Market Talk
– The U.S. dollar was on the front foot on Thursday, after two U.S. Federal Reserve officials signalled that inflation is yet to cool in the country, and the Fed was likely to raise rates even further to combat rising prices.
– Sterling was little changed at $1.2158 ahead of a BOE meeting later in the day at which most investors expect the central bank will raise rate by 50 basis points to 1.75%, the highest level since late 2008.
– The Australian dollar was at $0.6950 on Thursday morning after gaining 0.46% the day before, trying to head back above the symbolic $0.7 level it fell from earlier in the week after seemingly dovish remarks from the central bank.
– The euro was flat at $1.0163 and the Japanese yen, which has borne the brunt of this week’s dollar gains, recovered a little to 133.54 per dollar. Crude oil prices stabilized after sliding to an almost six-month low overnight helping the Canadian dollar recovered from Wednesday’s 1.2890 low.
– Gold prices edged higher on Thursday, with most other precious metals marking small gains after a rally in the U.S. dollar appeared to have paused. However, the outlook for the yellow metal is dulled by the prospect of rising interest rates this year.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 133.85. Stop at 133.40 and profit target 135.25.
3. Hint that the Fed was likely to raise rates even further to combat inflation and interest rate differential are both likely to aid the U.S. dollar.
4. Price is supported by the 20EMA with MACD hinting at a bullish price trend.
Fundamental Comments
1. Federal Reserve officials’ hint that the Fed was likely to raise rates even further to combat rising prices is likely to aid the U.S. dollar.
2. Interest rate differential is in the dollar’s favour.
Technical Comments
1. Price is supported by the 20EMA which is also hinting at a bullish price trend.
2. MACD has turned bullish and is hinting at a bullish price trend.
Technical Overview
AUD/USD – Price had reached a low of 0.6885 on Wednesday and this could be a temporary low. We see price rising from this low back to the previous high of 0.7050 in the next few days ahead. Stochastic has a bullish crossover and is moving higher, hinting at a bullish price trend. Both 20EMA and MACD has also turned bullish and is hinting at a bullish price trend. Only a price move below 0.6885 will negate our bullish view.
| Support | 0.6945 | 0.6915 | 0.6885 |
| Resistance | 0.6975 | 0.7045 | 0.7080 |
EUR/USD – After reaching a high of 1.0293 on Monday we have seen price decline back to 1.0122 overnight. If price can hold above the overnight low at 1.0122, we are likely to see a rally back to 1.0275 in the next few days. Stochastic is in the oversold zone and is hinting at a price rally. However, both MACD and 20EMA are hinting at a bearish price trend. We see price trading within a range of 1.0100 to 1.0275 in the next few days until there is a break out of this range.
| Support | 1.0150 | 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 1.2100 overnight. Currently, price is capped by the falling 20EMA line and is also below the uptrend line. Unless price can move above 1.2240, we see price moving lower to 1.2050 in the next 24 hours in a range move ahead of BOE monetary policy decision later in the global day. Trend remains bearish while momentum is hinting at a limited downside.
| Support | 1.2130 | 1.2090 | 1.2040 |
| Resistance | 1.2170 | 1.2230 | 1.2295 |
XAU/USD – We had a buy call at $1764.20 yesterday which was stopped out when price dipped to a low of $1754.10, which was just below our stop at $1754.70. Stochastic has a bullish crossover, hinting at a bullish price trend. MACD remains bullish and 20EMA is also hinting at a bullish price trend. Our view remains the same as yesterday. We see price moving higher to $1787 in the next 48 hours.
| Support | 1767.90 | 1752.35 | 1739.20 |
| Resistance | 1775.20 | 1787.60 | 1801.30 |
USD/CHF – We had a buy call at 0.9495 on Tuesday and yesterday, we had left stop at 0.9530 and profit order at 0.9590. We profit order was filled overnight and we are out of this position with a 95 pips profit. Price reached a high of 0.9650 overnight and this could be a temporary high. We see a price correction to the 20EMA support at 0.9570 in the next 24 hours before the rally resumes again.
| Support | 0.9595 | 0.9550 | 0.9515 |
| Resistance | 0.9650 | 0.9700 | 0.9740 |