Market Talk
– The Australian dollar ticked higher on Tuesday after an expected half-point increase in it cash rate by the Reserve Bank of Australia and supported by signs that the United States might soon ease tariffs on key trading partner China.
– The Reserve Bank of Australia on Tuesday raised its cash rate by 50 basis points as expected to 1.35% and flagged more tightening ahead as it struggles to contain surging inflation. The Aussie dollar was little changed at 0.6861.
– The euro and sterling rose on Monday against the U.S. dollar, supported by improved global risk sentiment in a quiet trading session due to a holiday in the United States. The single currency rose to $1.0435 against the dollar on Tuesday morning while sterling edged lower to $1.2115.
– The dollar gained to $136.36 this morning, after reaching a 24-year top of $137.01 last week, aided Treasury yields which jumped to 2.9780% in Tokyo on Tuesday from the lowest since May at 2.7910% on Friday. There was no trading in Treasuries on Monday, with U.S. markets closed for the Fourth of July holiday.
– Gold dipped slightly to $1810 an ounce on Tuesday, pressurized by a recovery in U.S. Treasury yields from last week’s one-month lows which reduced the appeal of the non-yielding bullion. Spot silver fell 0.3% to $19.81 an ounce, trading near its lowest in two years.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.2120. Stop at 1.2150 and profit target at 1.2010
3. An uptick in US Treasury yields and interest rate differential are both likely to aid the greenback.
4. Price is capped by the 20EMA with MACD also hinting at a bearish price trend.
Fundamental Comments
1. An uptick in US Treasury yields is likely to aid the US dollar.
2. Interest rate differential is in the greenback’s favour.
Technical Comments
1. Price is capped by the 20EMA which is hinting at a bearish price trend.
2. MACD is bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1.2080 | 1.2040 | 1.2005 |
| Resistance | 1.2125 | 1.2190 | 1.2225 |
Technical Overview
USD/JPY – After reaching a high on 29 June at 137.00, we have seen a price decline to a low of 134.73 on Friday and again on Monday. Price has since moved higher to a high of 136.36 this morning. We think the low is in at 134.73 and we are now on our way to break above 137.00 to a high of 137.25 in the next 1-2 days. Stochastic is rising and hinting at a price rally. 20EMA is also bullish but MACD remains neutral.
| Support | 135.95 | 135.40 | 134.90 |
| Resistance | 136.35 | 136.70 | 137.05 |
EUR/USD – Price reached a low of 1.0365 last Friday and that low was accompanied by a divergence warning from both the MACD and stochastic indicators. However, 20EMA is still hinting at a bearish price trend. Price could have found a bottom but will need to move above 1.0490 to confirm the bottom. We would prefer to wait for the confirmation with a breakout at 1.0490.
| Support | 1.0405 | 1.0365 | 1.0340 |
| Resistance | 1.0445 | 1.0490 | 1.0540 |
AUD/USD – We had a sell call at 0.6850 yesterday. Price rallied to a high of 0.6894 this morning, filling our entry price as well as triggering our stop order at 0.6885. We lost 30 pips as a result. Stochastic is rising and is hinting at a price rally ahead. 20EMA is bullish and is hinting at a bullish price trend. However, MACD remains bearish and is hinting at a price decline in the next 1-2 days.
| Support | 0.6860 | 0.6820 | 0.6795 |
| Resistance | 0.6895 | 0.6920 | 0.6960 |
XAU/USD – Price declined to a low of $1784.38 on Friday night and we think the decline could be over. There was a divergence warning from the MACD indicator as well. We are likely to see price move higher towards $1820 in the next few days. A move below $1784.38 would negate our bullish view. Stochastic continues to rise, hinting at a price rally. MACD remains bearish while 20EMA is neutral.
| Support | 1803.80 | 1793.45 | 1784.35 |
| Resistance | 1814.10 | 1824.85 | 1840.90 |
USD/CAD – We had a buy call on this pair at 1.2885 on Thursday, which was filled. Yesterday we had left stop order at 1.2855 and profit order at 1.2990. Price declined to a low of 1.2845 this morning and our stop was triggered. We are out of this position with a 30 pips loss. Stochastic is in the oversold zone but both MACD and 20EMA are both hinting at a bearish price trend. We think price is likely to test the Fibonacci 50% price correction at 1.2795.
| Support | 1.2835 | 1.2795 | 1.2755 |
| Resistance | 1.2870 | 1.2905 | 1.2965 |