Market Talk
– Sterling fell on Thursday and the U.S. dollar was clawing back a recent dip as relief at the Bank of England’s intervention in bond markets faded in the face of nagging doubts about Britain’s economic management and the outlook for global growth.
– The British pound jumped the most since mid-June on Wednesday after the BoE to shore up a gilt market that had been in freefall with the pound. Sterling jumped as high as $1.0916 and falling as low as $1.0539 as markets tried to digest what the move meant for the pound.
– The euro was last at $0.9670 in late Asian morning trading after falling as low as $0.9535 overnight. The greenback was last at 144.60 yen after touching an overnight low of 143.90 following a retreat in US Treasury yield from 12-year high.
– The Australian and New Zealand dollars gave up some of their overnight bounce on Thursday, as relief at the Bank of England’s intervention in bond markets faded while the overall bearish trend showed no sign of reversing. The Aussie was last trading at 0.6470 while the kiwi was at 0.5675.
– Gold prices fell slightly to $1,655.86 an ounce on Thursday after recovering sharply from multi-year lows aided by BoE purchase of UK government bonds, as markets remained wary of resurgence in the dollar and Treasury yields.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.3675. Stop at 1.3640 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 supported by the 20EMA 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 supported by the 20EMA which is also hinting at a bullish price trend.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 1.3675 | 1.3635 | 1.3595 |
| Resistance | 1.3735 | 1.3775 | 1.3820 |
Technical Overview
USD/JPY – Price reached a low of 143.90 overnight but has moved up again to 144.60 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 middle of its range and is neutral. MACD remains bullish and 20EMA is also hinting at a price rally. Only a move below 143.90 would negate our bullish view for the next few days.
| Support | 144.45 | 143.80 | 143.30 |
| Resistance | 144.90 | 145.35 | 145.90 |
EUR/USD – Price reached a low of 0.9535 overnight and had a rally that brought price higher to 0.9750. Price is currently sitting on the 20EMA at 0.9660. If price can stay above the 20EMA support, we are likely to see a rally back to the previous high at 0.9750. However, failure to hold above 0.9660 is likely to send price lower to 0.9535 again. We prefer a rally 0.9805 in the next couple of days ahead.
| Support | 0.9655 | 0.9595 | 0.9535 |
| Resistance | 0.9685 | 0.9750 | 0.9805 |
GBP/USD – We had a sell recommendation yesterday at 1.0730 but a Bank of England intervention in the gilts market sent price to a high of 1.0915, which triggered our stop at 1.0765. Price has since declined to a low of 1.0765 and we are expecting this decline to continue for today to 1.0665 unless the BoE stepped in to buy UK gilts again and in larger amount than the previous day. Stochastic is in the overbought zone but both MACD and 20EMA remain bearish.
| Support | 1.0735 | 1.0690 | 1.0635 |
| Resistance | 1.0805 | 1.0855 | 1.0915 |
XAU/USD – Price reached a low of $1614.58 and this low was accompanied by a divergence from the MACD indicator. Price had rallied to a high of $1662.42 and is currently finding support at the 20EMA at $1645. If price can hold above this support, we are likely to see another test of the high at $1662 again but failure to hold this support is likely to send price lower to $1614 again. Stochastic, 20EMA and MACD are all hinting at a bullish price trend.
| Support | 1642.75 | 1629.30 | 1614.55 |
| Resistance | 1652.55 | 1662.45 | 1673.95 |
AUD/USD – Price reached a new low of 0.6362 overnight and we have seen a rally to 0.6530. There was a Morning Star candlestick price pattern on the 4-hourly chart warning of a price bottom. MACD has a divergence warning of a possible price low as well. If price can stay above 0.6362, we may see another rally to 0.6590 in the next 48 hours. Stochastic is near to the overbought zone but both MACD and 20EMA remains bearish.
| Support | 0.6445 | 0.6400 | 0.6360 |
| Resistance | 0.6485 | 0.6530 | 0.6575 |