– The U.S. dollar retreated on Wednesday in Asia as the euro extended its overnight bounce on relief Europe might be able to avoid the worst fears concerning energy shortages, and on the chance the European Central Bank may deliver a more aggressive rate hike.
– The euro was up at $1.0229 after a Reuters report that the ECB was weighing a 50-basis-point rate hike at its Thursday meeting, double the hike many market participants had priced in, helped put the euro on track for its biggest one-day percentage gain in nearly two months.
– The greenback retreat coincided with reduced expectations of a super-sized 100-basis-point rate hike at next week’s Federal Reserve meeting and as global central banks around the world become more hawkish in their efforts to tame soaring inflation.
– The Aussie was steady at $0.6905, after rising 1.3% on the day overnight. Minutes of the Reserve Bank of Australia’s (RBA) July policy meeting out the day earlier showed that the central bank sees a need for more policy tightening to curb inflation.
– Gold was down on Wednesday morning in Asia, continuing along a downward trend and moving inversely to rising interest rates. Gold price edged lower to $1711.55 while silver was little changed at $18.78.
Chart Focus XAG/USD – Silver
Key Points
1. Buy Silver recommendation.
2. Buy Silver at $18.70. Stop at $18.45 and profit target at 19.35
3. Reduced expectations at next week FOMC meeting and a weak US dollar is aiding Silver.
4. Price is supported by the Fibonacci 50% correction point as well as the 20EMA line with MACD hinting at a bullish price trend.
Fundamental Comments
1. Reduced expectations of a super-sized 100-basis-point rate hike at next week’s Federal Reserve meeting is weighing on the US dollar.
2. A weak US dollar is also aiding silver.
Technical Comments
1. Price is supported by the Fibonacci 50% correction point and the 20EMA.
2. MACD had a divergence warning of a potential price low and is hinting at a bullish price trend.
Key Levels
| Support | 18.55 | 18.10 | 17.90 |
| Resistance | 19.00 | 19.40 | 19.85 |
Technical Overview
USD/JPY – We had a buy call at 138.10 which was filled on Monday. Yesterday we had left stop order at 137.85 and profit order at 139.35. Our stop order was triggered at 137.85 and we lost 25 pips on this trade. After reaching a low of 137.37 overnight, price has bounced back up to 138.37. We think this may be a correction and the decline should resume for 136.60 in the next few days as MACD remains bearish.
| Support | 137.80 | 137.35 | 136.95 |
| Resistance | 138.35 | 138.90 | 139.35 |
EUR/USD – From a low of 0.9952 last Thursday, we saw a rally to a high of 1.0200 on Monday. The correction following the high was shallower than expected. Price failed to reach the Fibonacci 38% correction point and we have seen a resumption of the uptrend to a high of 1.0268 overnight. We are expecting price to continue its rally towards 1.0360 ahead of Thursday ECB’s meeting. Stochastic is rising and both MACD and 20EMA are hinting at a bullish price trend.
| Support | 1.0200 | 1.0155 | 1.0110 |
| Resistance | 1.0265 | 1.0295 | 1.0360 |
GBP/USD – Price has reached close to a strong resistance point at 1.2050 and we may see a pullback in price to the 20EMA at 1.1950 in the next 48 hours before the rally resumes again. Stochastic is in the overbought zone and is hinting at a price decline. However, both MACD and 20EMA are hinting at a bullish price trend. If price can move above 1.2050, it is likely to move higher towards 1.2100.
| Support | 1.1985 | 1.1935 | 1.1875 |
| Resistance | 1.2050 | 1.2100 | 1.2150 |
XAU/USD – Despite the divergence given by the MACD indicator in the previous week, there was no reversal and price has moved sideways for most of this week. Stochastic is in the middle of its range and is not giving any clues. However, both MACD and 20EMA are hinting at a bearish price trend ahead. We think price is likely to test the previous week low at $1697.38 again. A move above $1724 will negate our bearish view.
| Support | 1697.35 | 1686.45 | 1676.55 |
| Resistance | 1710.80 | 1723.75 | 1733.95 |
NZD/USD – We had a buy call yesterday at 0.6165 but price did not reached our entry price and our order was not filled. Price has since moved higher to 0.6230 and stochastic has also reached the overbought zone. However, both MACD and 20EMA are hinting at a bullish price trend. We think price can continue to move higher towards 0.6250 and there is also a possibility that price can reached the Fibonacci 161.8% price projection target at 0.6285 in the next couple of days.
| Support | 0.6210 | 0.6165 | 0.6115 |
| Resistance | 0.6250 | 0.6290 | 0.6330 |