Market Talk
– The U.S. dollar hit a fresh 24-year peak against the yen and reached new highs versus the Australian and New Zealand dollars on Wednesday after U.S. economic data reinforced the view that the Federal Reserve will continue aggressive policy tightening.
– A report overnight showed the U.S. services industry unexpectedly picked up last month, reinforcing the view that the economy is not in recession and giving the Fed leeway for another super-sized 75 basis-point rate rise on Sept. 21.
– Sterling, is down about 15% this year, approaching the $1.1444 low from Monday, a level last seen in March 2020, with Britain also entangled in the energy crisis. Worries over the new UK PM’s tax cuts adding uncertainty to government finances are also weighing on the British pound.
– The Aussie declined 0.23% to $0.6716, and earlier touched $0.6710 for the first time since July 14, garnering little support from Tuesday’s as-expected Reserve Bank rate increase while New Zealand’s kiwi dropped 0.43% to $0.6015, the lowest since May 2020.
– Spot gold prices briefly broke below $1,700 on Wednesday after signs of strength in the U.S. economy led to increased expectations that the Federal Reserve will keep raising interest rates at a fast pace.
Chart Focus EUR/AUD
Key Points
1. Sell EUR/AUD recommendation.
2. Sell EUR/AUD at 1.4735. Stop at 1.4770 and profit target at 1.4625.
3. Energy crisis in Europe and interest rate differential are both against the euro.
4. Price could be capped by the previous high resistance and MACD is showing a divergence warning, hinting at a possible price high in the making.
Fundamental Comments
1. Energy crisis in Europe is likely to depress the single currency.
2. Interest rate differential is in the Aussie dollar favour.
Technical Comments
1. Price could be capped by the previous high resistance.
2. MACD is showing a divergence warning, hinting at a possible price high in the making.
Key Levels
| Support | 1.4690 | 1.4640 | 1.4590 |
| Resistance | 1.4740 | 1.4770 | 1.4805 |
Technical Overview
USD/JPY – We saw a rally to a high at $144.37 this morning on the back of a likely 75 basis point hike later in the month by the Federal Reserve. We are likely to see price continues its rally higher to $144.80 in the next couple of days as both MACD and 20EMA are hinting at strong bullish price trends. A divergence could be forming on the MACD indicator, warning of a possible price high. Stochastic is in the overbought zone, hinting at a limited upside.
| Support | 143.95 | 143.55 | 143.05 |
| Resistance | 144.40 | 144.80 | 145.30 |
EUR/USD – The rebound overnight was capped at the 20EMA line at $0.9950 despite reaching a high of $0.9985. We saw a decline to a fresh 20-year low at 0.9863 overnight. 20EMA is bearish and is hinting at a strong bearish price trend. MACD is also bearish but stochastic is close to the oversold zone and is hinting at a limited downside. We remain bearish but in view of the ECB meeting tomorrow, we view price staying within the previous day’s range of 0.9863 to 0.9985.
| Support | 0.9885 | 0.9855 | 0.9780 |
| Resistance | 0.9925 | 0.9985 | 1.0025 |
GBP/USD – Price reached a high of $1.1608 yesterday but was capped by previous support turned resistance line at $1.1620. Price has since turned lower and is near to its previous low at 1.1428. We think price is likely to break this support and moved lower to 1.1350 in the next few days. Stochastic is hinting at a price decline. 20EMA is also hinting at a bearish price trend. MACD is bearish. Only a move above 1.1610 would negate our bearish view.
| Support | 1.1440 | 1.1400 | 1.1350 |
| Resistance | 1.1490 | 1.1550 | 1.1610 |
XAU/USD – Price was capped by the high at $1726.67 yesterday which is around Fibonacci’s 50% correction point , from $1765.27 high to $1688.55 low. This was also the former support turned resistance line. Stochastic is hinting at a price decline. Both 20EMA and MACD are also bearish and hinting at a bearish price trend. Price could be on the way to testing the 2-month low at $1680.73 in the next 24 hours.
| Support | 1688.55 | 1680.70 | 1664.50 |
| Resistance | 1699.0 | 1709.35 | 1727.25 |
USD/CAD – We had a buy recommendation yesterday at $1.3120 which was filled when price declined to a low of $1.3100. Price had moved to a high of $1.3196 this morning. Stochastic, 20EMA, and MACD are pointing up and hinting at a price rally. Our view remains unchanged the same as yesterday. We would recommend raising stop higher to $1.3140 and profit target higher to 1.3220.
| Support | 1.3150 | 1.3110 | 1.3060 |
| Resistance | 1.3205 | 1.3260 | 1.3310 |