Market Talk
– The U.S. dollar sank to a fresh six-week low against the yen on Monday as markets continued to bet that the Federal Reserve has less tightening to do with the U.S. economy at risk of recession and after U.S. data showed slipping consumer inflation expectations.
– Data at the end of last week tossed the greenback in both directions, rising initially after the personal consumption expenditures price index showed the fastest inflation since 2005, only to sink after the final University of Michigan report – closely watched by Fed policymakers – showed slipping consumer inflation expectations.
– The euro edged lower to $1.0218, continuing its consolidation near the middle of its range over the past week and a half. The greenback dipped as low as 132.07 yen for the first time since June 16, and was at 132.50.
– Sterling was flat at $1.2186, after hitting the highest since June 28 at $1.2245 on Friday. Markets are laying 67% odds for a half-point rate hike on Thursday when the Bank of England meets for its policy meeting, compared to 33% probability of a quarter-point increase.
– Gold hit a more than three-week high on Friday, supported by a softer dollar and a lower US Treasury yields and bets that the Federal Reserve may cool the pace of rate hikes as economic risks deepen.
Chart Focus XAU/USD – Gold
Key Points
1. Buy Gold recommendation.
2. Buy Gold at $1753.40. Stop at $1748.40 and profit target at $1774.80
3. A lower U.S. Treasury yields and a slower pace of rate hike by the Fed are both likely to aid Gold.
4. Price is likely to be supported by the 20EMA line with MACD hinting at a bullish price trend.
Fundamental Comments
1. A lower U.S. Treasury yields is supporting Gold.
2. A slower pace of rate hike by the Fed is also likely to aid Gold.
Technical Comments
1. Price is likely to be supported by the 20EMA line, which is also hinting at a bullish price trend.
2. MACD is bullish and is hinting at a bullish price trend.
Key Levels
| Support | 1758.10 | 1749.50 | 1738.70 |
| Resistance | 1767.90 | 1784.40 | 1801.70 |
Technical Overview
USD/JPY – Price declined to a low at $132.05 this morning which is just above the 200% of the decline from 139.35 to 135.55. As there is no divergence from the MACD indicator, we are expecting price to continue lower to 131.70 in the next 24 hours. MACD and 20EMA are both bearish and hinting at a bearish price trend. Stochastic is in the oversold zone and hinting at a limited downside.
| Support | 132.05 | 131.70 | 131.45 |
| Resistance | 132.75 | 133.15 | 133.55 |
EUR/USD – Price is likely to trade within the high-low range of the past 2 weeks. The high lies at 1.0278 while the lower end of the range lies at 1.0100. Stochastic is moving towards the overbought zone. Both MACD and 20EMA are bullish and hinting at a bullish price trend. We see a test of the topside at 1.0278 in the next 1-2 days. Price will need to break above 1.0278 to continue the bullish trend but we think price is likely to be capped and declined back into the range.
| Support | 1.0200 | 1.0165 | 1.0115 |
| Resistance | 1.0240 | 1.0280 | 1.0310 |
GBP/USD – Price rallied to a high of 1.2245 this morning but this could be a price high as MACD is hinting at a possible price high with a divergence warning. However, both 20EMA and Stochastic are hinting that price is likely to move higher. As long as price stays above the 20EMA line. We are inclined to stay bullish and see a test of the high at 1.2245 in the next 24 hours again. A move below 1.0260 would negate our bullish view.
| Support | 1.2150 | 1.2115 | 1.2060 |
| Resistance | 1.2195 | 1.2245 | 1.2275 |
XAG/USD – Price reached a high of $20.36 last Friday and has been declining this morning. However, the trend remains bullish. Both MACD and 20EMA are hinting at a bullish price trend ahead. Stochastic is inside the overbought zone and we may see a price decline back to the 20EMA at $19.80 before another rally that could bring price higher to $20.50. Only a decline below $19.30 would negate this bullish price trend.
| Support | 20.05 | 19.75 | 19.40 |
| Resistance | 20.35 | 20.60 | 20.90 |
USD/CNH – We had a sell call at 6.7500 last Friday which was filled when price moved to a high of 6.7702. 20EMA has turned bullish but MACD remains bearish. Stochastic is moving higher and is currently hinting at a price rally. Hopefully, we have seen the high at 6.7702 and price declines for the rest of the day. For today, we would recommend keeping stop at 6.7715 and profit target at 6.7150.
| Support | 6.7585 | 6.7370 | 6.7250 |
| Resistance | 6.7705 | 6.7990 | 6.8200 |