Market Talk
– The U.S. dollar rose against the euro in a choppy session, but its gains were capped as traders were hesitant to drive big moves ahead of a crucial ECB policy decision later in the global day. Against the yen, the greenback rose after BOJ kept to its ultra-loose monetary policy.
– The euro hung below a two-week high to the dollar as investors braced for the European Central Bank’s first interest rate increase since 2011 and the scheduled reopening of a key Russian gas pipeline later in the day but faced pressure from the looming collapse of the Italian government.
– The Bank of Japan, as expected, maintain its ultra-low interest rates reinforcing its position as an outlier in a wave of global increases to interest rate. The dollar inched up to 138.34 yen, edging back in the direction of the 24-year high at 139.38 seen one week ago.
– Sterling weakened against the dollar, despite data showing British inflation climbed to its highest rate in 40 years, bolstering chances of a half-percentage-point Bank of England rate hike next month. The British pound edged lower to $1.1961
– Gold prices fell on Wednesday as a firmer dollar countered limited support for bullion from expectations the U.S. Federal Reserve may not resort to a 100-basis-point interest rate hike next week. The hawkish central bank regime is also reducing appetite for gold purchases.
Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation.
2. Buy EUR/USD at 1.0185. Stop at 1.0150 and profit target at 1.0300
3. An expected ECB interest rate increase and the scheduled reopening of a key Russian gas pipeline are both aiding the euro.
4. Price is supported by the Fibonacci 38% correction point as well as the 20EMA line with MACD hinting at a bullish price trend.
Fundamental Comments
1. Expectation of an interest rate hike is aiding the euro.
2. The reopening of a key Russian gas pipeline, Nord Steam is weighing on the safe haven U.S. dollar.
Technical Comments
1. Price is supported by the Fibonacci 38% correction point and the 20EMA.
2. MACD remains bullish and is hinting at a bullish price trend.
Technical Overview
USD/JPY – After reaching a low at $137.37 on Tuesday, we have seen price rallied to a high of $138.54 this morning. With BOJ keeping to its ultra-loose monetary policy, we are expecting this pair to head towards its 24-year high at $139.38 in the next few days ahead. Stochastic is rising and is hinting at a price really but both MACD and 20EMA are only mildly bullish. If price is unable to move above $138.65, we may see another test of the low at $137.37
| Support | 138.15 | 137.65 | 137.35 |
| Resistance | 138.65 | 139.00 | 139.40 |
USD/CHF – The price rally was capped by the 20EMA and we could see another attempt to test the previous low again. Stochastic is about to have a bearish crossover, hinting at a bearish price trend. MACD remains bearish and is hinting at bearish price trend. 20EMA is also hinting at a bearish price trend. Price could be heading towards the Double Top chart pattern’s price target at 0.9625. A movement above 0.9740 would negate our bearish view and hints at a price bottom.
| Support | 0.9685 | 0.9625 | 0.9590 |
| Resistance | 0.9740 | 0.9785 | 0.9820 |
GBP/USD – We saw a pullback in price to the 20EMA at 1.1950 overnight and if price is supported at this point, we are likely to see a resumption of the rally to 1.2050 in the next 48 hours. Stochastic is declining but MACD remains bullish and is hinting at a bullish price trend. 20EMA is also hinting at a bullish price trend. A move below 1.1950 would negate our bullish view for the next 48 hours.
| Support | 1.1950 | 1.1905 | 1.1860 |
| Resistance | 1.2005 | 1.2050 | 1.2100 |
XAU/USD – Price broke below the previous week’s low of $1697.38 overnight and declined to a low of $1689.77. The decline looks like continuing and we could see price decline to the July 2021 low of $1676.54 in the next 48 hours. Stochastic is in the oversold zone but both MACD and 20EMA are hinting at a strong bearish price trend. Only a price move above $1724 would negate our bearish view.
| Support | 1686.45 | 1676.55 | 1668.50 |
| Resistance | 1697.35 | 1710.80 | 1723.75 |
XAG/USD – We had a buy recommendation at $18.70 yesterday, which was filled. Price has rallied to a high of $19.09 overnight but has declined to a low of $18.52 this morning. We would recommend keeping stop at $18.45 and profit order at $19.35. Stochastic has turned down and is hinting at a price decline. Both MACD and 20EMA are bearish and are hinting at a bearish price trend.
| Support | 18.40 | 18.10 | 17.90 |
| Resistance | 18.75 | 19.10 | 19.40 |