Market Talk
– The U.S. dollar struggled versus its major rivals as softening inflation expectations prompted a reassessment of the prospects for aggressive interest rate hikes after some high-frequency data indicators showing economic momentum starting to cool amid a drop in commodity prices.
– The euro rose 0.3% overnight to $1.0578, as traders braced for European inflation figures to run hot this week and awaited a speech from central bank chief Christine Lagarde. Expectations that the ECB will soon raise interest rates for the first time in more than a decade also buoyed the single currency.
– The greenback held modest overnight gains and traded 135.37 yen as U.S. Treasury yields rose after data on orders for durable goods and pending home sales surprised to the upside. The uptick in Treasury yields weighed on the Japanese yen.
– The risk-sensitive Australian and New Zealand dollars were both weighed down by a slide in commodities prices. The Australian dollar was weaker at $0.6925 while the kiwi edged lower to 0.6295 in early Asian trading.
– Gold prices were lower in Asian trading as higher interest rates weighed on bullion, while investors watched for any cues on policy moves at the European Central Bank’s forum in Portugal.
Chart Focus EUR/JPY
Key Points
1. Buy EUR/JPY recommendation.
2. Buy EUR/JPY at 142.75. Stop at 142.35 and profit target at 144.20
3. Expectations that the ECB will soon raise interest rates and interest rate differential are aiding the Euro.
4. Price is supported by the 20EMA and a previous support line with 20EMA hinting at a bullish price trend.
Fundamental Comments
1. Expectations that the ECB will soon raise interest rates next month is aiding the Euro.
2. Interest rate differential is in favour of the euro
Technical Comments
1. Price is supported by the 20EMA and a previous support line.
2. 20EMA is bullish and is hinting at a bullish price trend,
Key Levels
| Support | 142.85 | 142.25 | 141.75 |
| Resistance | 143.45 | 143.90 | 144.25 |
Technical Overview
USD/JPY – Price has managed to hold above the support level at 134.50 for the past few days. If price can hold above this support, we are likely to see a move towards 136.70 in the next few days. Stochastic is rising and is hinting at a bullish price trend. MACD has turned bullish. 20EMA is flat but is supporting price at the moment. We see a rally to 136.70 in the next few days.
| Support | 135.00 | 134.50 | 134.05 |
| Resistance | 135.60 | 136.00 | 136.70 |
EUR/USD – We had a buy call yesterday at 1.0540 but price only fell to a low of 1.0552 and our entry order was not filled. 20EMA is pointing up and is hinting at a bullish price trend. MACD is also hinting at a bullish price trend. However, stochastic is close to the overbought zone and is hinting at a limited upside. We remain bullish. We are looking at a price rally to the resistance zone at 1.0650 in the next couple of days.
| Support | 1.0550 | 1.0505 | 1.0465 |
| Resistance | 1.0615 | 1.0650 | 1.0690 |
GBP/USD – Price has been trading in a range of 1.2160 to 1.2325 for the past 3 days and yesterday, we saw a brief break above the top of the range but price quickly fell back into the range. We are likely to see a continuation of this range for the next 24 hours. Stochastic is turning down. Both MACD and 20EMA are flat and neutral at the moment. We would recommend waiting for the breakout and following in the direction of the break.
| 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 last Thursday but price has bounced back higher again into the range. We think price is likely to trade within a range of $1816.85 to $1847.75 in the next few days until we have a breakout of this range. 20EMA and MACD are both flat and neutral at the moment while stochastic is hinting at a price decline.
| Support | 1816.85 | 1804.95 | 1798.90 |
| Resistance | 1828.30 | 1840.90 | 1857.40 |
AUD/USD – Price is currently supported by the 20EMA and MACD is hinting at a bullish price trend. Stochastic is also moving higher and is hinting at a bullish price trend. We think price, if it stays supported above the 20EMA, could be about to move higher to the previous high at 0.7065 in the next few days. Only a move below 0.6865 would negate our bullish view for the next few days.
| Support | 0.6905 | 0.6850 | 0.6810 |
| Resistance | 0.6960 | 0.6990 | 0.7020 |