Market Talk
– The U.S. dollar started the week firmly on Monday, with a strong U.S. labour market reinforcing bets on higher interest rates as traders braced for data expected to show stubbornly high inflation. Geopolitical instability in Europe and Asia also fed safe haven trades into the greenback.
– US data on Friday showed the U.S. economy created roughly as many jobs in September as expected and unemployment unexpectedly fell last month, reinforcing expectations for more aggressive rate rises.
– Sterling fell 0.2% to $1.1071, staying near to Friday’s low. The euro fell below $0.98 on Friday and was last at $0.9733 on Monday morning. The yen was last at 145.37 per dollar, drifting into a zone on the weaker side of 145 per dollar that prompted authorities’ intervention to support it last month.
– The Aussie fell 0.3% to a 2-1/2 year low of $0.6347 in early trade in Asia that was thinned by a holiday in Japan. The New Zealand dollar touched a two-week low of $0.5593. The Canadian dollar was little changed at 1.3733, supported by a higher crude oil price.
– Gold prices stayed below key levels on Monday after a strong U.S. jobs report gave the Federal Reserve few reasons to soften its hawkish rhetoric, while concerns over geopolitical instability in Europe and Asia fed safe haven trades into the dollar.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.3715. Stop at 1.3685 and profit target at 1.3830
3. Bets on higher U.S. interest rate and geopolitical tensions are aiding the U.S. dollar.
4. Price is supported by the 20EMA with MACD hinting at a bullish price trend.
Fundamental Comments
1. Bets on higher U.S. interest rates in the coming months by the Federal Reserve is aiding the US dollar
2. Geopolitical instability in Europe and Asia is feeding safe haven demand into the greenback.
Technical Comments
1. Price is supported by the 20EMA which is also hinting at a bullish price trend.
2. MACD is bullish and is hinting at a bullish price trend.
Key Levels
| Support | 1.3715 | 1.3675 | 1.3640 |
| Resistance | 1.3760 | 1.3795 | 1.3835 |
Technical Overview
USD/JPY – After a decline to the low at 143.51 on last Tuesday, we have seen a price rally to 145.66 this morning. We think price is likely to continue higher to 145.90 in the next 1-2 days. Stochastic is already in the overbought zone and is hinting at a limited upside. MACD is bullish and hinting at a bullish price trend. 20EMA is also hinting at a bullish price trend. Only a move below 144.35 would negate our bullish view.
| Support | 145.25 | 144.90 | 144.40 |
| Resistance | 145.65 | 145.90 | 146.30 |
EUR/USD – Price reached a high of 0.9999 on Tuesday and has been declining since that high. Price is currently near to the Fibonacci 62% of the rally from the low of 0.9535 to the high at 0.9999. If price break below the Fibonacci 62% correction point at 0.9712, we are likely to see a decline to 0.9535 in the next few days. Ability to hold above the 62% correction point is likely to send price higher to 0.9805. Watch the reaction for clue to the next price direction.
| Support | 0.9710 | 0.9680 | 0.9635 |
| Resistance | 0.9750 | 0.9790 | 0.9830 |
GBP/USD – Price reached a high of 1.1495 on Wednesday but that high was accompanied by a divergence warning from the MACD indicator. We have since seen a price decline to 1.1055 on Friday. We are expecting the decline to continue to 1.0935 in the next few days if price fails to move above 1.1135. Stochastic is in the oversold zone but both 20EMA and MACD are hinting at a bearish price trend.
| Support | 1.1050 | 1.1015 | 1.0970 |
| Resistance | 1.1085 | 1.1135 | 1.1170 |
XAU/USD – Price broke above a downtrend channel that has been in force since 8 March 2022 last Wednesday but inability to break the resistance at $1734.85 has resulted in price moving back into the downtrend channel again on Friday. We are expecting price to continue lower to the Fibonacci 50% correction point at $1670 in the next few days. Stochastic is in the overbought zone but MACD remains bearish.
| Support | 1675.60 | 1662.10 | 1645.20 |
| Resistance | 1687.70 | 1700.40 | 1715.10 |
EUR/AUD – We had a sell call last Friday at 1.4310 but our call was wrong. This morning price reached a high of 1.5343 taking out our stop at 1.5340. Stochastic is rising and is hinting at a price rally. MACD is also bullish and hinting at a price rally. 20EMA is also hinting at a bullish price trend. The next resistance point lies at 1.5416 and we think price could be heading in this direction.
| Support | 1.5365 | 1.5320 | 1.5260 |
| Resistance | 1.5400 | 1.5445 | 1.5500 |