Market Talk
– The US dollar lingered near a two-decade top on major peers on Monday, ahead of a week loaded with market holidays and central bank decisions from Washington to London and Tokyo.
– Markets have priced in at least another 75 basis point increase for this week’s Federal Open Market Committee’s meeting, as U.S. consumer price rises have proved stubbornly persistent and while labour market remains resilient.
– The dollar was firm at 143.15 yen on Monday, hovering beneath strong resistance at 145 as Japanese policymakers have toughened talk of currency intervention. The Aussie dollar fell to $0.6710, not far from its lowest level since mid-2020 at $0.6670, which it hit on Friday.
– Sterling slipped to $1.1403, just above a 37-year trough of $1.1351 hit on Friday. Markets are split on whether the Bank of England will raise rates by 50 or 75 basis points on Thursday. The euro fell below parity to $0.9995, with little for investors to cheer about as an energy crisis seems certain to tip Europe into recession in the winter.
– Gold prices recovered slightly from recent losses on Monday but remained pinned below key levels as markets awaited more policy tightening measures from the Federal Reserve. Bullion prices slumped to a 2-½ year lows at $1653.90 last week.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.1440. Stop at 1.1475 and profit target at 1.1355.
3. Expectation of an aggressive tightening by the Fed and an increase in US Treasury yields are both weighing on the British pound.
4. Price is likely to be capped by the 20EMA with MACD hinting at a bearish price trend.
Fundamental Comments
1. Expectation of an aggressive tightening by the Fed is aiding the US dollar.
2. An increase in US Treasury yield is also aiding the US dollar.
Technical Comments
1. Price is likely to be capped by the falling 20EMA line and a previous support turned resistance line.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1.1385 | 1.1350 | 1.1300 |
| Resistance | 1.1415 | 1.1450 | 1.1500 |
Technical Overview
USD/JPY – Price has been trading within a range of 142.60 to 143.83 after it failed to break above 145 in the previous week. Fear of a BOJ intervention is likely to cap the rally, while the base is likely to be supported by a strong US Treasury yield. Stochastic is in the middle of its range. MACD remains above the zero line but is flat and is neutral at the moment. 20EMA is also neutral. We see price staying within the range of 142.60 to 143.83 in the next couple of days.
| Support | 142.90 | 142.55 | 141.95 |
| Resistance | 143.35 | 143.80 | 144.40 |
EUR/USD – Last Friday, we had a sell call at 0.9995 with a stop at 1.0025. On Friday, price rose to a high of 1.0036 and our stop was taken out. Our view remains unchanged and we are looking for a price decline back to 0.9865 in the next few days. Stochastic is rising and is hinting at a price rally but MACD remains bearish and is hinting at a bearish price trend. 20EMA is also hinting at a bearish price trend.
| Support | 0.9955 | 0.9900 | 0.9865 |
| Resistance | 1.0035 | 1.0095 | 1.0135 |
AUD/USD – Price reached a low of 0.6669 on Friday, but this low was accompanied by a divergence warning from the MACD indicator hinting at a possible price low. We saw a rally to 0.6733 this morning but the rally was capped by the 20EMA and price is now closer to last Friday’s low of 0.6669. We are likely to see a continuation of the decline to 0.6510 in the next few days. Stochastic is rising from the oversold zone but both MACD and 20EMA are hinting at a strong bearish price trend.
| Support | 0.6665 | 0.6615 | 0.6585 |
| Resistance | 0.6700 | 0.6735 | 0.6770 |
XAU/USD – Price declined to a low of $1653.90 last Friday and MACD is not showing any divergence at the moment. This is a hint the decline may not have reached a bottom. We are expecting price to decline further to the next support at $1643.90 in the next 48 hours. Stochastic is rising from the oversold zone but remains weak. Both 20EMA and MACD are hinting at a bearish price trend. Only a move above $1680 will negate our bearish price view.
| Support | 1662.65 | 1653.90 | 1643.90 |
| Resistance | 1671.65 | 1680.20 | 1692.25 |
NZD/USD – Price reached a low of 0.5939 overnight, but this low was accompanied by a divergence warning from the MACD indicator hinting at a possible price low. We saw a rally this morning but the rally was capped at 0.6000 by the 20EMA. We are likely to see price continues its decline over the next few days to 0.5845. Stochastic is rising from the oversold zone but both 20EMA and MACD remains bearish.
| Support | 0.5935 | 0.5900 | 0.5850 |
| Resistance | 0.5975 | 0.6005 | 0.6040 |