Market Talk
– The U.S. dollar fell against most currencies in volatile trading on Thursday, after spiking early following a hotter-than-expected U.S. inflation report cementing expectations of a 75 bps hike, as some investors thought the market’s initial response to the data was excessive.
– Data showed U.S consumer prices increased more than expected in September and underlying inflation pressures continued to escalate, cementing expectations the Federal Reserve will deliver another 75-basis-point (bps) rate increase at next month’s policy meeting.
– Sterling posted steep gains against the dollar after reports of a possible U-turn by the UK government on its fiscal plans. The pound last changed hands at $1.1306, up 1.9% on a Sky News report that the British government is looking at which parts of the tax-cutting package can be ditched in a further U-turn by Prime Minister Liz Truss.
– The euro also fell against the dollar initially to a two-week low and then rebounded to trade 0.7% higher at $0.9773. The greenback briefly hit a 32-year peak against the yen of 147.66 after the data and then pared gains to trade 0.2% higher at 147.25 yen.
– Gold prices fell on Friday and were set to close the week lower amid fears of more interest rate hikes by the Federal Reserve, following a hotter-than-expected U.S. inflation report, cementing expectations the Federal Reserve will deliver another 75 bps hike.
Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.6305. Stop at 0.6275 and profit target at 0.6425.
3. A weaker US dollar and an improvement in risk sentiment are driving demand away from the safe haven U.S. dollar.
4. Price has moved above the 20EMA with MACD hinting at a potential price low in place.
Fundamental Comments
1. A softer US dollar is aiding the Aussie.
2. A stronger US equity market and an improvement in risk sentiment are driving demand away from the safe haven U.S. dollar.
Technical Comments
1. Price has moved above the 20EMA which is also hinting at a bullish price trend.
2. MACD has a divergence warning of a potential price low.
Key Levels
| Support | 0.6295 | 0.6235 | 0.6200 |
| Resistance | 0.6360 | 0.6425 | 0.6480 |
Technical Overview
USD/JPY – Price reached a high of 147.67 overnight, which is a 32-year high. Stochastic continues to stay inside the overbought zone and 20EMA is hinting at a strong bullish price trend. MACD is also hinting at a bullish price trend. MACD is also forming a divergence warning with price. The next price resistance comes in at 148.00 and there is also a possibility of BOJ intervention above the overnight high.
| Support | 147.15 | 146.65 | 146.25 |
| Resistance | 147.65 | 148.00 | 148.50 |
EUR/USD – Price reached a low of 0.9633 overnight and has rallied past the 20EMA line to a high of 0.9808 this morning. The low was also accompanied by a divergence warning from the MACD indicator hinting at a possible price low. Stochastic is rising and 20EMA as well as MACD has turned bullish. We are likely to see price continues to 0.9835. However, if price fails to move above this resistance, it could be heading back to 0.9635 again in the next few days.
| Support | 0.9760 | 0.9725 | 0.9665 |
| Resistance | 0.9810 | 0.9845 | 0.9895 |
GBP/USD – Price moved past the Fibonacci 62% of the decline from the high of 1.1495 to the low at 1.0923 at 1.1276. We are likely to see a continuation of the rally to the previous high at 1.1495 in the next few days. Stochastic is moving into the overbought zone but 20EMA remains bullish and is hinting at a strong bullish price trend. MACD is also hinting at a bullish price trend. Only a move below 1.1145 would negate our bullish view for the next few days.
| Support | 1.1280 | 1.1210 | 1.1160 |
| Resistance | 1.1335 | 1.1380 | 1.1420 |
XAU/USD – We had a sell recommendation yesterday at $1674.90, which was filled when price rallied to a high overnight at $1682.36. Price declined later to a low of $1642.22 and we are out of our position with a profit of $16.60. Price has moved up this morning but is currently being capped by the 20EMA at $1671.80. MACD is showing a divergence with price warning of a possible price low but price will need to move above $1682 to negate the bearish price trend.
| Support | 1658.30 | 1642.20 | 1629.40 |
| Resistance | 1672.20 | 1682.70 | 1693.65 |
NZD/USD – Price reached a low of 0.5511 overnight and this low was accompanied by a divergence warning from the MACD and Stochastic indicator. This is a warning of a potential price low. Price has since moved higher to 0.5670 and we are expecting the rally to continue to 0.5800 in the next few days. Stochastic is rising and MACD has turned bullish. 20EMA is also hinting at a bullish price trend.
| Support | 0.5650 | 0.5595 | 0.5560 |
| Resistance | 0.5705 | 0.5735 | 0.5775 |