FX Commentary – US Dollar Rose With Inflation Data Eyed For Clues.

Market Talk

– The U.S. dollar rose for a fourth straight session on Monday as investors looked to inflation data later this week that is likely to show that price pressures remain elevated in the world’s largest economy, keeping the Federal Reserve’s aggressive monetary policy on track to continue until next year.

– Chicago Fed President Charles Evans on Monday said inflation is much more persistent than the U.S. central bank initially thought. But he noted that the Fed may still be able to lower inflation without a sharp rise in unemployment and without pushing the economy into a recession.

– Japan’s yen was down against the greenback after slipping toward a 24-year trough of 145.90 per dollar, a level that prompted authorities’ intervention to support it last month. Sterling slipped for a fourth session running despite the BoE’s move to expand support for financial markets.

– The Australian dollar fell to a 2-1/2-year low of US$0.6275 as the greenback rose. It was last down more than 1% at US$0.6300. The Reserve Bank of Australia last week raised rates by less than expected, adding to the pressure on the currency.

– Gold prices fell 1.5% to $1,669.28 an ounce on Tuesday, as hawkish comments from Federal Reserve officials sent bullion lower. An elevated dollar and solidifying bets for an aggressive Fed interest rate hike help to push the non-yielding bullion to its lowest level in a week.


Chart Focus EUR/JPY

Key Points

1. Sell EUR/JPY recommendation.

2. Sell EUR/JPY at 141.25. Stop at 141.60 and profit target at 139.40.

3. Ukraine war and recession worries in Euro land are both likely to weigh on the single currency.

4. A possible bear Flag chart pattern and bearish MACD are hinting at a price decline.

Fundamental Comments

1. Ukraine war is likely to weigh on the single currency.

2. Recession worries in Euro land is likely to weigh on the single currency.

Technical Comments

1. A possible bear Flag chart pattern is hinting at a price decline.

2. MACD remains bearish and is hinting at a bearish price trend.



Key Levels

Support140.90140.20139.75
Resistance141.60142.10142.80

Technical Overview

USD/JPY – We have seen a price rally to 145.80 overnight. We think price is likely to proceed higher to 145.90 in the next 24 hours. Previously, this level invited BOJ to intervene in the market and there could be a repeat of intervention if price moves above 146.00.Stochastic is also in the overbought zone but both MACD and 20EMA are hinting at a bullish price trend ahead. A possible MACD divergence could also be forming on the 4-hourly chart.

Support145.60144.90144.40
Resistance145.90146.30146.80

EUR/USD – Price has moved past the Fibonacci 62% of the rally from the low of 0.9535 to the high at 0.9999. We are likely to see a decline to 0.9535 in the next few days. Stochastic is in the oversold zone and is hinting at a limited downside. Both MACD and 20EMA are hinting at a strong bearish price trend. There might be a price correction higher but we remain bearish for 0.9535 unless price can move above 0.9820.

Support0.96650.96100.9555
Resistance0.97050.97500.9790

GBP/USD – Price reached a high of 1.1495 last Wednesday but that high was accompanied by a divergence warning from the MACD indicator. We have since seen a price decline to 1.1019 overnight and this is also the Fibonacci 127% of the decline from 1.1495 to the low at 1.1115. Stochastic is in the oversold zone. MACD might be forming a bullish divergence. 20EMA is hinting at a bearish price trend.

Support1.10151.09701.0930
Resistance1.10551.10951.1130

XAU/USD – Price moved past the Fibonacci 50% correction point at $1670 overnight and we are expecting price to test the Fibonacci 62% of the rally from 1614.58 to the high at $1729.03 at $1658.30 in the next 24 hours. A break of the Fibonacci 62% support is likely to send price lower to $1614 in the next few days. Ability to hold above this support can send price back to $1729. Stochastic is oversold but MACD and 20EMA are both bearish.

Support1658.301641.251629.40
Resistance1668.851685.301700.40

USD/CAD – We had a buy call yesterday at 1.3715 which was filled when price declined to a low of 1.3703. Price has reached a high of 1.3830 this morning and our profit order was filled. We are out of this position with a profit of 115 pips.  Price may continue higher to 1.3880. Stochastic is in the overbought zone but both 20EMA is hinting at a bullish price trend. MACD may be forming a divergence with price.

Support1.37951.37601.3715
Resistance1.38451.38901.3935

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