Market Talk
– The dollar held just below multi-decade peaks on Tuesday as investors expected a rate hike of 75 basis points at the conclusion of policy meeting on Wednesday from the U.S. Fed but wondered whether hints of a slowing economy may prompt a shift away from its focus on inflation.
– A profit warning from Walmart on Monday was the latest sign that the living is getting tough as customers were tightening their belts, following several softer-than-expected U.S. and European data prints. The euro rose 0.21% to $1.0240 but was hemmed in by uncertainty over Europe’s energy security, which is not helped by a looming cut in the westbound flow of Russian gas.
– Bank of Japan policymakers agreed on the need to maintain ultra-low interest rates to support a fragile economy and ensure rising inflation was accompanied by higher wages, minutes of their June rate-setting meeting showed on Tuesday.
– The Aussie hit a one-month high of $0.6984 and last traded $0.6970, breaking above its 50-day moving average as traders waited for Australian inflation data that due on Wednesday. Economists forecast that the Reserve Bank of Australia’s underlying “trimmed mean” inflation hit 1.5% last quarter.
– Gold edged higher on Tuesday, helped by a weaker dollar, but prices were stuck in a tight range as investors refrained from taking big positions ahead a possible U.S. interest rate hike.
Chart Focus
Key Points
1. Buy CAD/JPY recommendation.
2. Buy CAD/JPY recommendation at 106.47. Stop at 106.23 and profit target at 106.95.
3. BOJ’s action to keep ultra-low rates will weigh on the yen and the rising oil price will likely to aid on CAD.
4. Price moved above the rising 20EMA support with bullish MACD and Stochastic.
Fundamental Comments
1. BOJ’s action to keep ultra-low rates will weigh on the yen.
2. Rising oil price on increasing concerns about tightening European supply after Russia will likely to aid on CAD.
Technical Comments
1. Price broke and closed above the rising 20EMA support, as well as its recent price high resistance.
2. Both MACD and Stochastic are bullish and are rising, hinting at the increased upward momentum.
Key Levels
| Support | 106.47 | 106.33 | 106.06 |
| Resistance | 106.73 | 106.89 | 107.05 |
Technical Overview
USD/JPY – Price rebounded after hitting a temporary low of 135.55. It could be on the way going to test its overhead 20EMA resistance point at 136.94. A penetration of the 20EMA will lead price higher to 137.34, whereas, a failure move to penetrate above the 20EMA will likely to bring price lower to 135.88.
| Support | 136.25 | 135.90 | 135.55 |
| Resistance | 136.80 | 137.00 | 137.35 |
NZD/USD – Price formed a Shooting Star candlestick pattern last Friday, hinting at price high and a reversal. There is twice price rejection level at $0.6279 as well. Stochastic and MACD are going to have a bearish crossover soon. We think that price is likely to retrace to the Fibonacci 62% correction point at $0.6153 in the next few days.
| Support | 0.6250 | 0.6215 | 0.6185 |
| Resistance | 0.6280 | 0.6305 | 0.6330 |
GBP/USD – A Shooting Star candlestick pattern was formed yesterday after retesting its previous price high resistance zone. This could be a hint of possible reversal if price moves below 1.2050, which will lead price correction to $1.2000. Stochastic is falling from the overbought region and MACD is showing potential divergence warning.
| Support | 1.2050 | 1.2025 | 1.2000 |
| Resistance | 1.2090 | 1.2115 | 1.2130 |
XAU/USD – Price corrected after testing its previous price high resistance zone at around $1,737.50. However, price managed to stay above this 20EMA support, hinting that the bullish trend remains intact. As long as price stay above 20EMA support, we think price is likely to resume its upward movement to $1,742.70.
| Support | 1720.75 | 1714.65 | 1707.55 |
| Resistance | 1728.05 | 1736.15 | 1741.50 |
EUR/USD – Price is currently moving within a consolidation zone between 1.0275 and 1.0155. We think price is likely to move within this range until either ends is broken for a directional movement. Both Stochastic and MACD are bullish and this could be a hint that a penetration towards the upper boundary is likely.
| Support | 1.0200 | 1.0180 | 1.0155 |
| Resistance | 1.0250 | 1.0280 | 1.0305 |