Market Talk
– The U.S. dollar slid below recent peaks on Wednesday, after an overnight report showed U.S. private sector activity contracted for a second-straight month in August, raising prospects the Federal Reserve will ease its rate hiking cycle.
– The U.S. S&P Global flash composite PMI for August dropped to 45 – the lowest since May 2020 and in contraction territory for a second straight month, while a plunge in new home sales last month knocked the greenback from a 20-year high on the euro.
– The euro briefly reached parity in New York trade, but by the Asia morning it was under pressure at $0.9958 – barely above Tuesday’s low of $0.9900. The yen also gave back some overnight gains to hover around 136.85 per dollar.
– The Australian and New Zealand dollars bounced overnight but started to give back gains in Asia trade. The Aussie fell 0.2% to $0.6912, while the kiwi was down 0.3% to $0.6192.
– Gold prices held recent gains on Wednesday as the dollar retreated slightly on weak economic data, as investors waited to hear from the Federal Reserve and pondered whether weak U.S. data may slow the pace of rate hikes.
Chart Focus XAG/USD – Silver
Key Points
1. Sell Silver recommendation.
2. Sell Silver at $19.15. Stop at $19.45 and profit target at $18.65
3. Federal Reserve officials’ determination to cap inflation and worries about a recession are both likely to aid the U.S. dollar.
4. Price is capped by the 20EMA with MACD and 20EMA both hinting at a bearish price trend.
Fundamental Comments
1. Federal Reserve official’s determination to cap inflation is likely to send interest rate higher.
2. Worries about a recession are likely to aid the safe haven U.S. dollar.
Technical Comments
1. Price is capped by the 20EMA which is hinting at a bearish price trend.
2. MACD is bearish and is hinting at a bearish price trend.
Key Levels
| Support | 18.95 | 18.65 | 18.25 |
| Resistance | 19.15 | 19.50 | 19.80 |
Technical Overview
USD/JPY – Price has declined to a low overnight at 135.80 and has moved higher to the 20EMA at 136.75. We think the decline is just corrective and price is likely to move up again to 137.70 in the next couple of days. Stochastic is declining and hinting at a price decline but MACD remains bullish and is hinting at a bullish price trend. A move above 137.10 would be the first sign of a rally to 137.70 while a break below 135.80 is likely to hint at a move to 134.65.
| Support | 136.35 | 135.80 | 135.15 |
| Resistance | 137.00 | 137.70 | 138.15 |
EUR/USD – A rally overnight was capped by the 20EMA at 1.0015 and we are likely to see a continuation of the decline, first back to the previous low at 0.9899 and later to 0.9850 in the next few days. Stochastic is rising and is hinting at a price rally. However 20EMA is pointing lower with a steep slope and is hinting at a strong bearish price trend. MACD is also bearish and hinting at a bearish price trend.
| Support | 0.9930 | 0.9875 | 0.9830 |
| Resistance | 0.9970 | 1.0015 | 1.0070 |
GBP/USD – The overnight rally was capped by the Fibonacci 38% correction point of the decline from 1.2139 to the low at 1.1878 as well as the 20EMA at 1.1850. MACD and 20EMA are both hinting at a bearish price trend. Stochastic is on a rising trend and is hinting at a price rally. We think price is likely to test the previous low at 1.1717 in the next 48 hours if price fails to move above 1.1890.
| Support | 1.1795 | 1.1745 | 1.1705 |
| Resistance | 1.1840 | 1.1880 | 1.1925 |
XAU/USD – We saw a rally to $1753.70 overnight but price was capped by the 20EMA and has since declined lower. A Shooting Star candlestick price pattern is also hinting at a price decline. We see price continuing to move lower and test the previous low of 1727.70 again in the next 48 hours. Only a move above $1760 would negate our bearish view. Stochastic is rising but both MACD and 20EMA are hinting at a bearish price trend.
| Support | 1739.95 | 1727.70 | 1713.35 |
| Resistance | 1748.70 | 1759.75 | 1771.30 |
EUR/JPY – We had a sell order yesterday at 136.35 but our stop was triggered when price spiked up to 137.06. We lost 35 pips on this trade. Our view remains unchanged and we are still looking at a decline to 135.05 in the next 48 hours. 20EMA is bearish and hinting at a bearish price trend. MACD is also bearish but stochastic is near to the oversold zone and is hinting at a limited downside.
| Support | 135.65 | 134.95 | 134.35 |
| Resistance | 136.10 | 136.60 | 137.10 |