Market Talk
– The U.S. dollar edged lower in thin summer trading with market participants in wait and-see mode ahead of a key inflation figures that could shed more light on how aggressive the Federal Reserve might be in its expected interest rate hike in September.
– The U.S. Consumer Price Index (CPI) report will be released later in the global day, with markets watching for signs that inflation eased in July despite last week’s unexpectedly strong U.S. jobs numbers.
– The euro was struggling at $1.0214 and is caught in a range from 1.0100 to 1.0280 for the past 2 week. The greenback was at 135.05 yen on Wednesday morning, close the previous week’s high at 135.57. The British pound was little changed at 1.2080.
– The Australian and New Zealand dollars marked time on Wednesday ahead of a key U.S. inflation reading. The Aussie was at $0.6959, having shied away from resistance around $0.7000 in very thin trading. The kiwi dollar was flat at $0.6286, sandwiched between support at $0.6214 and resistance around $0.6315.
– Gold also pared gains and was down at $1,789.15 an ounce. It briefly broke through the $1,800 barrier overnight for the first time in more than a month, while market participants awaited U.S. inflation data for cues on the Federal Reserve’s policy tightening path.
Chart Focus AUD/USD
Key Points
1. Sell AUD/USD recommendation.
2. Sell AUD/USD at 0.6960. Stop at 0.6995 and profit target at 0.6870.
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 has moved below the 20EMA and stochastic is hinting at a price decline after a bearish crossover near the overbought zone.
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 has moved below the 20EMA and could be heading lower to the previous low at 0.6870.
2. Stochastic is hinting at a price decline after a bearish crossover near the overbought zone.
Key Levels
| Support | 0.6945 | 0.6915 | 0.6870 |
| Resistance | 0.6970 | 0.7010 | 0.7050 |
Technical Overview
USD/JPY – Price reached a high of 135.57 on Monday morning and 20EMA remains bullish and is hinting that price can go higher to 137.30. MACD is also bullish and hinting at a bullish price trend. However, stochastic is moving lower from the overbought zone and is hinting at a price decline. We see price continuing to move higher towards 137.30. Only a move below 132.50 would negate our bearish view.
| Support | 135.00 | 134.65 | 134.15 |
| Resistance | 135.60 | 136.10 | 136.60 |
EUR/USD – Price has been caught in a range below Friday’s low at 1.0140 and Monday’s high at 1.0247. We think price is likely to trade within this range for the next 1-2 days until there is a breakout of this range. Stochastic is hinting at a bearish price trend but both MACD and the 20EMA are hinting at a bullish price trend. 20EMA is also supporting price at the moment.
| Support | 1.0200 | 1.0170 | 1.0140 |
| Resistance | 1.0220 | 1.0250 | 1.0290 |
GBP/USD – Price has been caught in a range below Friday’s low at 1.2003 and Monday’s high at 1.2137. The 20EMA is pointing lower and is hinting at a bearish price trend. Stochastic is also pointing down and is hinting at a bearish price trend. MACD is bearish but is pointing up and hinting at a price rally. We think price could be heading lower to test the previous low at 1.2003 again in the next 1-2 days. Only a move above 1.2140 would negate our bearish view.
| Support | 1.2060 | 1.2000 | 1.1965 |
| Resistance | 1.2090 | 1.2140 | 1.2175 |
XAU/USD – Price reached a high of $1800.25 overnight and this high was accompanied by a divergence warning from both the stochastic indicator and the MACD. This could be a hint of a possible price high in the making. Stochastic is also hinting at a bearish price trend after turning down with a bearish crossover from the overbought zone. 20EMA and MACD remain bullish. We think price could be heading lower to $1752 in the next few days.
| Support | 1785.90 | 1777.15 | 1764.60 |
| Resistance | 1800.25 | 1811.50 | 1824.65 |
USD/CAD – We had a buy call on Monday at 1.2885 with a stop at 1.2855. Our call was wrong and we lost 30 pips on this trade. Stochastic is rising at the moment and is hinting at a price rally. 20EMA is bullish and is hinting at a bullish price trend. However, MACD remains bearish and is hinting at a bearish price trend. We think if price can stay above the 20EMA, we are likely to see another rally to 1.2985 in the next 48 hours.
| Support | 1.2875 | 1.2835 | 1.2785 |
| Resistance | 1.2910 | 1.2960 | 1.2990 |