Market Talk
– The British pound jumped against the dollar on Monday after Britain scrapped bits of a controversial tax cut plan, tentatively improving global market sentiment and rallying UK gilts and the pound while the greenback was weakened by a below forecast US data.
– The US dollar was also on the back foot after ISM manufacturing September showed a drop to 50.9 from 52.8, well below economists’ forecasts for a drop to 52.2, stoked optimism somewhat that the Fed may be forced to consider a pivot to avoid pushing the economy into a deep recession.
– The euro was at $0.9823, about three cents stronger than last week’s 20-year trough. The dollar was last just slightly lower at 144.69 yen. The Canadian dollar strengthened overnight to 1.3623 on news of a cut in production from OPEC+.
– The Australian dollar declined to $0.6450 after the Reserve Bank of Australia on Tuesday surprised the market by lifting interest rates by a smaller-than-expected 25 basis points to 2.6%, saying they had already risen substantially, though it added that further tightening would still be needed.
– Gold prices were muted on Tuesday after a strong rally Monday, retaking the $1,700 an ounce level after nearly three weeks on a weakening dollar, but gains in the red metal were dampened by more signs of weakening global manufacturing activity.
Chart Focus USD/CAD
Key Points
1. Sell USD/CAD recommendation.
2. Sell USD/CAD at 1.3635. Stop at 1.3670 and profit target at 1.3460
3. Expectations of a production cut by OPEC+ and a weak US data are both weighing on the US dollar.
4. A possible Double Top chart pattern and a bearish MACD are both hinting at a price decline ahead.
Fundamental Comments
1. Expectations that OPEC+ may agree to a large cut in crude output when it meets on Wednesday is boosting crude oil price and the Canadian dollar.
2. A weaker than expected ISM manufacturing September data is weighing on the US dollar.
Technical Comments
1. A possible Double Top chart pattern is hinting at a price decline ahead.
2. MACD has turned bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1.3590 | 1.3555 | 1.3495 |
| Resistance | 1.3655 | 1.3705 | 1.3745 |
Technical Overview
USD/JPY – Price had declined to a low of 144.15 overnight and has been moving higher. We think price is likely to test Monday’s morning high at 145.30 again in the next couple of days head. The final designation could be the previous high at 145.90. Stochastic is in the middle of its range and is neutral. Both MACD and 20EMA are showing a mild bullish trend at the moment. A price move below 144.10 would negate our bullish view.
| Support | 144.60 | 144.15 | 143.75 |
| Resistance | 144.95 | 145.30 | 145.90 |
EUR/USD – We have a buy recommendation at 0.9780 yesterday which was filled when price declined to a low of 0.9753. Our view remains the same as yesterday. We would recommend keeping stop at 0.9745 and profit order at 0.9880. Stochastic is rising and is hinting at a bullish price trend. MACD is bullish with both its line above the zero line and 20EMA are also hinting at a bullish price trend.
| Support | 0.9825 | 0.9775 | 0.9735 |
| Resistance | 0.9885 | 0.9930 | 0.9965 |
GBP/USD – Price jumped up after the British government did a U-turn on its tax cut budget and we are likely to see the rally continues to the previous high at 1.1350 in the next 24 hour. However, a divergence could be forming on the 4-hourly MACD, hinting at a possible price high and a decline in price ahead. Stochastic is also in the overbought zone but 20EMA is hinting at a strong bullish price trend.
| Support | 1.1315 | 1.1165 | 1.1125 |
| Resistance | 1.1365 | 1.1405 | 1.1460 |
XAU/USD – Price spiked higher to $1702.30 on a weak US ISM data but the rally could run into a stiff resistance at $1706.55. This is where a previous resistance is acting as resistance again and also the Fibonacci 200% price projection target. Stochastic is also in the overbought zone and is hinting at a limited upside. However both MACD and 20EMA are hinting at a strong bullish price trend.
| Support | 1694.70 | 1684.95 | 1668.25 |
| Resistance | 1706.55 | 1719.95 | 1731.55 |
AUD/USD – Price declined this morning after the RBA hiked rate by a smaller than expected 25bp. This had sent price to a low of 0.6450 but price has recovered and is close to the price level before the RBA hike. Stochastic is rising and is hinting at a price rally. MACD has also turned bullish and is hinting at a bullish price trend. 20EMA is also bullish. We see price moving above the resistance at 0.6530 to a high of 0.6600 again in the next couple of days.
| Support | 0.6475 | 0.6430 | 0.6390 |
| Resistance | 0.6525 | 0.6560 | 0.6590 |