Market Talk
– The US dollar hovered near a two-decade peak against a basket of currencies on Wednesday, after yields on U.S. Treasuries leaped ahead of an expected aggressive interest rate hike by the Federal Reserve.
– Yields on the two-year U.S. Treasury notes, a rough gauge of interest rate expectations, hit 3.992% overnight, the highest since 2007, while yields on the benchmark 10-year Treasury rose to 3.604%, the highest since 2011.
– The yen, which has fallen about 20% against the U.S. dollar this year, was marginally up by 0.1% at 143.56 per dollar, but remained not far off its 24-year low of 144.99. Sterling last traded $1.1381, languishing near a 37-year low of $1.1351, while the euro was 0.02% lower at $0.9967.
– The Australian and New Zealand dollars were likewise nursing losses, with the Aussie at $0.6701 after a shedding 0.54% overnight. The kiwi gained 0.14% to $0.5902, after falling 1% in the previous session and touching a more than two-year low of $0.5887.
– Gold was slightly higher at $1666 but largely kept to a tight range on Wednesday as anticipation of a large interest rate hike by the Federal Reserve boosted the dollar and weighed on the yellow metal.
Chart Focus USD/CHF
Key Points
1. Buy USD/CHF recommendation.
2. Buy USD/CHF at 0.9655. Stop at 0.9620 and profit target at 0.9755
3. An increase in US Treasury yields and expectations of an aggressive rate hike by the Fed are aiding the US dollar.
4. Price is supported by a strong support with MACD hinting at a bullish price trend.
Fundamental Comments
1. An increase in US Treasury yields is aiding the US dollar.
2. Expectations of an aggressive rate hike by the Fed are also aiding the US dollar.
Technical Comments
1. Price is likely to be supported by the Fibonacci 38% correction point and the 20EMA.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 0.9625 | 0.9585 | 0.9555 |
| Resistance | 0.9665 | 0.9695 | 0.9730 |
Technical Overview
USD/JPY – Price broke above the recent range high at 143.83 to a high of 144.07 this morning but has fallen back into the range again. We are expecting this range trading to continue until the FOMC announcement. Stochastic is inside the overbought zone and is hinting at a limited upside. 20EMA is bullish and is hinting at a bullish price trend. MACD is flat and neutral at the moment.
| Support | 143.40 | 142.90 | 142.55 |
| Resistance | 144.05 | 144.40 | 144.95 |
EUR/USD – Price broke below the recent low at 0.9945 and we are looking for a continuation of this decline to the previous low at 0.9865 in the next 1-2 days. Price will need to move above 0.9955 to negate our bearish trend view. Stochastic is declining and is hinting at a price decline. MACD has turned down and is hinting at a price decline. 20EMA is also hinting at a bearish price trend.
| Support | 0.9865 | 0.9805 | 0.9775 |
| Resistance | 0.9905 | 0.9955 | 1.0005 |
GBP/USD – We had a short position from Monday at 1.1440. Yesterday, we had left stop at 1.1465 and profit order at 1.1355. Price declined to a low of 1.1304 this afternoon and our profit order was filled at 1.1355. We made 85 pips on this trade. Stochastic is declining but MACD is starting to hint with a divergence of a potential low. 20EMA is hinting at a strong bearish price trend.
| Support | 1.1305 | 1.1255 | 1.1200 |
| Resistance | 1.1360 | 1.1410 | 1.1460 |
XAU/USD – We had a sell call at $1679.60 overnight but price only reached a high of $1675.82 and our entry order was not filled. Overnight, price declined to a low of $1659.86, which was just above the low hit on Monday. Price is likely to range till the FOMC announcement. The expected range is $1659 to $1680. Stochastic is hinting at a price rally. Both MACD and 20EMA are also starting to hint at a bullish price trend.
| Support | 1653.65 | 1643.90 | 1631.80 |
| Resistance | 1669.60 | 1680.20 | 1692.25 |
USD/CAD – Price broke above the previous high at 1.3343 and we are looking at a continuation of this price rally to the next price target at 1.3420 in the next 48 hours. Stochastic is inside the overbought zone and is hinting at a limited upside. However, 20EMA is hinting at a strong bullish price trend. MACD remains bullish but a potential divergence warning could be forming. A move below 1.3230 would negate our bullish view and hints at a completed rally.
| Support | 1.3340 | 1.3305 | 1.3270 |
| Resistance | 1.3390 | 1.3420 | 1.3460 |