a price decline.
| Support | 1.2225 | 1.2170 | 1.2115 |
| Resistance | 1.2280 | 1.2335 | 1.2380 |
XAU/USD – Price has declined to $1825.45 this morning which is close to the Fibonacci 62% correction point of the price rally from $1804.95 to $1857.40. Stochastic is close to the oversold zone but MACD and 20EMA has turned bearish and are both hinting at a bearish price trend. If price moves below $1824.85, we are likely to see a test of $1804 in the next few days. If price can stay above $1824.85, we are likely to see a test to the previous high of $1857.40.
| Support | 1824.45 | 1815.75 | 1804.95 |
| Resistance | 1832.80 | 1846.20 | 1857.45 |
AUD/USD – We had a sell recommendation at 0.6980 yesterday which was filled when price advanced to a high of 0.6993. Price has declined lower this morning to 0.6915 and our view remains the same as yesterday. We would recommend bring stop lower to cost at 0.6980 and keeping profit order unchanged at 0.6860. Both MACD and 20EMA are hinting at a bearish price trend. Stochastic is also hinting at a price decline.
| Support | 0.6915 | 0.6885 | 0.6850 |
| Resistance | 0.6950 | 0.6995 | 0.7035 |