Market Talk
– The U.S. dollar struggled to gain a footing on Friday after falling by its sharpest pace in two weeks, as investors remained on tenterhooks ahead of the widely anticipated U.S. jobs data and amid growing worries about a recession.
– Investors await the key U.S. nonfarm payrolls report due at 1230 GMT, which will provide hints of how the U.S. economy is faring. Economists expect an increase of 250,000 jobs for the month of July, after 372,000 were added in June.
– The Bank of England raised its benchmark rate by half a percentage-point to 1.75%, the highest since late 2008, but warned about a long recession ahead in Britain. Sterling held steady at around $1.2157 in the early Asia trade on Friday, recouping most of its losses following the BoE warning.
– The euro surged 0.8% overnight and last traded $1.0238, though reprieve is likely short-lived as concerns about an energy crisis remain. Against the yen the greenback last traded 132.90 yen per dollar and is on track for a third straight weekly loss.
– Gold prices extended gains on Friday and were set to end the week higher amid growing jitters over slowing global growth, while weakness in the dollar and US Treasury yields ahead of U.S. nonfarm payrolls data also helped the yellow metal.
Chart Focus USD/CHF
Key Points
1. Buy USD/CHF recommendation.
2. Buy USD/CHF at 0.9550. Stop at 0.9520 and profit target at 0.9690
3. Hint that the Fed is likely to raise rates to combat inflation and interest rate differential are both likely to aid the U.S. dollar.
4. Price is supported by the Fibonacci 62% correction point 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 Fibonacci 62% correction point.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 0.9540 | 0.9505 | 0.9465 |
| Resistance | 0.9580 | 0.9610 | 0.9650 |
Technical Overview
USD/JPY – We had a buy call at 133.85 yesterday but our call was wrong. Price declined to a low of 132.51 and our stop order at 133.40 was triggered. We lost 45 pips on this trade. MACD and 20EMA are both bullish and are hinting at a bullish price trend. However, stochastic is declining and is hinting at a price decline. Price has also managed to stay above the Fibonacci 50% correction point of the rally from 133.35 to the high at 134.50, hinting at a price rally.
| Support | 133.20 | 132.75 | 132.25 |
| Resistance | 133.75 | 134.50 | 134.85 |
EUR/USD – From the low of 1.0122, price has moved up to 1.0253 this morning. We think this could be a temporary high and we see a price decline to 1.0100 again in the next 1-2 days. Stochastic may be rising and is hinting at a bullish price trend but MACD remains bearish and is hinting at a price decline. 20EMA is bullish. Only a price move above 1.0280 would negate our bearish view for the next couple of days.
| Support | 1.0205 | 1.0175 | 1.0135 |
| Resistance | 1.0255 | 1.0295 | 1.0330 |
GBP/USD – Price declined to a low of 1.2064 overnight and we have seen a rally higher to 1.2150. Stochastic is rising and is hinting at a bullish price trend. However, both MACD and 20EMA are bearish and is hinting at a bearish price trend. Price is also below the uptrend line and this is another hint of a bearish price trend. Unless price can move above 1.2240, we see price moving lower to 1.2000 in the next 24 hours.
| Support | 1.2125 | 1.2090 | 1.2040 |
| Resistance | 1.2175 | 1.2235 | 1.2295 |
XAU/USD – Price moved up to a high of $1794.70 overnight and we think this could be the high as there was a divergence warning from the MACD indicator. Stochastic is also in the overbought zone and is hinting at a price decline. However, 20EMA is bullish and hinting at a bullish price trend. The first target of this decline is to the 20EMA line at $1775. If price moves below this support, we are likely to see a decline to $1754.
| Support | 1787.25 | 1774.90 | 1761.20 |
| Resistance | 1797.20 | 1811.50 | 1824.70 |
NZD/USD – Price is currently supported by the 20EMA line and if price can stay above the 20EMA, we are likely to see another rally to test the previous high at 0.6352 in the next couple of days. Stochastic is rising and is hinting at a bullish price trend. However, stochastic is close to the overbought zone. MACD is hinting at a bearish price trend but 20EMA is hinting at a bullish price trend.
| Support | 0.6280 | 0.6240 | 0.6195 |
| Resistance | 0.6315 | 0.6350 | 0.6395 |