Market Talk
– The U.S. dollar held firm on Tuesday on safe haven flows, while the euro languished around a two-decade low as investors braced for a hard winter in Europe as it grapples with energy supply and broader economic growth concerns.
– The euro touched its lowest since late 2002 at $0.9926 overnight and was last barely higher at $0.9939. Russia will halt natural gas supplies to Europe via the Nord Stream pipe for three days at the end of the month, the latest reminder of the precarious state of the continent’s energy supply.
– The pound was also dragged to a new 2.5-year low overnight, and hobbled near that level at $1.1758 in early Asia trade ahead of flash manufacturing PMI readings out later in the day, which will provide further clarity on the growth trajectory for the UK economy.
– The Japanese yen steadied at 137.30 against the greenback, after touching a one-month low of 137.70. The Aussie was last up 0.15% to $0.6689, while the kiwi gained 0.18% to $0.6183.
– Gold prices rose 0.1% to $1,738.62 an ounce on Tuesday after seven straight sessions of losses, but remained under pressure as growing expectations of a hawkish Federal Reserve boosted the greenback and treasury yields.
Chart Focus EUR/JPY
Key Points
1. Sell EUR/JPY recommendation.
2. Sell EUR/JPY at 136.35. Stop at 136.70 and profit target at 135.05.
3. Rise in natural gas prices and risk of a recession in Europe are weighing on the euro.
4. A Double Top chart pattern and bearish MACD and 20EMA are all hinting at a bearish price trend.
Fundamental Comments
1. Natural gas prices hitting a record closing high is adding to inflationary pressure.
2. The risk of recession in Europe due to war and inflation is weighing on the single currency.
Technical Comments
1. Price has broken below a Double Top chart pattern, hinting at a bearish price trend.
2. MACD and 20EMA are both hinting at a bearish price trend.
Key Levels
| Support | 135.90 | 135.40 | 134.90 |
| Resistance | 136.40 | 136.85 | 137.30 |
Technical Overview
USD/JPY – Since reaching a low last Wednesday at 133.90, price has moved up to 137.71 this morning and the rally looks exhausted. Our price target remains unchanged at 139.40 but there is likely to be a price correction first before another rally to 139.40. Stochastic has been in the overbought zone for a prolong period of time and MACD is showing a divergence. However, 20EMA is hinting at a strong bullish price trend. We see a correction to 135.75.
| Support | 137.05 | 136.65 | 136.25 |
| Resistance | 137.45 | 137.95 | 138.35 |
EUR/USD – The decline continues and price has reached a low of 0.9912 at the point of this writing. The decline is also showing no signs of stopping due to worries of natural gas stoppage for 3 days at the end of the month. Stochastic is in the oversold zone but 20EMA is hinting at a strong bearish price trend. MACD is also hinting at a strong bearish price trend. The next support level comes in at 0.9855.
| Support | 0.9875 | 0.9830 | 0.9785 |
| Resistance | 0.9925 | 0.9955 | 0.9990 |
GBP/USD – The decline continues and price has reached a low of 1.1716, which is a 2.5 year low, at the point of this writing. The decline could be coming to a temporary low as MACD is starting to show a divergence. Stochastic is also in the oversold zone but 20EMA is hinting at a strong bearish price trend.
| Support | 1.1710 | 1.1660 | 1.1635 |
| Resistance | 1.1760 | 1.1790 | 1.1840 |
XAU/USD – Price reached a low of $1727.70 on Monday and we have seen a price bounce to $1740 this morning. However, this could be a corrective bounce and we think price is likely to be capped at the resistance at $1745. From this resistance point, we see another decline to $1700 in the next few days. Stochastic is rising from the oversold zone hinting at a price rally. But 20EMA and MACD are hinting that the rally is likely to be a corrective rally.
| Support | 1727.70 | 1713.35 | 1698.80 |
| Resistance | 1740.20 | 1757.95 | 1771.30 |
NZD/JPY – Yesterday, we had a buy call at 84.65 but it was not filled. Price had dropped to a low of 84.63 but that was the bid price. The lowest offer price was 84.67 and that was why our order was not filled. Stochastic continues to rise and to hint at a bullish price trend. However both MACD and 20EMA has turned neutral at the moment. We remains bullish for 86.00 but a break of 84.35 would negate our bullish view for the next few days.
| Support | 84.65 | 84.10 | 83.75 |
| Resistance | 85.15 | 85.50 | 85.95 |