Market Talk
– The U.S. dollar touched a new 20-year high against a basket of currencies on Monday, benefiting from weakness in the euro amid a worsening energy crisis, while investors continued to bet on more interest rate hikes by the Federal Reserve.
– August U.S. jobs report showed the pace of U.S. hiring rose more than expected, but wage growth moderated and unemployment ticked higher. However, investors are still leaning toward a hike of 75 basis points from the Fed this month.
– The euro was down to $0.9908 after Russia shut a major gas pipeline to Europe, leading some governments there to announce emergency measures to ease the pain of soaring energy prices and as markets priced in more risk of a European recession.
– The greenback was firm at 140.20 yen, just short of Friday’s 24-year high at 140.80. Sterling was struggling at $1.1481, after diving as low as $1.1458 and levels last seen in March 2020 at the start of the pandemic.
– Gold was steady around $1710 an ounce in Monday morning Asian trading, after advancing on Friday on U.S. jobs data, which showed a higher unemployment rate in the US economy than forecast, leaving the Fed with more room to adjust its monetary policy.
Chart Focus XAG/USD
Key Points
1. Sell Silver recommendation.
2. Sell Silver at $18.10. Stop at $18.35 and profit target at $17.55
3. Expectations of more US interest rate hikes and economic risks from Europe and China are all likely to weigh on Silver.
4. Price is likely to be capped by the 20EMA with MACD hinting at a bearish price trend.
Fundamental Comments
1. Investors continued to bet on more interest rate hikes by the Federal Reserve which are likely to weigh on Silver.
2. Recession risk in Europe and slowdown risk in China are both likely to weigh on Silver.
Technical Comments
1. Price is likely to be capped by the 20EMA, which is also hinting at a bearish price trend.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 17.90 | 17.55 | 17.05 |
| Resistance | 18.10 | 18.50 | 18.90 |
Technical Overview
USD/JPY – Price reached a high of 140.80 last Friday but this high was also accompanied by a divergence warning from the MACD indicator, warning of a possible price high in the making. Stochastic is also in the overbought zone and is hinting at a limited upside. However, 20EMA remains bullish and is hinting at a bullish price trend. A price move below 139.70 would confirm the high and calls for a decline to 138.05.
| Support | 139.80 | 139.55 | 139.05 |
| Resistance | 140.30 | 140.80 | 141.20 |
EUR/USD – Price broke below the previous low at 0.9900 and declined to a low of 0.9877 at the point of this writing. We are expecting the decline to continue lower to 0.9815 in the next couple of days. Stochastic is moving lower but is not inside the oversold zone as yet, hinting there could be more downside. MACD and 20EMA are both hinting at a bearish price trend. Only a move above 0.9970 would negate our bearish price view.
| Support | 0.9860 | 0.9815 | 0.9790 |
| Resistance | 0.9900 | 0.9940 | 0.9975 |
GBP/USD – Price dived as low as $1.1441 this morning which is a level last seen in March 2020 at the start of the pandemic. There could be a divergence forming on the MACD indicator, but it is likely to take more time to form. Stochastic is inside the oversold zone but 20EMA is hinting at a strong bearish price trend. We think the decline could continue to the previous low at 1.1335 in early March 2020.
| Support | 1.1445 | 1.1400 | 1.1335 |
| Resistance | 1.1495 | 1.1555 | 1.1605 |
XAU/USD – Price was capped by the 20EMA at $1707 and there is also a support turned resistance point at $1719.70. If price fails to move above this resistance zone, we are likely to see a price decline back lower to $1688.55 in the next few days. Stochastic is rising and is hinting at a price rally. However, both MACD and 20EMA are hinting at a bearish price trend. We prefer a test to $1688.55.
| Support | 1706.60 | 1697.20 | 1680.70 |
| Resistance | 1719.70 | 1727.25 | 1745.30 |
USD/CAD – We had a buy call last Friday at 1.3125 but price dipped to a low of 1.3075, taking out our stop in the process. We lost 30 pips on this trade. However, our view remains unchanged. We are looking for a price rally to 1.3200 in the next couple of days. MACD remains bullish and is hinting at a bullish price trend. 20EMA is bullish and supporting price. Stochastic is in the middle of its range.
| Support | 1.3110 | 1.3075 | 1.3020 |
| Resistance | 1.3165 | 1.3205 | 1.3255 |