Market Talk
– The U.S. dollar slipped against its major peers on Friday, on course for its first weekly decline this month as investors assess the path for Federal Reserve policy and whether aggressive rate hikes would trigger a recession.
– Fed Chair Jerome Powell, in his second day of Congressional testimony, stressed the central bank’s “unconditional” commitment to taming inflation, even amid risks to growth. Market is currently betting on more cautious policy action from the Fed after another expected 75 basis point rate increase in July
– The euro edged lower to $1.0533 after weak European factory data reduced bets for European Central Bank tightening. Sterling rebounded 0.16% to $1.2281, putting it on track for a 0.5% weekly rise that would end a three-week losing run.
– Against the yen, the dollar eased to 134.79. For the week, it was down about the same amount, and set to snap a three-week, 6.19% losing streak against the greenback. Australia’s dollar ticked up to $0.6904, but was still set for a 0.48% weekly decline, its third straight losing week.
– Gold was down on Friday morning in Asia, set for its second straight decline, with worries of big interest rate hikes from the U.S. Federal Reserve weighing on bullion demand from war and inflation front.
Chart Focus EUR/JPY
Key Points
1. Sell EUR/JPY recommendation.
2. Sell EUR/JPY at 142.20. Stop at 142.55 and profit target at 140.50
3. A weak European factory data reduced bets for European Central Bank tightening while worries about a recession is aiding the safe haven yen.
4. Price is likely to be capped by the 20EMA and the previous support turned resistance line with MACD hinting at a price decline
Fundamental Comments
1. A weak European factory data reduced bets for European Central Bank tightening
2. Worries over a possible recession is aiding the safe haven yen.
Technical Comments
1. Price is likely to be capped by the 20EMA and the previous support turned resistance line.
2. MACD is bearish and is hinting at a price decline.
Key Levels
| Support | 141.75 | 141.05 | 140.40 |
| Resistance | 142.25 | 142.70 | 143.40 |
Technical Overview
USD/JPY – We had a buy call on this pair at 134.70 with a stop at 134.40. Both orders were filled overnight when price declined to a low of 134.25. However, our view remains unchanged. We think price may have reached a low and there is a likely rally to 136.72 again in the next few days. Stochastic is in the oversold zone but both MACD and 20EMA are bearish and are hinting at a bearish price trend.
| Support | 134.65 | 134.25 | 133.80 |
| Resistance | 135.25 | 135.85 | 136.25 |
EUR/USD – Price fell to a low of 1.0482 overnight, led lower by weak European factory data. However, price managed to stay above the Fibonacci 50% correction point. Stochastic is in the middle of its range. MACD remains bullish and 20EMA is also hinting at a bullish price trend. We think price is likely to move up to 1.0605 again in the next couple of days. A price move below 1.0450 would negate our bullish view.
| Support | 1.0505 | 1.0470 | 1.0440 |
| Resistance | 1.0555 | 1.0595 | 1.0635 |
GBP/USD – Price managed to stay above the Fibonacci 50% correction point on 3 separate occasions 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. A break of current range from 1.2160 to 1.2325 would be the first sign of a new direction.
| Support | 1.2225 | 1.2170 | 1.2115 |
| Resistance | 1.2285 | 1.2335 | 1.2380 |
XAU/USD – Price broke below the previous low of $1822.95 as well as the Fibonacci 62% correction point overnight. 20EMA is currently hinting at a bearish price trend. MACD is also hinting at a bearish price trend. Stochastic is pointing lower and hinting at a price decline. We think price is likely to decline to the previous week’s low at $1804.95 in the next few days. Only a move above $1848 would negate this bearish view.
| Support | 1815.75 | 1804.95 | 1786.55 |
| Resistance | 1827.35 | 1844.45 | 1857.20 |
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 0.6950 and keeping profit order unchanged at 0.6860. We would recommend keeping orders unchanged for today. Stochastic is starting to turn up but both MACD and 20EMA are still bearish and hinting at a bearish price trend.
| Support | 0.6880 | 0.6850 | 0.6810 |
| Resistance | 0.6925 | 0.6980 | 0.7020 |