Market Talk
– The US dollar slipped while the euro was steady on Thursday in choppy trading as investors awaited Federal Reserve Chairman Jerome Powell’s speech on Friday for further clues about the pace of the U.S. central bank’s rate hikes.
– Positive U.S. economic readings on Thursday also gave the Fed more space to continue its aggressive pace of interest rate hikes.US Prelim GDP numbers came in better than expected while US jobless claims were lower than forecast.
– The euro was 0.05% higher at $0.9974, just below parity with the U.S. currency. The single currency briefly rose back above parity overnight, before retracing after the release of a closely watched index showing business morale in Germany in August had fallen to its lowest since June 2020.
– The greenback also fell 0.47% against the Japanese yen to 136.47. The Australian dollar was lifted after a Chinese state media report said China would take more steps to support the economy, including increasing funding support for infrastructure projects and ramping up support for private firms and technology companies.
– Gold prices fell to $1754.40 an ounce on Friday as traders awaited more cues on U.S. monetary policy from the Jackson Hole Symposium later in the global day, but were set to end the week higher as the dollar retreated from 20-year peaks.
Chart Focus AUD/JPY
Key Points
1. Buy AUD/JPY recommendation.
2. Buy AUD/JPY at 95.25. Stop at 94.95 and target at 96.20
3. Divergent monetary policy and interest rate differential are both in the Australian dollar favour.
4. A bullish Flag chart pattern and a bullish MACD are both hinting at bullish price trend.
Fundamental Comments
1. Divergent monetary policy between the two central banks is in the Australian dollar favour.
2. Interest rate policy is in the Australian dollar favour.
Technical Comments
1. A bullish Flag chart pattern is hinting at a bullish price trend.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 95.00 | 94.55 | 94.10 |
| Resistance | 95.45 | 95.75 | 96.25 |
Technical Overview
USD/JPY – We were anticipating a price move to 135.55 but price had moved overnight in a tight range ahead of Jackson Hole meeting. We are expecting this tight range to continue ahead of Jackson Hole. The range high is likely to be 137.25 while the low is likely to be supported at 136.15. Stochastic and MACD are both neutral. 20EMA is hinting at a bullish price trend. We prefer to stay on the bullish side.
| Support | 136.70 | 136.40 | 135.80 |
| Resistance | 137.25 | 137.70 | 138.15 |
EUR/USD – Price briefly broke above the neckline of a Double Bottom chart pattern but swiftly moved back below the neckline. This price action is hinting at a decline to the previous low at 0.9910. Price has moved below the 20EMA, adding weigh to the bearish price trend. Stochastic and MACD are also hinting at a price decline. Price will need to move above 1.0035 to negate this bearish view. We remain bearish ahead of Jackson Hole meeting.
| Support | 0.9945 | 0.9910 | 0.9875 |
| Resistance | 0.9980 | 1.0030 | 1.0075 |
GBP/USD – Yesterday, we had a buy call on this pair but price declined below our stop at 1.1800 to a low of 1.1791. We lost 35 pips on this trade. Stochastic has a bearish crossover and could be moving lower. MACD is likely to have a bearish crossover as well. Price is currently below the 20EMA. Price could be heading lower today, with the focus at 1.1750 or 1.1716. A move above 1.1865 would negate our bearish view.
| Support | 1.1790 | 1.1755 | 1.1715 |
| Resistance | 1.1845 | 1.1875 | 1.1930 |
XAU/USD – Price moved higher overnight to a high of $1765.27 but failed to reach the Fibonacci 50% correction point at $1768. The decline was supported by the 20EMA at $1752, keeping the range tight ahead of Jackson Hole meeting. Stochastic, MACD and 20EMA are all hinting at a bullish price trend ahead. Price will need to move above $1772 and $1777 to negate the bearish price trend.
| Support | 1752.10 | 1742.30 | 1727.70 |
| Resistance | 1765.35 | 1777.20 | 1785.70 |
XAG/USD – We had a sell call at $19.15 on Wednesday which was filled. Yesterday, we had recommended keeping stop at $19.45 and profit order at $18.65. Price reached a high of $19.39 and has stayed around the 20EMA. Stochastic is rising and is hinting at a continuation of the rally. MACD has turned bullish. We would recommend keeping orders unchanged for today.
| Support | 19.10 | 18.85 | 18.40 |
| Resistance | 19.40 | 19.80 | 20.05 |