Market Talk
– The safe-haven U.S. dollar gained broadly in volatile trading on Tuesday, amid hawkish Federal Reserve commentary pointing to the need to tighten monetary policy further and keep rates higher for longer. Investors are also waiting for inflation data later in the global day and on Thursday for clues to US interest rate path.
– Federal Reserve Bank of Cleveland President Loretta Mester echoed recent remarks from other voting Fed members, calling on the need for monetary policy to become “more restrictive” to “put inflation on a sustainable downward path to 2%.”
– Sterling dropped to a two-week low of $1.0932 after a top Bank of England official; Andrew Bailey reiterated that the central bank will end its bond-buying program on Friday and told pension fund managers to finish rebalancing their positions within that time frame.
– In Japan, confidence among manufacturers fell for a second straight month, according to a Reuter’s poll, sending the dollar/yen above 146 for the first time since 1998 prompting authorities in Tokyo to pledge necessary steps in the foreign exchange market if needed. Investors are waiting to see if the BOJ will intervene to bring down the USD/JPY rate.
– Gold prices moved little on Wednesday as investors avoided big bets ahead of key U.S. inflation data this week, while the minutes of the Federal Reserve’s September meeting were also in focus.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation
2. Sell GBP/USD at 1.1060. Stop at 1.1095 and profit target at 1.0920
3. Expectation of more US rate hikes and concerns over a UK economic recession are likely to weigh on the British pound
4. Price is capped by the 20EMA 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. Concerns over a UK economic recession are likely to weigh on the British pound
Technical Comments
1. Price is capped by the 20EMA which is hinting at a bearish price trend
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1.0965 | 1.0920 | 1.0880 |
| Resistance | 1.1015 | 1.1085 | 1.1120 |
USD/JPY – Price moved above the previous 24-year high at 145.90 to a high of 146.38 this morning aided by a weak Japanese data. The rally higher has been slow, owing to fear of a BOJ intervention. The next resistance lies at 146.80. Stochastic is in the overbought zone. MACD remains bullish and is hinting at a bullish price trend. 20EMA is also hinting at a strong bullish price trend.
| Support | 145.95 | 145.55 | 144.90 |
| Resistance | 146.40 | 146.80 | 147.65 |
EUR/USD – Price has moved past the Fibonacci 62% of the rally from the low of 0.9535 to the high at 0.9999 overnight and we are likely to see a decline to 0.9535 in the next few days. Stochastic is rising and is hinting at a bullish price trend but 20EMA remains bearish and is hinting at a bearish price trend. MACD remains bearish and is hinting at a bearish price trend. A move above 0.9815 would negate our bearish view.
| Support | 0.9680 | 0.9630 | 0.9590 |
| Resistance | 0.9735 | 0.9790 | 0.9830 |
AUD/USD – Price made a low at 0.6239 overnight and this low was accompanied by a divergence warning from the MACD indicator, warning of a potential price low. Stochastic is in the oversold zone and is hinting at a limited downside as well. However, 20EMA is hinting at a strong bearish price trend. We think price may have reached a low and a move above 0.6340 would confirm the low and a rally to 0.6465 in the next few days.
| Support | 0.6235 | 0.6185 | 0.6135 |
| Resistance | 0.6295 | 0.6345 | 0.6390 |
XAU/USD – After reaching a low at $1660, price had a rally overnight but was capped by the 20EMA at $1682.75. Price has since declined back to $1660. A break of the Fibonacci 62% support at $1658.30 is likely to send price lower to $1614 in the next few days. Stochastic is in the oversold zone but both MACD and 20EMA are hinting at a bearish price trend. Price will need to move above $1683 to negate our bearish view.
| Support | 1658.30 | 1641.25 | 1629.40 |
| Resistance | 1671.95 | 1682.75 | 1700.40 |
EUR/JPY – We had a sell call at 141.25 yesterday but we were wrong on our call. We lost 35 pips on this trade. Price has moved higher to 142.17 but stochastic has yet to reach the overbought zone. Stochastic is hinting there is potential for further price upside. MACD is also turning bullish. 20EMA has already turned bullish and price could be heading towards the Fibonacci 62% correction point at 142.85.
| Support | 141.75 | 141.25 | 140.75 |
| Resistance | 142.20 | 142.85 | 143.45 |