Market Talk
– The U.S. dollar took a breather on Tuesday, easing slightly from milestone highs on the euro, yen and sterling. Worries of recession in Europe and U.S. interest rates are poised for sharp rises, are keeping the greenback near milestone high.
– The euro was up 0.4% to $0.9963 in early Asia trade after it hit a two-decade low of $0.9876 on Monday as the prospects for a winter without Russian gas sunk in. The energy crisis is expected to severely impact economic growth in the Eurozone.
– Sterling had hit a 2-1/2 year low of $1.1444 on the news of the new UK PM’s tax cuts adding uncertainty to government finances, but rose 0.5% to $1.1585 in Asia. The yen, last traded at 140.30 per dollar, not far from a 24-year trough of 140.80 hit last week.
– Australia’s central bank raised its cash rate 50 basis points as expected to a seven-year high of 2.35% on Tuesday and left the door wide open for yet more tightening ahead as it fights to restrain surging inflation.
– Gold prices recovered sharply from a six-week low on Tuesday as a worsening energy crisis in Europe drove up safe haven demand for the yellow metal. Gold prices bounced up from $1706 to a high of $1726.67 on Tuesday morning.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.3120. Stop at 1.3090 and profit target at 1.3200
3. Expectations of US interest rate hikes and risk of a recession in Europe are both likely to keep the US dollar strong.
4. Price is likely to be supported by a previous resistance turned support line with hinting at a bullish price trend.
Fundamental Comments
1. Expectations of US interest rate hikes are likely to keep the US dollar strong.
2. Risk of a recession in Europe is likely to aid the US dollar.
Technical Comments
1. Price is likely to be supported by a previous resistance turned support line.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 1.3110 | 1.3060 | 1.3020 |
| Resistance | 1.3150 | 1.3205 | 1.3260 |
USD/JPY – Price moved higher this morning to $140.95 despite a divergence warning from the MACD indicator. Stochastic is in the overbought zone and is hinting at a limited upside. MACD is hinting at a possible price high but 20EMA is hinting at a strong bullish price trend. Despite the divergence, we may see a price movement to test the next higher resistance at $141.20. A move below $139.80 would hint at a reversal of the uptrend and a top in place.
| Support | 140.65 | 140.05 | 139.65 |
| Resistance | 141.20 | 141.70 | 142.20 |
EUR/USD – Price broke below the 2 weeks low at $0.9901 and reached a low of $0.9877 yesterday but has rebounded to the 20EMA line at 0.9970. Stochastic is rising and is hinting at a price rally. MACD remains bearish and is hinting at a price decline. Price needs to move above the 20EMA at 0.9970 to reverse the bearish price trend. A move below $0.9900 is likely to negate our bullish view.
| Support | 0.9945 | 0.9900 | 0.9860 |
| Resistance | 0.9975 | 1.0025 | 1.0070 |
GBP/USD – Price reached a low of $1.1442 yesterday and we saw a rally to a high at $1.1599 this morning. Stochastic is moving higher and hinting at a price rally. MACD remains bearish as the indicator is still below the zero line but there is also a bullish divergence warning forming from the MACD indicator. We may see a short-term technical rebound to 1615 before the downtrend resumes again.
| Support | 1.1550 | 1.1495 | 1.1445 |
| Resistance | 1.1590 | 1.1645 | 1.1690 |
XAU/USD – Price reached a high of $1726.70 this morning but was capped by a previous support turned resistance line at $1727.35. Stochastic is also still rising and hinting at a continuation rally. MACD is also pointing upwards and hinting at a price rally. Price has also moved above the 20EMA line. However, price will need to move above the resistance at $1727.35 in order to reversal the previous bearish trend.
| Support | 1709.60 | 1697.20 | 1680.70 |
| Resistance | 1719.70 | 1727.25 | 1745.30 |
XAG/USD – We had a sell call yesterday at $18.10 which was filled but the price went higher and triggered our stop loss at $18.35 this morning. We lost $0.25 on this trade. Price has move higher to $$18.39. 20EMA is hinting at bullish price trend. Stochastic and MACD are also hinting at a rally as both of the lines are moving up. We could see a price move higher to $18.50 in the next 24 hours.
| Support | 18.25 | 17.90 | 17.55 |
| Resistance | 18.55 | 18.90 | 19.40 |