Market Talk
– The U.S. dollar began the week nudging down from multi-year highs, with a hotter-than-forecast inflation reading in New Zealand lending modest support to the kiwi, though fears about Europe’s gas supply put a cap on dollar selling.
– The U.S. dollar fell as investors evaluated how high the Federal Reserve is likely to raise interest rates when it meets later this month. The greenback has jumped to a two-decade high last Thursday as the Fed is expected to raise rates faster and further than peer central banks as inflation soars to four-decade highs.
– The euro last bought $1.0094, after bouncing from a two-decade trough of $0.9952 last week. Europe is waiting anxiously to see if Russia resumes the flow of gas through the Nord Stream 1 pipeline on July 21, while Italy teeters on the brink of political turmoil should Prime Minister Mario Draghi go ahead and resign.
– The greenback was a shade softer at 138.30 yen, having climbed 1.8% last week to a 24-year peak of 139.38. The New Zealand dollar inched higher to 0.6199 this morning after inflation surged to a three-decade high in New Zealand.
– Gold slipped below $1700 last week after rising interest rates and a firm dollar pushed the non-yielding gold 2% lower. The yellow metal managed to recover to $1714.35 on Monday morning.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 138.10. Stop at 137.85 and profit target at 139.30
3. Expectation of a rate hike and current interest rate differential are both likely to aid the greenback against the yen.
4. Price is likely to be supported and MACD is hinting at a bullish price trend.
Fundamental Comments
1. Expectation of a hike in rates is likely to keep the greenback stronger against the yen.
2. Interest rate differential is likely to aid the greenback against the yen.
Technical Comments
1. Price is likely to be supported by the Fibonacci 50% correction point as well as the 20EMA line.
2. MACD is bullish and is hinting at a bullish price trend.
Key Levels
| Support | 138.00 | 137.55 | 136.95 |
| Resistance | 138.55 | 138.90 | 139.35 |
Technical Overview
USD/CHF – Price reached a high of 0.9885 last Thursday but this high was accompanied by a divergence warning from the MACD indicator, hinting at a possible price high. Price declined below 0.9755 this morning, triggering a Double Top chart pattern, with a price target at 0.9625. Price is currently hovering around the neckline at 0.9755 and if price is unable to move above 0.9790, we are likely to see a move to 0.9625 in the next couple of days.
| Support | 0.9735 | 0.9680 | 0.9630 |
| Resistance | 0.9770 | 0.9805 | 0.9850 |
EUR/USD – Price may have made a low last Thursday at 0.9952 as that low was accompanied by divergence warning from the MACD indicator. Price has since moved higher and this morning, price is close to the resistance high at 1.0120. If price can move above this strong resistance, it could be heading towards 1.0275. If price is unable to move above this resistance, it is likely to decline back to 0.9952 again.
| Support | 1.0075 | 1.0010 | 0.9950 |
| Resistance | 1.0120 | 1.0180 | 1.0220 |
GBP/USD – Price may have made a low last Thursday at 1.1760 as that low was accompanied by divergence warning from the MACD indicator. Stochastic is also moving higher, hinting at a price rally. Price has also moved above the 20EMA. The rally could continue to move higher, sending price to the previous high of 1.2050 in the next few days. MACD and 20EMA are also hinting at a price rally.
| Support | 1.1855 | 1.1805 | 1.1755 |
| Resistance | 1.1910 | 1.1965 | 1.2010 |
XAU/USD – Price declined to a low of 1697.38 last Thursday. While there was a divergence warning from the MACD indicator, hinting at a price low, price has been capped by the 20EMA as well as a price resistance at $1715. Price will need to move above this resistance point or else, we might see another decline back to test the previous low of $1697.38 in the next few days. Stochastic is near to the oversold zone but both MACD and 20EMA are pointing to a bearish price trend.
| Support | 1697.35 | 1686.45 | 1676.55 |
| Resistance | 1715.65 | 1733.20 | 1744.85 |
NZD/USD – Price inched higher to 0.6199 this morning after New Zealand’s inflation surged to a three-decade high. However, price has been unable to hold the high ground and has since declined to 0.6160. Stochastic is also near to the overbought zone and is hinting at a price decline. MACD and 20EMA are both currently bullish and hinting at a bullish price trend. Whether price goes higher or lower will depend on whether it can hold above the 20EMA line at 0.6135.
| Support | 0.6135 | 0.6095 | 0.6060 |
| Resistance | 0.6200 | 0.6255 | 0.6285 |