Market Talk
– The British pound dropped to an all-time low against the dollar on Monday as investors worried Britain’s new economic plan will hurt the country’s finances, while the Bank of England said it was watching financial markets “very closely” following sharp moves in asset prices.
– Sterling, which collapsed to a record low $1.0327 on Monday, recovered to $1.0742. The Bank of England said it would not hesitate to change interest rates and was monitoring markets “very closely” which helped to halt the decline.
– The dollar firmed to 144.585 against the yen, heading back toward Thursday’s 24-year peak of 145.90. It sank to around 140.31 that same day after Japan conducted yen-buying intervention for the first time in more than 20 years.
– The European single currency was up 0.3% on the day at $0.9634 after hitting a 20-year low a day ago. The risk-sensitive Australian dollar touched $0.6438, its lowest since May 2020, and was last down 1.02%.
– Gold prices rose to $1629.95 from two-year lows on Tuesday as a rally in the dollar paused. Rising interest rates boosted the greenback’s safe haven demand, helping the currency largely overtake gold as a preferred safe haven this year.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.3630. Stop at 1.3595 and profit target at 1.3790.
3. A hawkish Federal Reserve and a potential economic recession in Europe and US are both likely to aid the US dollar.
4. Price is likely to be supported by the 20EMA line as well as a previous resistance turned support line with MACD hinting at a bullish price trend.
Fundamental Comments
1. A hawkish Federal Reserve bent on hiking interest rates to curb inflation is likely to weigh on the Canadian dollar.
2. A potential economic recession in Europe and US is likely to aid the US dollar as a safe haven.
Technical Comments
1. Price is likely to be supported by the 20EMA line as well as a previous resistance turned support line.
2. MACD remains bullish and is hinting at a bullish price trend.
Technical Overview
USD/JPY – Price reached a high of 145.90 on Friday before BOJ intervention sent it down to 140.35. Price has recovered to 144.78 and we are likely to see price test the 145.00 level again. Stochastic is close to the overbought zone but both MACD and 20EMA are both bullish and hinting at a bullish price trend. Fear of another intervention is likely to cap price around the previous high.
| Support | 144.25 | 143.80 | 143.30 |
| Resistance | 144.80 | 145.35 | 145.90 |
EUR/USD – Price declined to a low of 0.9525 on Monday and there was no divergence. This is a hint that the low may not be in. Price is likely to find resistance at the 20EMA at 0.9715. Unless price can move above this resistance, we are likely to see another test of the low at 0.9525 again in the next few days. Stochastic is rising from the oversold zone. However, both 20EMA and MACD are bearish and hinting at a bearish price trend.
| Support | 0.9620 | 0.9580 | 0.9525 |
| Resistance | 0.9665 | 0.9710 | 0.9760 |
GBP/USD – After reaching a low of 1.0322 on Monday, we have seen a recovery to a high of 1.0929. Currently, the 20EMA line at 1.0920 is likely to cap the rally. Unless price can move above this resistance, we are likely to see another test of the previous low at 1.0322 again in the next few days. MACD and 20EMA remain bearish while stochastic is rising from the oversold zone.
| Support | 1.0725 | 1.0680 | 1.0605 |
| Resistance | 1.0810 | 1.0875 | 1.0930 |
XAU/USD – Price reached a low of $1620.75 overnight. Stochastic is also in the oversold zone and is hinting at a limited downside. However, both 20EMA and MACD are bearish and hinting at bearish price trend. We think price may do a correction back to the 20EMA resistance line at $1646 to the previous low turned supported point at $1653.80 and if price cannot move above this resistance, we are likely to see a continuation of the downtrend.
| Support | 1620.75 | 1606.40 | 1590.45 |
| Resistance | 1634.40 | 1646.10 | 1658.25 |
XAG/USD – Yesterday, we had a sell call at $18.65. Overnight price went up to a high of $19.02, taking out our stop at $18.90. Price had declined to a low of $18.31 and this low was accompanied by a divergence warning from the MACD indicator. Price may have reached a low and we are likely to see a price rally back to $19.00 again. Stochastic is in the oversold zone. Both 20EMA and MACD remain bearish.
| Support | 18.30 | 18.00 | 17.80 |
| Resistance | 18.70 | 19.05 | 19.40 |