Market Talk
– The U.S. dollar remained elevated on Wednesday following its biggest surge in three weeks against major peers overnight, with Federal Reserve officials hinting that more interest rate hikes are coming in the near term.
– A trio of Fed officials from across the policy spectrum suggested Tuesday that they and their colleagues remain resolute and united on getting U.S. rates up to a level that will put a dent in activity and inflation.
– Their comments triggered a 1% spike in the USD/JPY rate. The greenback enjoyed its best gains in six weeks, as US Treasury yields rebounded, sending the greenback to an overnight high of 133.89, before settling at 132.60 in Wednesday Asian trading.
– The Australian dollar sank 0.44% to $0.6890, extending a 1.52% slide from Tuesday, when the nation’s Reserve Bank hiked the key rate by another half point, as expected, but opened the door to slowing the pace of tightening.
– Gold prices sank on Wednesday, with gold price falling to a low of $1754.85 on Wednesday after hawkish comments from several Federal Reserve officials drove up the U.S. dollar with the prospect of sharper interest rate hikes in the coming months.
Chart Focus XAU/USD – Gold
Key Points
1. Buy Gold recommendation.
2. Buy Gold at $1764.20. Stop at $1754.70 and profit target at $1787.00.
3. An elevated level of inflation and an unlikely sharper interest rate are both likely to aid Gold.
4. Price is supported by the 20EMA and MACD is hinting at a bullish price trend.
Fundamental Comments
1. An elevated level of inflation is likely to aid Gold.
2. A sharper interest rate hikes in the coming months is unlikely to sustain with the economy slowing.
Technical Comments
1. Price is supported by the 20EMA line which is also hinting at a bullish price trend.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 1764.20 | 1752.35 | 1739.20 |
| Resistance | 1770.30 | 1787.60 | 1801.30 |
Technical Overview
USD/JPY – Price rallied from the low of 130.38 overnight on hawkish comments from Fed officials. However, the rally stalled at the Fibonacci 50% correction point of the decline from 137.46 to the low at 130.38. While stochastic is rising and hinting at a price rally, MACD remains bearish and is hinting at a bearish price trend. 20EMA is neutral at the moment. If price is supported above the 20EMA line at 132.70, we are looking at a rally to 134.75. Below the 20EMA line, we see another decline to 130.38.
| Support | 132.85 | 132.25 | 131.60 |
| Resistance | 133.30 | 133.90 | 134.45 |
EUR/USD – After reaching a high of 1.0293 on Monday we have seen price decline back to 1.0149. If price can hold above the overnight low at 1.0149, we are likely to see a rally back to 1.0275 but a decline below 1.0149 is likely to send price lower to 1.0100. Stochastic is declining into the oversold zone. Both MACD and 20EMA remain bearish and is hinting at a bearish price trend.
| Support | 1.0160 | 1.0100 | 1.0075 |
| Resistance | 1.0195 | 1.0240 | 1.0295 |
GBP/USD – After reaching a high of 1.2293 on Monday we have seen price decline back to 1.2135. Currently, price is also sitting on an uptrend line and is capped by a falling 20EMA line. A break of this uptrend line is likely to send price lower to 1.2050. MACD is also hinting at a price high with a bearish divergence. Stochastic is also hinting at a bearish price trend. Only a price move above 1.2240 would negate this bearish view for 1.2050.
| Support | 1.2135 | 1.2090 | 1.2040 |
| Resistance | 1.2195 | 1.2240 | 1.2295 |
AUD/USD – After reaching a high of 0.7046 on Monday we have seen price decline back to 0.6885 this morning. 20EMA is hinting at a bearish price trend. MACD is also hinting at a bearish price trend. However, stochastic is in the overbought zone and is hinting at a limited downside in price. If price is capped by the 20EMA line, we are likely to see another decline to 0.6855 in the next 24 hours.
| Support | 0.6885 | 0.6855 | 0.6805 |
| Resistance | 0.6945 | 0.6975 | 0.7020 |
USD/CHF – We had a buy call at 0.9495 which was filled when price declined to a low of 0.9494. Price had rallied to a high of 0.9589 overnight, missing our profit order at 0.9590. Stochastic is rising and is hinting at a price rally. 20EMA has turned bullish and is hinting at a bullish price trend. We think if price can stay above the 20EMA line support at 0.9535, we can see another rally to 0.9590. For today, we would recommend shifting stop higher to 0.9530 while keeping profit order unchanged at 0.9590.
| Support | 0.9535 | 0.9495 | 0.9465 |
| Resistance | 0.9590 | 0.9630 | 0.9665 |