Market Talk
– The U.S. dollar remained under pressure on Thursday as it looked set to extend declines against major peers to a fourth day, hurt by Treasury yields wallowing near two-week lows amid rising concerns of a recession.
– Fed Chair Jerome Powell said in testimony to Congress that the central bank is fully committed to bringing prices under control even if doing so risks an economic downturn. He said a recession was “certainly a possibility,” reflecting fears in financial markets that the Fed’s tightening pace will throttle growth.
– Markets have become increasingly concerned that the Fed’s commitment to quelling red-hot inflation will spur a recession. Those worries sent the 10-year Treasury yields sliding to an almost two-week low. The yen gained to 135.97 yen, recovering from a 24-year high of 136.71 reached on Wednesday.
The euro was little changed at $1.0564, aided by interest rate hikes in the coming months, according to Phillip Lane, chief economist at the ECB. Sterling slipped to $1.2253. The Aussie dollar dropped 0.47% to $0.6891 while the Kiwi edged down to 0.6261.
Gold was down on Thursday morning in Asia as investors expected aggressive interest rate hikes after U.S. Federal Reserve Chair Jerome Powell said the central bank is fully committed to bringing prices down.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 134.75. Stop at 134.40 and profit target at 136.70
3. Expectations of an aggressive rate hike and current interest rate differential are both in the greenback’s favour.
4. Price could be supported by the Fibonacci 38% correction point and a previous support with MACD hinting at a bullish price trend.
Fundamental Comments
1. Expectations of an aggressive rate hike is likely to favour the greenback.
2. Interest rate is in the greenback’s favour.
Technical Comments
1. Price could be supported by the Fibonacci 38% correction point and a previous support.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 135.35 | 134.70 | 134.30 |
| Resistance | 136.05 | 136.70 | 137.25 |
Technical Overview
USD/CAD – Price moved to a high of 1.2996 overnight and our entry order at 1.2990 was filled. Our view remains unchanged and with Treasury yield declining, we are looking at a weaker US dollar. We would recommend bringing stop lower to cost at 1.2990 while keeping profit target order unchanged at 1.2860. Currently MACD and 20EMA are flat and neutral at the moment. Stochastic is also flat.
| Support | 1.2935 | 1.2890 | 1.2860 |
| Resistance | 1.2990 | 1.3025 | 1.3070 |
EUR/USD – We had a buy recommendation at 1.0505 on Monday and yesterday we had left stop at 1.0475 and profit order at 1.0605. Unfortunately, price declined overnight to a low of 1.0468 and our stop was triggered at 1.0475. We lost 30 pips on this trade. Price has advanced to 1.0605 early this morning but we think there will be another rally that will bring price higher to 1.0665. MACD and 20EMA are both bullish while stochastic is rising and hinting at a price rally.
| Support | 1.0550 | 1.0505 | 1.0470 |
| Resistance | 1.0595 | 1.0635 | 1.0665 |
GBP/USD – Price managed to stay above the Fibonacci 50% correction point for the past 48 hours but there was no rally. Instead, price has been trading in a range for the past 48 hours. Both MACD and 20EMA are flat and neutral at the moment. Stochastic is also in the middle of its range. We remain bullish but would prefer to wait for clearer vision.
| Support | 1.2225 | 1.2170 | 1.2115 |
| Resistance | 1.2280 | 1.2335 | 1.2380 |
XAU/USD – The decline had managed to hold above the Fibonacci 62% correction point and we saw a rally to $1847.73. However, Powell’s comments sent the yellow metal back lower to $1831. Stochastic is rising and hinting at a bullish price trend but both MACD and 20EMA are flat and neutral at the moment. We may see price moves in a range of $1847 to $1822 in the next couple of days until a breakout of this range.
| Support | 1830.70 | 1822.95 | 1804.95 |
| Resistance | 1847.75 | 1857.20 | 1876.85 |
AUD/USD – We had a sell recommendation at 0.6980 on Tuesday which was filled and yesterday we had recommended bringing 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. Price has declined to a low of 0.6880 overnight. We would recommend bringing stop lower to 0.6950 and keeping profit target at 0.6860.
| Support | 0.6880 | 0.6845 | 0.6810 |
| Resistance | 0.6915 | 0.6950 | 0.6995 |