Market Talk
– The U.S. dollar slipped against most major peers on Wednesday as U.S. Treasury 10-year yields slid more than 1 basis point in Tokyo, taking some of the sheen off the greenback, with investors mulling the risk of a recession from aggressive Federal Reserve rate hikes.
– U.S. consumer confidence slumped in June on concerns that high inflation will likely weaken economic growth later this year. The report brought to the fore concerns about what rising inflation means for growth, an outlook many investors anticipate as the Federal Reserve aggressively hikes interest rates to halt rising inflation.
– The euro was down to $1.0523 after ECB President Christine Lagarde offered no fresh insight into the central bank’s policy outlook. Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations.
– The greenback edged up to 136.04 yen, while sterling rose to $1.2204. The risk-sensitive Australian and New Zealand dollars staged small rebounds from Tuesday’s declines against the greenback. The Aussie climbed to $0.6905 while the kiwi was at $0.6245.
– Gold prices were hemmed in a tight range on Wednesday morning in Asian trading as prospects of higher interest rates challenged bullion’s safe-haven appeal while recession risks boosted it. A decline in benchmark U.S. 10-year Treasury yields also provides some support to gold.
Chart Focus AUD/JPY
Key Points
1. Sell AUD/JPY recommendation.
2. Sell AUD/JPY at 93.80. Stop at 94.15 and profit target at 92.70
3. A decline in commodities prices and risk aversion are both aiding the yen.
4. Price broke below the 20EMA with both 20EMA and MACD hinting at a bearish price trend.
Fundamental Comments
1. A decline in commodities prices are weighing on the Aussie dollar.
2. An increase in risk aversion is aiding the yen
Technical Comments
1. Price broke below the 20EMA.
2. 20EMA and MACD are both hinting at bearish price trend.
Key Levels
| Support | 93.45 | 93.00 | 92.50 |
| Resistance | 94.00 | 94.70 | 95.05 |
Technical Overview
USD/JPY – Price has managed to hold above the support level at 134.50 and we have seen a move higher. We are likely to see price move towards 136.70 in the next couple days. Stochastic is rising but is in the overbought zone. MACD remains bullish. 20EMA is hinting at a bullish price trend. Only a price movement below 134.65 would negate our bullish view for the next 2 days.
| Support | 135.65 | 134.50 | 134.05 |
| Resistance | 136.10 | 136.70 | 137.25 |
EUR/USD – Price turned down after ECB President Christine Lagarde offered no fresh insight into the central bank’s policy outlook. Price has also moved below the support at 1.0505. We are likely to see the price decline continue towards 1.0440 in the next 1-2 days. MACD and 20EMA are both hinting at a bearish price trend. However, stochastic is close to the oversold zone and is hinting at a limited downside.
| Support | 1.0465 | 1.0405 | 1.0360 |
| Resistance | 1.0505 | 1.0565 | 1.0590 |
GBP/USD – Price continues to trade within the range of 1.2160 to 1.2325. Price has been in this range for the past 5 days now. Price is close to the bottom of this range but stochastic is in the oversold zone and is hinting at a limited downside. MACD and 20EMA are both bearish. Price will need to break below the range’s low to continue lower but we think price is likely to stay within the range for another day
| Support | 1.2160 | 1.2110 | 1.2065 |
| Resistance | 1.2225 | 1.2285 | 1.2335 |
XAU/USD – Price continues to trade within the range of $1816.85 to $1847.75. Stochastic is in the oversold zone and is hinting at a limited downside. MACD is flat and neutral at the moment. 20EMA is bearish and hinting at a bearish price trend. A price break below $1816.85 is likely to send price lower to $1804.95. Watch the break for clues to the next directional move.
| Support | 1816.85 | 1804.95 | 1798.90 |
| Resistance | 1828.30 | 1840.90 | 1857.40 |
EUR/JPY – We had a buy order yesterday at 142.75 but price only reached a low of 142.77, missing our buy entry price. Stochastic is declining from the overbought zone and is hinting at a price decline. 20EMA has turned bearish and is hinting at a bearish price trend. MACD is flat and neutral at the moment. We think price is likely to break the support at 142.65 and moved lower to the next support level at 141.40 in the next 1-2 days.
| Support | 142.25 | 141.75 | 141.35 |
| Resistance | 142.75 | 143.45 | 143.90 |