Market Talk
– The U.S. dollar was headed for its third weekly gain in a row and stood near its highest levels in decades on the euro and yen on Friday, with investors in little mood for selling ahead of U.S. labour data that could bolster the case for interest rate hikes.
– Overnight US data showing the jobless claims falling and manufacturing activity climbing in the month of August pushed the greenback above 140 yen for the first time since 1998. The dollar also hit a 2-1/2 year high against sterling and a six-week high on the Australian and New Zealand dollars.
– Against the stronger dollar, the euro fell back below parity to $0.9958 and was not far from last week’s 20-year low of $0.9901. Sterling fell 0.7% overnight and is down about 1.5% this week. It was last at $1.1546 after touching $1.1499 overnight.
– The yen declined to a low of 140.39 in early Asian trading. The Australian dollar was last at $0.6789 while the kiwi flirting with $0.6062, its lowest levels since the onset of the pandemic in 2020, when the U.S. dollar soared.
– Gold price fell below the key $1,700 level on Thursday for the first time since July, but is trying to push above the $1700 level on Friday Asian trading. A rising dollar and expectations for aggressive interest rate hikes are eroding its appeal.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.3125. Stop at 1.3095 and profit target at 1.3200
3. A decline in crude oil price and interest rate differential are both likely to weigh on the Canadian dollar
4. Price is likely to be supported by the 20EMA with MACD is hinting at a bullish price trend
Fundamental Comments
1. A recent decline in crude oil prices are weighing on the Canadian dollar
2. Expectations that U.S. Fed is on an aggressive hike path are likely to the interest rate differential between the two countries.
Technical Comments
1. Price is likely to be supported by the 20EMA which is hinting at a bullish price trend.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 1.3120 | 1.3070 | 1.3020 |
| Resistance | 1.3170 | 1.3205 | 1.3225 |
Technical Overview
USD/JPY – Price broke above the Rounding Bottom chart pattern at 139.08 and moved to a high at $140.27 this morning, accompanied by the divergence warning from the MACD indicator. Stochastic is in the overbought zone and is hinting at a limited upside. However, both 20EMA and MACD are bullish and hinting at a bullish price trend. If the price is able to sustain above the previous high at $139.40, we are likely to see the price rally to test the next resistance at $140.65 before a reversal.
| Support | 140.05 | 139.55 | 139.05 |
| Resistance | 140.65 | 141.20 | 141.70 |
EUR/USD – Price broke below the bearish Wedge chart pattern and declined to a low at $0.9910 yesterday night. Price has moved below the 20EMA and which hinted at a change in trend to bearish. MACD has also crossed below the zero line and hinting at a possible bearish trend. The stochastic indicator is moving lower and hinting at a price decline. Unless price can move above the 20EMA, we may see price decline further and test the previous week’s low at 0.9900.
| Support | 0.9935 | 0.9900 | 0.9855 |
| Resistance | 0.9985 | 1.0025 | 1.0055 |
GBP/USD – Price further fell after the support at $1.1645 was violated and hit another new low at $1.1498 overnight. We saw a slight rebound as price rallied back to $1.1559 this morning. Both 20EMA and MACD remain bearish and are hinting at a bearish trend. However, Stochastic is at the oversold zone and may be hinting at a limited downside. Tonight NFP is likely to decide on the next price direction.
| Support | 1.1530 | 1.1495 | 1.1445 |
| Resistance | 1.1565 | 1.1605 | 1.1660 |
XAU/USD – Price reached a low of $1688.55 overnight accompanied by a bullish divergence warning from both MACD and Stochastic. However, 20EMA remains bearish and is hinting at a bearish price trend. Although MACD has a bullish crossover, the MACD indicator remains bearish as the MACD is still below the zero line. We may see the price to further fall and test the July month at $1680.70, if the current support at $1688.60 is violated
| Support | 1697.20 | 1680.70 | 1670.80 |
| Resistance | 1709.35 | 1720.10 | 1733.40 |
NZD/USD – We had a buy call on Wednesday at $0.6135 which was filled but the price went below our stop overnight. We lost 35 pips on this trade. Price declined to $0.6049 today but this low was accompanied by a bullish divergence warning from MACD, hinting at a possible price low. MACD and 20EMA are still bearish and hinting at a bearish price trend. Stochastic is in the oversold condition which may be hinting at a possible limited downside
| Support | 0.6050 | 0.6025 | 0.5990 |
| Resistance | 0.6100 | 0.6155 | 0.6195 |