Market Talk
– A resurgent U.S. dollar, aided by safe-haven demand on renewed worries about higher rates and a global recession after central bank chiefs signaled a resolution to bring down inflation, climbed to a new 24-year peak against the yen.
– Speaking at the European Central Bank’s annual conference in Sintra, Portugal, U.S. Federal Reserve Chair Jerome Powell said it was important to bring down inflation, even if it meant economic pain, with similar remarks from ECB President Christine Lagarde.
– The greenback hit fresh a 24-year peak of 137 yen overnight, as the gap between a hawkish Fed and a dovish Bank of Japan continues to weigh heavily on the yen, which was last trading at 136.57 yen in early Asian hours.
– The euro was last down 0.74% at $1.0440. The ECB is widely expected to raise interest rates in July for the first time in a decade, following its global peers, to cool accelerating inflation. Economists are divided on the magnitude of any hike, giving investors pause.
– Gold was down on Thursday morning in Asia and was set to fall for a third straight month, as investors assessed bullion’s outlook with major central banks adopting aggressive means to bring down soaring prices.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2885. Stop at 1.2840 and profit target at 1.3010.
3. Safe haven demand and interest rate differential are both in the U.S. dollar favour.
4. Price is supported by the 20EMA and Fibonacci 38% correction point with MACD and 20EMA hinting at a bullish price trend.
Fundamental Comments
1. Safe-haven demand on renewed worries about higher rates and a global recession is aiding the US dollar.
2. Interest rate differential is in the U.S. dollar favour.
Technical Comments
1. Price is supported by the Fibonacci 38% correction point and the 20EMA.
2. MACD and 20EMA are both hinting at a bullish price trend.
Technical Overview
USD/JPY – Price reached a fresh 24-year peak of 137 yen overnight but has declined lower to 136.13 at the point of this writing. Our target was 137.25 but with divergence showing up in the MACD indicator, we think price is more likely to go into a correction first before the next rally. Stochastic is also in the overbought zone and is turning down. 20EMA is supporting price but if price moves below this 20EMA line, we are likely to see a correction to 134.40 in the next few days.
| Support | 136.05 | 135.65 | 135.15 |
| Resistance | 136.50 | 137.00 | 137.25 |
EUR/USD – Price has declined below the Fibonacci 62% correction point at 1.0455 to a low of 1.0432 this morning. MACD has turned bearish and 20EMA is also hinting at a bearish price trend. However, stochastic is in the oversold zone and is hinting at a limited downside. We think there could be a price correction higher to the 20EMA line before the decline resumes again. Above 1.0605 would negate our bearish view for the next few days.
| Support | 1.0430 | 1.0395 | 1.0360 |
| Resistance | 1.0470 | 1.0505 | 1.0565 |
GBP/USD – Price broke below the range low last night to a low of 1.2105. This price low is also the Fibonacci 62% correction point of the rally from 1.1930 to 1.2407. Stochastic is in the oversold zone and is hinting at a limited downside. However, both MACD and 20EMA are hinting at a bearish price trend. We think any rally is likely to be capped by the 20EMA line at 1.2170 and a decline to 1.1930 is likely in the next few days.
| Support | 1.2105 | 1.2060 | 1.1990 |
| Resistance | 1.2170 | 1.2225 | 1.2285 |
XAU/USD – Price broke below the range low at $1816.85 overnight and we are likely to see a decline to 1804.95 in the next 2-3 days. Stochastic is in the oversold zone and is hinting at a limited downside. MACD is flat and neutral at the moment. 20EMA is hinting at a bearish price trend. We are bearish and think the 20EMA line at $1821 is likely to cap any rally and from there, we see a decline to $1804.95.
| Support | 1811.90 | 1804.95 | 1786.60 |
| Resistance | 1821.85 | 1832.60 | 1847.75 |
AUD/JPY – We had a sell call on this pair yesterday but we were wrong on our call. We lost 35 pips on this trade. Price has moved higher after being supported by the 20EMA. MACD remains bullish and is hinting at a bullish price trend. Stochastic is also close to the oversold zone and is hinting at a price rally ahead. Price is likely to test the recent high at 94.70 if price can hold above the 20EMA.
| Support | 93.80 | 93.40 | 93.00 |
| Resistance | 94.20 | 94.70 | 95.05 |