Market Talk
– The British pound languished near a record low on Wednesday on lingering concerns over Britain’s radical tax cuts to spur growth, while the U.S. dollar edged up after a Fed official’s hawkish comment and a surge in US Treasury yields overnight.
– Speaking on Tuesday, St. Louis Fed President James Bullard made a case for more rate hikes, while Chicago Fed President Charles Evans said the central bank will need to raise rates by at least another percentage point this year.
– Sterling fell to $1.0660 in Asian trading, following a slight 0.4% gain in the previous session. Bank of England Chief Economist Huw Pill said overnight that the central bank is likely to deliver a “significant policy response” to finance Minister Kwasi Kwarteng’s huge tax cuts.
– The Japanese yen stood close to a 24-year trough at $145.90 at 144.80 in Tokyo trading. Benchmark U.S. 10-year Treasury yields and the 30-year yields rose to new milestones high overnight weighing on the yen. The euro was down against the dollar at $0.9559.
– Gold prices were little changed on Wednesday, remaining near Monday’s low of $1620.75 as the dollar remained pinned to 20-year highs helped by looming rate hikes and benchmark 10-year US Treasury yields hitting a 12-year high, climbing above 4.00% overnight.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.0730. Stop at 1.0765 and profit target at 1.0540
3. Expectations of more Fed’s rate hike and lingering concerns over Britain’s radical tax cuts are both weighing on the British pound
4. Price is likely to be capped by a previous support turned resistance with MACD and 20EMA both hinting at a bearish price trend
Fundamental Comments
1. Expectation of more rate hikes by the Fed is aiding the US dollar
2. Lingering concerns over Britain’s radical tax cuts is likely to weigh on the British pound.
Technical Comments
1. Price is likely to be capped by a previous support turned resistance.
2. Both MACD and 20EMA are hinting at a bearish price trend.
Key Levels
| Support | 1.0635 | 1.0600 | 1.0530 |
| Resistance | 1.0690 | 1.0735 | 1.0790 |
Technical Overview
USD/JPY – Price moved in a tight range for the past 24 hours, supported by rising US Treasury yields but capped by fears of a BOJ intervention again. We are likely to see price test the 145.00 level again and later 145.90 high. BOJ intervention is likely above 145.90. Stochastic is in the overbought zone but 20EMA is hinting at a bullish price trend. MACD is also hinting at a bullish price trend.
| Support | 144.35 | 143.80 | 143.30 |
| Resistance | 144.90 | 145.35 | 145.90 |
EUR/USD – Price reached a low of 0.9541 this morning, just above the previous low at 0.9525. If price is able to hold above the previous low, we are likely to see a rally back to the 20EMA line at 0.9650. However, a break of Monday’s low at 0.9525 is likely to send price lower to 0.9470. Stochastic is above the oversold zone but is moving lower. MACD may be forming a divergence but 20EMA is hinting at a strong bearish price trend.
| Support | 0.9525 | 0.9470 | 0.9435 |
| Resistance | 0.9580 | 0.9620 | 0.9660 |
AUD/USD – Price reached a new low of 0.6376 at the point of this writing. The next price support comes in at 0.6250. Stochastic is currently in the oversold zone and is hinting at a limited downside. However, 20EMA is pointing down with a steep slope, hinting at a strong bearish price trend. MACD remains bearish but could be forming a divergence and hinting at a possible price low and reversal.
| Support | 0.6370 | 0.6335 | 0.6300 |
| Resistance | 0.6415 | 0.6470 | 0.6505 |
XAU/USD – Price is testing Monday’s low at $1620.75 at the time of this writing. We are likely to see this support breaks and a decline in price to the next support level at $1604 in the next few days ahead. If price can hold above Monday’s low, we can see a test back to $1654 again. Stochastic is in the oversold zone but 20EMA is pointing down with a steep slope, hinting at a strong bearish price trend. MACD is also bearish.
| Support | 1620.75 | 1604.10. | 1590.45 |
| Resistance | 1639.45 | 1653.55 | 1671.35 |
USD/CAD – We had a buy call at 1.3630 overnight but price only reached a low of 1.3639 and our entry order was not filled. Price has since moved higher to 1.3775 and we are likely to see price test last Monday’s high of 1.3806 in the next 24 hours. This could be a final rally before the correction as both MACD and stochastic could be forming divergence with price. 20EMA remains bullish.
| Support | 1.3760 | 1.3715 | 1.3670 |
| Resistance | 1.3805 | 1.3865 | 1.3900 |