Market Talk
– The US dollar eased from multi-year highs on Friday after a strong rally earlier in the week, though expectations that the Federal Reserve would need to hike more to keep inflation in check sent Treasury yields higher and kept the greenback in demand.
– U.S. retail data released overnight showed retail sales unexpectedly rebounded in August, while a separate report from the Labour Department showed initial claims for state unemployment benefits fell 5,000, adding to the case that the economy could tolerate higher interest rates
– The IMF said the global economic outlook remains downbeat and some countries are expected to slip into recession in 2023 while the World Bank said the world could be edging towards a global recession in 2023 as central banks across the world simultaneously hike interest rates to combat persistent inflation.
– The dollar dropped 0.4% against the yen to 142.95. The euro was up 0.1% on the day at $1.0006, having lost 0.51% in a month the Aussie hit a two-month low of $0.6685 on Friday. The kiwi likewise fell to $0.5956, its lowest level since May 2020.
– Gold prices moved little on Friday after declining overnight and were set for steep weekly losses as growing expectations of sharper interest rate hikes by the Federal Reserve boosted the dollar and dented the yellow metal.
Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation.
2. Sell EUR/USD at 0.9995. Stop at 1.0025 and profit target at 0.9900.
3. Expectation of sharper Fed hike and interest rate differential are both aiding the US dollar.
4. Price is likely to be capped by the 20EMA with the MACD hinting at a bearish price trend.
Fundamental Comments
1. Expectations that the Federal Reserve would need to hike more to keep inflation in check is aiding the greenback.
2. Interest rate differential is in the US dollar favour.
Technical Comments
1. Price is likely to be capped by the 20EMA which is also hinting at a bearish price trend.
2. MACD is bearish and is hinting at a bearish price trend.
Key Levels
| Support | 0.9955 | 0.9910 | 0.9865 |
| Resistance | 1.0015 | 1.0055 | 1.0085 |
Technical Overview
USD/JPY – Price was supported by the 20EMA overnight with fear of BOJ’s intervention preventing the yen from weakening. Stochastic is still declining but MACD remains bullish and is hinting at a bullish price trend. 20EMA is flat at the moment. We remain bullish but are also wary of central bank intervention. We see price moving higher to test the previous high at 144.99 again in the next few days.
| Support | 143.15 | 142.75 | 142.20 |
| Resistance | 143.85 | 144.40 | 144.95 |
AUD/USD – Price reached a low of 0.6684 overnight, but this low was accompanied by a divergence warning from the MACD indicator hinting at a possible price low. We are expecting price to decline to 0.6647 in the next 1-2 days. Stochastic is rising from the oversold zone but remains weak. 20EMA is pointing lower with a steep slope which is a hint of a strong bearish price trend. MACD is neutral.
| Support | 0.6680 | 0.6645 | 0.6615 |
| Resistance | 0.6720 | 0.6770 | 0.6815 |
GBP/USD – Yesterday, we had a sell call at 1.1540, but price only reached a high of 1.1527 and our entry order was not filled. Price has declined lower to 1.1450 and we are expecting the decline to continue down to 1.1405 in the next 1-2 days. Stochastic is in the oversold zone but both 20EMA and MACD are hinting at a strong bearish price trend. Price will need to move above 1.1585 to negate our bearish view.
| Support | 1.1450 | 1.1405 | 1.1350 |
| Resistance | 1.1505 | 1.1545 | 1.1580 |
XAU/USD – Price declined to a low of $1660.20 overnight and MACD is not showing any divergence at the moment. This is a hint the decline may not have reached a bottom. We are also expecting price to decline further to the next support at $1643.90 in the next 48 hours. Stochastic is in the oversold zone but 20EMA remains bearish and is hinting at a strong bearish price trend. MACD is also hinting at a strong bearish price trend.
| Support | 1657.90 | 1643.90 | 1631.85 |
| Resistance | 1667.50 | 1680.70 | 1697.35 |
NZD/USD – Price reached a low of 0.5956 overnight, but this low was accompanied by a divergence warning from the MACD indicator hinting at a possible price low. Stochastic is rising from the oversold zone but remains weak. 20EMA is pointing lower with a steep slope which is a hint of a strong bearish price trend. We think price can continue lower to the next support at 0.5920 in the next 1-2 days.
| Support | 0.5925 | 0.5875 | 0.5840 |
| Resistance | 0.5980 | 0.6025 | 0.6060 |