Market Talk
– The U.S. dollar resumed its rise in Asia on Thursday after falling back from a two-decade high overnight, as investors pondered the path of global monetary policy ahead of a European Central Bank rate decision and comments from Federal Reserve Chair Jerome Powell later in the day.
– The Bank of Canada raised interest rates by 75 bps to a 14-year high on Wednesday, as expected, and said the policy rate would need to go even higher as it battles raging inflation. The Canadian dollar gained against the US dollar to $1.3108.
– The euro slipped 0.21% to $0.9987, after plumbing a 20-year low of $0.9864 earlier in the week. The ECB is widely expected to also raise rates by 75 basis points later on Thursday to fight runaway inflation, although Europe’s energy crisis has kept the euro under pressure.
– The greenback gained 0.18% to 144.09 yen, after reaching a 24-year high of 144.99 in the previous session, hitting the level for the first time since August 1998. Sterling weakened 0.23% to $1.1509, heading back toward the day’s 37-year low of $1.1407.
– Gold prices moved higher to $1,718 on Thursday as a pause in the recent dollar rally took some pressure off bullion prices, and as benchmark Treasury yields tumbled after earlier hitting three-month highs, but the precious metal’s outlook was still clouded by prospects of aggressive rate hikes.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 143.10. Stop at 142.70 and profit target at 144.90.
3. Expectations of US rate hikes and interest rate differential are both in the U.S. dollar’s favour.
4. Price is likely to be supported by the 20EMA with MACD hinting at a bullish price trend.
Fundamental Comments
1. Expectations of US rate hikes are likely to aid the U.S. dollar.
2. Interest rate differential is in the U.S. dollar’s favour.
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 | 143.55 | 143.05 | 142.65 |
| Resistance | 144.00 | 144.55 | 144.95 |
Technical Overview
EUR/AUD – We had a sell call yesterday at $1.4735 which was filled but the price went up and triggered our stop loss at $1.4770. We lost 35 pips on this trade. Price moved higher to a high at $1.4867 this morning. Stochastic is in the overbought zone now and hinting at a limited upside. However, both 20EMA and MACD are bullish and hint at a bullish price trend. We think price may have peak and we see a price decline in the next 24 hours.
| Support | 1.4775 | 1.4725 | 1.4685 |
| Resistance | 1.4835 | 1.4870 | 1.4925 |
EUR/USD – Price reached a low of $0.9875 on Wednesday and we saw a rally to $1.0012 this morning. Stochastic is moving higher and hinting at a price rally. Price has moved above the 20EMA and which is hinting at a bullish price trend. MACD is also bullish and is also hinting at bullish price trends. If the price can stay above the 20EMA support at $0.9950, we are likely to see the price rally to the next resistance at $1.0035.
| Support | 0.9975 | 0.9930 | 0.9890 |
| Resistance | 1.0015 | 1.0050 | 1.0090 |
GBP/USD – Price rebounded to a high of $1.1520 this morning after making a new lower low of $1.1404 yesterday. However, the rebound is capped at the 20EMA, around $1.1517. While stochastic is pointing higher, both 20EMA and MACD are hinting at a bearish price trend. Price is likely moving lower to $1.1400 in the next 48 hours. However, a break above $1.1610 would negate our bearish view.
| Support | 1.1460 | 1.1400 | 1.1335 |
| Resistance | 1.1535 | 1.1605 | 1.1650 |
XAU/USD – Price is still moving sideways, hovering in the range of $1688.55 to $1727.25. Stochastic is rising and hinting at a rally in the price. Price has moved up above the 20EMA and MACD has crossed above the zero line. Both trend indicators are hinting at a possible bullish price trend. We see the price is likely to test the resistance at $1727.25 which could be strong support turned resistance level here.
| Support | 1713.40 | 1702.25 | 1688.30 |
| Resistance | 1727.25 | 1745.30 | 1758.30 |
USD/CAD – We had a long position from Tuesday at 1.3120. Yesterday we had placed stop at 1.3140 and profit target at 1.3220. Unfortunately price declined beyond 1.3140 to a low of 1.3110 overnight and we are out of this position with a 20 pips profit. We think the decline can continue lower to 1.3075 in the next 1-2 days ahead. Stochastic is moving lower. Both MACD and 20EMA are also pointing lower.
| Support | 1.3100 | 1.3060 | 1.3020 |
| Resistance | 1.3155 | 1.3205 | 1.3260 |