Market Talk
– The US dollar index hit a five-week high as hawkish comments from several Fed officials suggested that the central bank was likely to commit to raising interest rates at a sharp clip to combat overheated inflation.
– The greenback climbed as high as 137.40 yen, the strongest since July 27 after benchmark 10-year U.S. Treasury yields rose above 3% in Tokyo trading on Monday for the first time since July 21. The U.S. dollar rose as high as 6.8308 yuan in onshore trading after the People’s Bank of China cut the one- and five-year loan prime rates.
– The euro was struggling at $1.0030 after losing 2.2% last week. The single currency sank to a new five-week trough after Russia announced a three-day halt to European gas supplies via the Nord Stream 1 pipeline at the end of this month, exacerbating the region’s energy crisis.
– Sterling fell to $1.1805, nearing Friday’s five-week low of $1.1791. The Aussie was little changed at $0.6876 after sliding to $0.6859 on Friday for the first time since July 19. The kiwi was flat at $0.6170 after declining to $0.6167 at the end of last week, also a first since July 19.
– Gold prices slipped further on Monday to $1747.50 as uncertainty over the Federal Reserve’s path of monetary tightening persisted as the bullion’s appeal waned with a stronger dollar and more U.S. interest rate hikes on the horizon.
Chart Focus NZD/JPY
Key Points
1. Buy NZD/JPY recommendation.
2. Buy NZD/JPY at 84.65. Stop at 84.35 and profit target at 86.10.
3. Divergent monetary policy and interest rate differential are both against the Japanese yen.
4. Price is supported by the Fibonacci 50% correction point with MACD hinting at a bullish price trend.
Fundamental Comments
1. Interest rate differential is in the New Zealand dollar’s favour.
2. Divergent monetary policy between the two central banks are likely to increase the interest rate differential between the two countries.
Technical Comments
1. Price has reached the Fibonacci 50% correction point with a divergence, hinting at a possible low at the Fibonacci 50% correction point.
2. MACD has a divergence and is hinting at a bullish price trend.
Key Levels
| Support | 84.80 | 84.45 | 84.10 |
| Resistance | 85.15 | 85.50 | 85.95 |
Technical Overview
USD/JPY – Price rallied past previous high at 135.55 on Friday and has reached a high of 137.43 this morning. Stochastic is in the overbought zone and is hinting at a limited upside. MACD and 20EMA are both bullish and are hinting at a bullish price trend. As long as price stays above the previous high at 135.55, price could be on its way to 139.40 but we could see a corrective decline to 135.95 first before the rally.
| Support | 136.95 | 136.40 | 135.85 |
| Resistance | 137.45 | 137.95 | 138.40 |
EUR/USD – Price reached a low of 1.0222 and this low was accompanied by a divergence warning from the MACD indicator. Stochastic is in the oversold zone but both MACD and 20EMA are hinting at a strong bearish price trend. There was also a bullish Engulfing candlestick price pattern on the 4-hourly chart. We think there could be a corrective rally ahead with price likely to move higher to the 20EMA resistance at 1.0090.
| Support | 1.0020 | 0.9990 | 0.9950 |
| Resistance | 1.0055 | 1.0095 | 1.0125 |
GBP/USD – Price reached a low of 1.1791 on Friday and this could be a temporary low. Stochastic is in the oversold zone but both MACD and 20EMA are hinting at a strong bearish price trend. We could see a corrective rally to 1.1900 before another decline below 1.1791 in the next couple of days ahead. Only a move above the 20EMA resistance line at 1.1925 would negate our bearish view.
| Support | 1.1790 | 1.1750 | 1.1700 |
| Resistance | 1.1840 | 1.1895 | 1.1925 |
XAU/USD – Price was capped by the 20EMA at $1782 last Wednesday and we saw a decline to the low this morning to at $1742.50. Price has moved past the Fibonacci 50% correction point of the previous rally from rally from $1680 to $1807. We are likely to see price move lower to the Fibonacci 62% correction point at $1730 in the next 24 hours. Stochastic is in the oversold zone but both 20EMA and MACD are both hinting at a strong bearish price trend.
| Support | 1730.25 | 1718.95 | 1705.70 |
| Resistance | 1745.05 | 1759.05 | 1772.55 |
EUR/JPY – Last Friday, we had a buy call at 137.30 which was filled. Price had also dipped to a low of 136.85, triggering our stop at 136.95. We lost 35 pips on this trade. However our view remains bullish. Price is back near to last Friday’s high and we are expecting price to break above this high to 138.30 in the next couple of days. MACD and 20EMA remains bullish while stochastic is neutral at the moment.
| Support | 137.45 | 136.85 | 136.35 |
| Resistance | 137.95 | 138.40 | 138.75 |