Market Talk
– The euro rose against the U.S. dollar in a choppy session on Thursday, after the European Central Bank delivered a 50 basis points rate hike to tame inflation in its first rate increase since 2011. Higher jobless claims, the third weekly gain in a row and the first time above 250,000 since January added to the US dollar weakness.
– The ECB raised its benchmark deposit rate by half-percentage point to 0%, breaking its own guidance for a 25 basis points move as it joined global peers in jacking up borrowing costs. The euro’s initial rally, faltered after Lagarde said the bank was accelerating its exit from negative interest rates but not changing the ultimate point of arrival.
– The U.S. dollar was 0.4% lower against the Japanese yen at 137.77 yen, after the Bank of Japan stuck as expected to its ultra-easy policy settings, continuing to buck the global monetary tightening trend even as it raised its inflation forecast.
– The British pound was down at $1.1964 with traders watching the race to replace Boris Johnson as British prime minister. Former finance minister Rishi Sunak and foreign secretary Liz Truss make it through to the last round of the contest to become Conservative Party leader.
– Gold bounced off a one-year low at $1,680.70 on Thursday, gaining more than 1% as the dollar eased and persistent economic concerns boosted bullion’s safe-haven appeal. A decline in US Treasury yields also helped the yellow metal.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 137.60. Stop at 137.30 and profit target at 138.85
3. Expectation of a rate hike and current interest rate differential are both likely to aid the greenback against the yen
4. Price is supported by the Fibonacci 50% correction point with a Morning Doji Star candlestick price pattern hinting at a bullish price trend.
Fundamental Comments
1. Expectation of a hike in rates next week 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 supported by the Fibonacci 50% correction point.
2. A Morning Doji Star candlestick price pattern is hinting at a price rally.
Key Levels
| Support | 137.55 | 137.05 | 136.75 |
| Resistance | 137.95 | 138.55 | 138.90 |
Technical Overview
USD/CHF – The price rally was capped by the 20EMA and we could see another attempt to test the previous low at 0.9653 again. The 20EMA is hinting at a bearish price trend. MACD is also bearish and hinting at a bearish price trend. Stochastic is near to the oversold zone and is hinting at a limited downside. We favour a test of the Double Top chart pattern’s price target at 0.9625.
| Support | 0.9655 | 0.9620 | 0.9580 |
| Resistance | 0.9695 | 0.9740 | 0.9785 |
EUR/USD – We had a buy order at 1.0185 which was filled when price declined to a low of 1.0152. Price went up to a high of 1.0275 but has declined back to 1.0185. We would recommend keeping stop at 1.0150 and lowering profit order at 1.0270. Stochastic is still declining and hinting at a price decline but both MACD and 20EMA remains bullish and is hinting at a bullish price trend.
| Support | 1.0165 | 1.0115 | 1.0070 |
| Resistance | 1.0205 | 1.0275 | 1.0305 |
GBP/USD – We saw a pullback in price to the Fibonacci 50% correction point of the rally from 1.1760 to 1.2045 at 1.1950 overnight. The 20EMA is also supporting price at the moment. Above the Fibonacci 50% point, we are likely to see another rally towards 1.2050 in the next 2-3 days. Stochastic is rising and is hinting at a bullish price trend. MACD is also hinting at a bullish price trend. A price move below 1.1865 would negate our bullish view.
| Support | 1.1950 | 1.1885 | 1.1845 |
| Resistance | 1.2005 | 1.2050 | 1.2100 |
XAU/USD – Price hit a one-year low at $1,680.70 on Thursday and staged a strong rebound to a high of $1720 this morning. Stochastic continues to rise and is hinting at a price rally. MACD has turned bullish. 20EMA is pointing up and is also hinting at a bullish price trend. However, price needs to move above $1724 would negate our bearish view and confirm the low at $1680.70.
| Support | 1712.40 | 1697.35 | 1680.70 |
| Resistance | 1723.75 | 1739.70 | 1752.00 |
XAG/USD – We had a buy recommendation at $18.70 on Wednesday which was filled and yesterday, we had left stop at $18.45 and profit order at $19.35. Our stop order was triggered when price declined to a low of $18.23. Price has since moved higher to $18.80 and stochastic is hinting at a price rally. However, both MACD and 20EMA are hinting at a sideways movement. We think price is likely to move up to $19.35 again in the next few days.
| Support | 18.40 | 18.10 | 17.90 |
| Resistance | 18.85 | 19.10 | 19.40 |