Market Talk
– The U.S. dollar suffered an overnight correction but stayed near 20-year high, lifted by hawkish comments from Federal Reserve Chair Jerome Powell last Friday while the euro was boosted by growing expectations for European Central Bank rate hikes.
– The euro clawed higher overnight, helped by comments from a European official that pointed to a possible 75-basis-point hike at the Sept. 8 ECB meeting. However, the euro remained below parity with the dollar at $0.9993.
– Sterling fell to a 2-1/2-year low of $1.1649 overnight in thin trading on a UK public holiday, versus the greenback and was last down 0.23% at $1.1703 The greenback was up 0.78% against the Japanese yen at 138.76 yen.
– The Aussie hovered at $0.6885, after rallying from a six-week low of $0.6841 overnight only to run into resistance at $0.6926. The kiwi dollar held at $0.6142, having bounced from $0.6103 overnight to as far as $0.6167 resistance.
– Gold prices recovered slightly on Tuesday, taking some relief as the dollar retreated from a 20-year peak but the outlook for the yellow metal is severely depressed by the prospect of higher U.S. interest rates
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.3000. Stop at 1.2970 and profit target at 1.3075.
3. A dip in crude oil price and interest rate differential are both likely to weigh on the Canadian dollar.
4. Price has a strong support point and MACD is hinting at a bullish price trend.
Fundamental Comments
1. A dip in crude oil prices is weighing on the Canadian dollar.
2. Expectations that U.S. interest rates would be kept higher for longer to bring down soaring inflation are likely to aid the greenback.
Technical Comments
1. Price is likely to be supported by the 20EMA and the Fibonacci 50% correction point.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 1.2990 | 1.2950 | 1.2905 |
| Resistance | 1.3030 | 1.3075 | 1.3110 |
Technical Overview
USD/JPY – Price is currently consolidating and forming a potential flag pattern, which is a sign of a bullish trend ahead. The price is also currently near to the resistance at $139.00. If this level is broken, we may see the price testing the next resistance at $139.40. Stochastic is in the overbought zone and hinting a price decline. MACD remains above the zero line and is hinting at a bullish price trend.
| Support | 138.20 | 137.70 | 137.20 |
| Resistance | 139.00 | 139.40 | 139.90 |
EUR/USD – Price is currently moving sideways, hovering in the range of $0.9910 to $1.0025. The price need to break above this range to regain its upside momentum. Stochastic has a bullish crossover and moved higher from the oversold area, hinting at a price rally. Price has also moved above the 20EMA which indicates a possible bullish price trend. We may see the price test $1.0075 resistance if the price is able to break above $1.0020.
| Support | 0.9980 | 0.9945 | 0.9900 |
| Resistance | 1.0025 | 1.0075 | 1.0125 |
GBP/USD – We had a sell call yesterday at $1.1710 which was filled. Our stop at 1.1740 was also triggered when price hit at high 1.1743. We lost 30 pips on this trade. We remain bearish. We are looking for a price decline to 1.1645 as 20EMA remains bearish. MACD is also hinting at a bearish price trend. Stochastic has moved above the oversold zone but is still weak. Only a move above 1.1745 would negate our bearish view.
| Support | 1.1685 | 1.1645 | 1.1595 |
| Resistance | 1.1740 | 1.1795 | 1.1845 |
XAU/USD – Price reached a low of $1,727.16 this morning but rebounded back up to $ $1,739.45. However, the rebound is capped by the 20EMA at $1,740. We may see a decline to the previous low support at 1,720.85 again. Trend indicators, 20EMA, and MACD remain bearish and hinting at a bearish price trend. Stochastic has moved above the oversold zone but remains weak.
| Support | 1730.70 | 1720.85 | 1711.15 |
| Resistance | 1749.80 | 1758.50 | 1765.00 |
NZD/USD – Price broke above the resistance at $0.6150 to reach a high of 0.6166 this morning. However, the price was unable to stay above 0.6150 and retrace to a low at 0.6130. 20EMA is also pointing downwards which indicates a bearish trend. MACD remains bearish and his hinting at price decline. Stochastic is hinting at a limited downside. We remain bearish if price failed to move above 0.6170.
| Support | 0.6100 | 0.6060 | 0.6010 |
| Resistance | 0.6165 | 0.6195 | 0.6225 |