Market Talk
– The U.S. dollar continued to climb against its major peers on Thursday as U.S. Treasury yields rose to its highest level since the mid-2008, while the yen slid to a fresh 32-year low and kept markets on high alert for any signs of an intervention.
– The Japanese yen hit a fresh trough of 149.96 per dollar, its lowest since August 1990, and last bought 149.92. It has been on a losing streak for 11 straight sessions as of Wednesday’s close, and has renewed 32-year lows for six sessions now.
– Sterling fell 0.2% to $1.1201, even as data released on Wednesday showed that the biggest jump in food prices since 1980 and pushed British inflation into double digits. The euro was down 0.1% to $0.9762.
– Data on Thursday showed that Australia’s jobless rate stayed near five-decade lows at 3.5% in September, though there was a potential sign of loosening in the very tight labour market as employment rose by much less than expected. The Aussie fell 0.2% to $0.6258, while the kiwi was 0.36% lower at $0.5656.
– Gold prices fell to an over three-week low on Thursday to $1,627.80 an ounce as expectations of more Federal Reserve interest rate hikes pushed up U.S. Treasury yields and caused a steep selloff in metal markets.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.1245. Stop at 1.1280 and profit target at 1.1145.
3. A rise in Treasury yields and expectations of more rate hikes are aiding the U.S. dollar.
4. A potential flag pattern and a divergence in MACD are both hinting at a price decline.
Fundamental Comments
1. Expectation of more rate hikes by the Fed is aiding the U.S. dollar.
2. A rise in US benchmark Treasury yields is aiding the U.S. dollar.
Technical Comments
1. A potential flag pattern is hinting at a bearish price trend.
2. A divergence in MACD is hinting at a price high and a bearish price trend.
Key Levels
| Support | 1.1185 | 1.1140 | 1.1080 |
| Resistance | 1.1255 | 1.1320 | 1.1360 |
Technical Overview
USD/JPY – Price reached a fresh high at 149.95 this morning and price is hovering close to this high. Stochastic is in the overbought zone but MACD remains bullish but is hinting at a price high with a divergence warning. 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 | 149.50 | 149.05 | 148.65 |
| Resistance | 150.00 | 150.50 | 151.00 |
EUR/USD – The decline continues after a false break above 0.9660 on Tuesday at the previous support turned resistance line. The decline is likely to continue towards 0.9700 initially and later to 0.9665 in the next few days. Stochastic is declining and is hinting at a price decline. MACD remains bullish and is hinting at a bullish price trend while 20EMA is bearish. Only a move above 0.9875 would negate our bearish view.
| Support | 0.9750 | 0.9705 | 0.9665 |
| Resistance | 0.9800 | 0.9855 | 0.9895 |
AUD/USD – Price has declined past the 20EMA and we are likely to see a continuation of the decline to 0.6190 in the next 48 hours. Stochastic is approaching the oversold zone but 20EMA is bearish and hinting at a bearish price trend. MACD is neutral at the moment. Ability to move above the 20EMA could send price higher to 0.6340. Watch the 20EMA for clue to the next direction.
| Support | 0.6230 | 0.6190 | 0.6170 |
| Resistance | 0.6275 | 0.6305 | 0.6345 |
XAU/USD – Price reached a low of $1622.35 this morning and price may have reached a temporary low. A bullish Engulfing candlestick price pattern is hinting at a potential price low. MACD is also hinting at a possible price low with a divergence warning. Stochastic is also hinting at a limited downside. If price can stay above $1622.35, we are likely to see a corrective rally to $1642 in the next 48 hours.
| Support | 1622.35 | 1614.55 | 1606.40 |
| Resistance | 1634.88 | 1646.65 | 1658.55 |
XAG/USD – We had a sell call on this pair yesterday at $18.70 but price only reached a high of $18.66 and our entry order was not filled. Price has declined to a low of $18.21 this morning. We think the 20EMA resistance is likely to cap price and we are likely to see a test of the previous low at $18.05 in the next 24 hours. Stochastic is in the oversold zone but 20EMA is bearish. MACD is neutral at the moment.
| Support | 18.20 | 17.95 | 17.55 |
| Resistance | 18.60 | 18.95 | 19.30 |