Market Talk
– The US dollar continues to gain against its peers on expectations of rising U.S. interest rates, global recession and China doubling down on its zero-COVID strategy. Sterling fell sharply against the U.S. dollar on Friday after UK PM Liz Truss fired her finance minister and scrapped parts of their economic package that has caused havoc in UK financial markets.
– U.S. retail sales were unexpectedly unchanged in September as stubbornly high inflation and rapidly rising interest rates crimp demand for goods. A survey from the University of Michigan on Friday showed consumer sentiment improved further in October, but inflation expectations deteriorated a bit as average national gasoline prices moved back up towards $4 per gallon after falling over the summer.
– The greenback continued its march higher against a beleaguered yen, hitting a fresh 32-year peak of 148.86. Traders are once again on the lookout for any potential action from Japan’s financial authorities to stem the currency’s slide.
– The British pound fell for a second straight day against the dollar, last trading at $1.1166, down 1.5%. Kwasi Kwarteng said he had resigned at Truss’s request after being forced to rush back to London overnight from IMF meetings in Washington.
– Gold prices inched higher on Monday but were pinned below key support levels as markets feared more interest rate hikes by the Federal Reserve as data showed U.S. inflation will likely take much longer to cool than initially expected.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.3800. Stop at 1.3765 and profit target at 1.3960.
3. Expectations of rising U.S. interest rates and global recession are both likely to aid the U.S. dollar
4. Price is likely to be supported by the 20EMA with stochastic hinting at a bullish price trend.
Fundamental Comments
1. Expectations of rising U.S. interest rates and global recession are both likely to aid the U.S. dollar.
2. Data showed U.S. inflation will likely take much longer to cool than initially expected is also aiding the U.S. dollar.
Technical Comments
1. Price is likely to be supported by the 20EMA, which is also hinting at a bullish price trend.
2. Stochastic is rising and is hinting at a bullish price trend.
Key Levels
| Support | 1.3800 | 1.3765 | 1.3705 |
| Resistance | 1.3850 | 1.3895 | 1.3925 |
Technical Overview
USD/JPY – Price reached a fresh 32-year high at 148.85 last Friday and price is hovering close to this high on Monday’s morning. Stochastic is in the overbought zone but MACD remains bullish and is hinting at a bullish price trend. 20EMA is pointing up with a steep slope, hinting at a strong bullish price trend. The next target lies at 150.00. We remain bullish but are cautious of BOJ intervention.
| Support | 148.40 | 147.85 | 147.35 |
| Resistance | 148.85 | 149.50 | 150.00 |
EUR/USD – Price is hovering around the 20EMA line on the 4-hourly chart. If price stays above the 20EMA it is likely to move higher to 0.9810. However, a move below the 20EMA line is likely to send price lower to 0.9630. We prefer the downside. Stochastic is still declining and is hinting at a price decline. MACD remains bullish and hinting at a price rally. 20EMA is flat and neutral at the moment.
| Support | 0.9705 | 0.9665 | 0.9630 |
| Resistance | 0.9755 | 0.9805 | 0.9845 |
GBP/USD – Last Friday’s decline was supported by the 20EMA and price has since moved higher this morning. As long as price stays above the 20EMA, we are likely to see another rally to 1.1380 and maybe even 1.1495. However, a break of this support is likely to send price lower to 1.0930. Stochastic is moving lower but both MACD and 20EMA are bullish and are hinting at a bullish price trend.
| Support | 1.1195 | 1.1150 | 1.1095 |
| Resistance | 1.1260 | 1.1315 | 1.1380 |
XAU/USD – Price reached a low of $1639.95 last Friday and we have seen a rally to $1654.11 this morning. If price continues to be capped by the falling 20EMA, we are likely to see another decline to last Friday’s low. Only a move above the 20EMA can negate the current bearish trend. Stochastic is in the oversold zone but both 20EMA and MACD are bearish and hinting at a bearish price trend.
| Support | 1639.95 | 1629.40 | 1614.25 |
| Resistance | 1654.10 | 1663.50 | 1672.20 |
AUD/USD – We had a buy call on Friday but our call was wrong. We lost 30 pips on this trade. Price had decline to a low of 0.6193 on Friday, which was slightly higher than the previous low at 0.6169. MACD had earlier warned of a possible low with a divergence and if price can stay above 0.6169, a rally back to 0.6425 is still possible. Stochastic is on the decline and 20EMA has also turned bearish.
| Support | 0.6195 | 0.6165 | 0.6120 |
| Resistance | 0.6235 | 0.6265 | 0.6310 |