Market Talk
– The U.S. dollar stood tall on Wednesday, holding at a 20-year peak against the euro and multi-month highs against other major peers as higher gas prices and political uncertainty renewed recession fears and sent investors scrambling to the safe-haven currency.
– In Asian trading, the euro was at $1.0250, just a fraction above its overnight low of $1.0236, as uncertainty over Europe’s gas supply has set prices rocketing and fueled recession concerns. The risk of Europe sliding into a recession rose after another big 17% jump in natural gas prices in Europe.
– Sterling was also pinned by a two-year low and not helped by the latest political crisis to hit Prime Minister Boris Johnson’s government, with the resignation of his finance and health secretaries questioning his longevity as leader. After touching $1.1899 overnight the currency steadied at $1.1964 in Asia.
– The Aussie was last huddled at $0.6810, having slid 1.0% overnight to a two-year trough of $0.6762. In contrast, the recently-under-fire Japanese yen gained a little support from some safety bids, with the dollar dropping 0.3% to 135.41 yen.
– Gold was up on Wednesday morning in Asia, after losing more than 2% overnight, to sink further to a 7-month low, weighed down by a sharp rally in the dollar and rising interest rates which sapped appetite for the yellow metal.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.3010. Stop at 1.2980 and profit target at 1.3135.
3. Safe haven demand and interest rate differential are both in the U.S. dollar favour.
4. Price is supported by a previous resistance turned support line with MACD and 20EMA hinting at a bullish price trend.
Fundamental Comments
1. Safe-haven demand on renewed worries about 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 a previous resistance turned support line.
2. MACD and 20EMA are both hinting at a bullish price trend.
Key Levels
| Support | 1.3010 | 1.2965 | 1.2930 |
| Resistance | 1.3050 | 1.3085 | 1.3140 |
Technical Overview
USD/JPY – A decline in US Treasury yields and fear of a recession in Europe led to the yen gaining ground to 135.00. Stochastic is declining and is hinting at a bearish price trend. 20EMA has turned bearish and is also hinting at a bearish price trend. Similarly, MACD is also hinting at a bearish price trend. We think price is not going to 137.25 but rather lower to 134.20 again in the next 1-2 days.
| Support | 134.75 | 134.35 | 133.80 |
| Resistance | 135.35 | 135.85 | 136.35 |
EUR/USD – We were wrong to think that price had bit a bottom on Friday at 1.0365. Rocketing gas prices in Europe has fueled recession concern sending the euro to a 20-year low at 1.0236. 20EMA is pointing down with a steep slope, hinting at a strong bearish price trend. MACD is also hinting at a strong bearish price trend but stochastic is in the oversold zone and hinting at a limited downside.
| Support | 1.0235 | 1.0200 | 1.0175 |
| Resistance | 1.0275 | 1.0305 | 1.0360 |
GBP/USD – We had a sell call yesterday at 1.2120, which was filled when price rallied to a high of 1.2125. Price has declined overnight to a two-year low at 1.1899. Our profit order was filled as a result at 1.2010. We are out of this position with a 110 pips profit. Stochastic is near to the oversold zone but both MACD and 20EMA are hinting at a strong bearish price trend. Price is likely to be capped at 1.1975 and we are likely to see another decline to 1.1900 in the next 1-2 days.
| Support | 1.1895 | 1.1850 | 1.1790 |
| Resistance | 1.1935 | 1.1970 | 1.2005 |
XAU/USD – Price broke below last Friday’s low at $1784.38 and reached a low of $1762.42 this morning. This morning’s low is also the Fibonacci 127% price projection target of the previous decline from $1857.40 to the low at $1784.38. The strong decline has sent stochastic into the oversold zone but both MACD and 20EMA are hinting at a strong bearish price trend ahead.
| Support | 1762.40 | 1749.95 | 1737.60 |
| Resistance | 1772.70 | 1784.40 | 1799.50 |
NZD/USD – Price reached a low of 0.6123 overnight and has moved higher to 0.6180 this morning. However, we think price is likely to test the low of 0.6123 again in the next 24 hours. Stochastic is in the oversold zone but 20EMA is hinting at a bearish price trend. MACD is also hinting at a bearish price trend. Only a move above 0.6205 will negate our bearish view for the next 24 hours.
| Support | 0.6145 | 0.6115 | 0.6075 |
| Resistance | 0.6180 | 0.6215 | 0.6250 |