Market Talk
– The U.S. dollar pushed to a fresh two-decade high versus major peers on Thursday, propelled by the Federal Reserve’s hawkish outlook for interest rates and Russian President Vladamir Putin’s mobilization of more troops for the war in Ukraine.
– The Fed issued new projections showing rates peaking at 4.6% next year with no cuts until 2024 after raising its target interest rate range by another 75 basis points overnight to 3.00%-3.25%, as was widely expected.
– The Bank of Japan maintained ultra-low interest rates and dovish policy guidance on Thursday, as it seeks to reassure markets that it will continue to swim against a global tide of central banks tightening monetary policy to combat soaring inflation.
– The euro weakened to a new 20-year trough of $0.9807, weighed down by hawkish Fed and Putin announcement on calling up reservists to fight in Ukraine and said Moscow would respond with the might of its entire vast arsenal if the West pursued what he called its “nuclear blackmail” over the conflict there.
– Sterling fell to a fresh 37-year low of $1.1225, and last changed hands at $1.1233, a 0.3% decline from the previous session. The Bank of England also announces policy on Thursday, with markets split on whether a 50 or 75 basis point hike is in the offing.
– Spot Gold fell 0.3% to $1,659.56 an ounce, weighed down by an interest rate hike and hawkish message from the Federal Reserve.
– There will be no FX commentary tomorrow. Update will resume on Monday, 26 September.
Chart Focus EUR/JPY
Key Points
1. Sell EUR/JPY recommendation.
2. Sell EUR/JPY at 142.95. Stop at 143.30 and profit target at 141.60.
3. A prolong war in Ukraine is likely to weigh on the euro and aid the safe haven yen.
4. Price is likely to be capped by the 20EMA with MACD hinting at a bearish price trend.
Fundamental Comments
1. Putin threat and a prolong war in Ukraine is likely to weigh on the Euro.
2. War in Ukraine is likely to benefit the safe haven yen.
Technical Comments
1. Price is likely to be capped by the 20EMA.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 142.30 | 141.75 | 141.05 |
| Resistance | 142.95 | 143.55 | 144.00 |
Technical Overview
USD/JPY – Price broke above the high at 144.99 and moved to 145.38. Price has since moved back towards 144.95 and we think this support is likely to hold and another test of the high at 145.38 is likely in the next 24 hours. Stochastic is in the overbought zone but 20EMA is hinting at a strong bullish price trend. MACD is also bullish and hinting at a bullish price trend. Only a move below 144.40 would negate our bullish view.
| Support | 144.40 | 143.95 | 143.40 |
| Resistance | 145.00 | 145.40 | 146.00 |
EUR/USD – Price broke below the previous low at 0.9865 and moved to a low of 0.9807. Stochastic is in the oversold zone and is hinting at a limited downside. However, 20EMA is pointing down with a steep slope and hinting at a strong bearish price trend. MACD is also bearish and hinting at a bearish price trend. As long as price stays below 0.9865, we are likely to see another test of the low at 0.9807 and a possible decline to 0.9765.
| Support | 0.9805 | 0.9765 | 0.9705 |
| Resistance | 0.9865 | 0.9905 | 0.9955 |
GBP/USD – Price broke below previous low yesterday and moved to a new 37-year low at 1.1225. We are likely to see the decline continues to the next price support at 1.1150 in the next 1-2 days. A move above 1.1355 would negate our bearish view. Stochastic is in the oversold zone but 20EMA is pointing down with a steep slope and is hinting at a strong bearish price trend. MACD remains bearish and is hinting at a bearish price trend.
| Support | 1.1190 | 1.1150 | 1.1100 |
| Resistance | 1.1255 | 1.1305 | 1.1350 |
XAU/USD – Price tested the previous week’s low at $1653.90 overnight and managed to hold above this support. However, MACD is hinting at a bearish price trend. 20EMA is also hinting at a bearish price trend. Stochastic is neutral at the moment. We think price is likely to break below the previous week’s low at $1653.90 in the next few days. We see price going lower to $1643.90 in the next 48 hours.
| Support | 1653.90 | 1643.90 | 1631.80 |
| Resistance | 1664.25 | 1680.20 | 1692.25 |
USD/CHF – We had a buy call at 0.9655 overnight but price declined to a low of 0.9618 overnight and our stop was triggered. We lost 35 pips on this trade. However, our view remains unchanged. We are looking for a rally to 0.9750 in the next few days. Stochastic is rising and is hinting at a price rally. 20EMA is also supporting price and hinting at a price rally. MACD is also bullish.
| Support | 0.9620 | 0.9585 | 0.9555 |
| Resistance | 0.9665 | 0.9695 | 0.9730 |