Market Talk
– The dollar rallied across the board on Friday, notching its biggest daily percentage gain since mid-June against the yen, after a stronger-than-expected U.S. payrolls report suggested the Federal Reserve may need to continue aggressively raising interest rates in the near term.
– US data on Friday showed nonfarm payrolls increased by 528,000 jobs last month, the largest gain since February. That was well above economists’ expectations and pushed back against talk of recession but also bolstered the case for more super-sized rate hikes.
– The euro was struggling at $1.0164 and not far from chart support around $1.0095. The single currency was not helped by news Moody’s had cut Italy’s outlook to negative as Prime Minister Mario Draghi’s resignation shook the country’s political landscape.
– The greenback was at 135.42 yen on Monday morning, and had earlier rose to 135.58 yen, its highest since July 28, after surging 1.57% in on Friday night buoyed by higher Treasury yields after blockbuster U.S. jobs data lifted expectations for more aggressive Federal Reserve policy tightening.
– Gold prices recovered on Monday morning to $1774 after a sharp decline on Friday night as an unexpectedly strong U.S. jobs report eased recession worries and dashed speculation that the Federal Reserve would pivot away from its aggressive monetary policy tightening.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2885. Stop at 1.2855 and profit target at 1.2985.
3. A decline in crude oil price and a stronger-than-expected U.S. payrolls report suggested the Federal Reserve may need to continue aggressively raising interest rates in the near term aiding the U.S. dollar.
4. Price is supported by the 20EMA with MACD hinting at a bullish price trend.
Fundamental Comments
1. A stronger-than-expected U.S. payrolls report suggested the Federal Reserve may need to continue aggressively raising interest rates in the near term aiding the U.S. dollar.
2. A decline in crude oil price is weighing on the Canadian dollar.
Technical Comments
1. Price is above the 20EMA with the 20EMA hinting at a bullish price trend.
2. MACD remains bullish and is hinting at a bullish price trend.
Technical Overview
USD/JPY – Price reached a high of 135.57 this morning and 20EMA remains bullish and is hinting at price can go higher to 137.30 in the next 1-2 days. Stochastic and MACD remain healthy and are hinting at a price rally. There is a strong resistance zone from 135.25 to 135.60 and if price can move above this zone, it could be heading higher to 137.30. If price fails to clear this zone, it could be heading lower to 132.40 in the next few days.
| Support | 135.05 | 134.65 | 134.15 |
| Resistance | 135.60 | 136.10 | 136.60 |
EUR/USD – Price reached a low of 1.0141 on Friday but we think this may not be the end of the decline. We think price is likely to make another attempt at 1.0105 in the next 24 hours to complete the bearish price move. Stochastic is declining and hinting at a price decline. 20EMA and MACD both remain bearish but MACD could be forming a bullish divergence warning in the next 24 hours.
| Support | 1.0150 | 1.0105 | 1.0070 |
| Resistance | 1.0195 | 1.0230 | 1.0290 |
GBP/USD – Price reached a low of 1.2002 on Friday and we think this may be the low and the end of the correction. Stochastic is hinting at a low with a divergence warning and MACD is about to have a bullish crossover, hinting at a bullish price trend. However, 20EMA remains bearish. We see a price rally to 1.2200. A move below 1.2000 would negate our bullish view in the next 1-2 days.
| Support | 1.2055 | 1.2005 | 1.1960 |
| Resistance | 1.2110 | 1.2170 | 1.2230 |
XAU/USD – Price moved up to a high of $1794.70 on Thursday and had declined to $1764.63 on Friday on the back of a strong US NFP data. We think price is likely to continue lower to $1752 in the next 1-2 days. Stochastic and MACD are both hinting at a possible price high at $1794.70 with a divergence warning. 20EMA has also turned bearish and is hinting at a bearish price trend. Only a move above $1795 would negate our bearish view.
| Support | 1764.65 | 1752.80 | 1740.85 |
| Resistance | 1778.65 | 1794.80 | 1811.50 |
USD/CHF – We had a buy order on Friday at 0.9550, which was filled when price declined to a low of 0.9536. Price had rallied higher on Friday but was capped by the previous high at 0.9650. Both MACD and Stochastic are showing a divergence warning of a possible price high. However, 20EMA remains bullish. We would recommend bring stop higher to cost at 0.9550 while keeping profit target at 0.9690.
| Support | 0.9585 | 0.9540 | 0.9495 |
| Resistance | 0.9625 | 0.9660 | 0.9695 |