Market Talk
– The U.S. dollar advanced on Monday after strong consumer spending data pointed to persistent underlying inflation pressure, cooling bets that the U.S. Federal Reserve could signal a slowdown in its aggressive monetary policy tightening campaign.
– Data on Friday showed U.S. consumer spending rose more than expected in September while underlying inflation pressures continued to bubble, keeping the Federal Reserve on track to hike interest rates by another three-quarters of a percentage point next week.
– Sterling was lower at $1.1600, though was on track for a nearly 4% monthly gain, staging a strong recovery after former British prime minister Liz Truss’s budget plan was dumped by the new British PM. The euro last bought $0.9953, but was likewise headed for a monthly gain of over 1%, its first since May.
– Ahead of another central bank decision tomorrow, the Australian dollar rose 0.09% to $0.6417.The RBA is expected to raise interest rates by a more modest 25 basis points for a second straight month on Tuesday and is set to do so again in December despite the highest inflation in three decades, a Reuters poll found.
– Gold prices traded flat on Monday around $1641, but were still reeling from sharp losses on Friday, as U.S. Treasury yields rose past 4% on expectations that the Federal Reserve will hike rates by at least 75 basis points this week following a strong US consumer spending last Friday.
Chart Focus USD/CHF
Key Points
1. Buy USD/CHF recommendation.
2. Buy USD/CHF at 0.9945. Stop at 0.9915 and profit target at 1.0025
3. A strong U.S. consumer spending data last Friday and interest rate differential are aiding the U.S. dollar.
4. Price is supported by the 20EMA with both 20EMA and MACD hinting at a bullish price trend.
Fundamental Comments
1. A strong U.S. consumer spending data is pointing to persistent inflation and more Fed rate hike, aiding the U.S dollar.
2. Interest rate differential is also aiding the U.S. dollar.
Technical Comments
1. Price is supported by the 20EMA, which is also hinting at a bullish price trend.
2. MACD is moving up after a bullish crossover, hinting at a bullish price trend.
Key Levels
| Support | 0.9935 | 0.9890 | 0.9840 |
| Resistance | 0.9980 | 1.0030 | 1.0095 |
Technical Overview
USD/JPY – Price reached a low of 145.10 on Thursday and the rally has moved past the 20EMA resistance line to a high of 148.27 this morning. Stochastic has reached the overbought zone and is hinting at a price correction ahead. Both 20EMA and MACD are hinting at a bullish price trend. If price can stay above the 20EMA line at 147.35, we are likely to see a continuation of the rally to 149.45 in the next 1-2 days ahead.
| Support | 147.75 | 147.15 | 146.60 |
| Resistance | 148.25 | 148.75 | 149.45 |
EUR/USD – Price is little change for today, staying close but below the 20EMA line. Price is also being supported by the Fibonacci 38% correction point. Stochastic is in the oversold zone and is hinting at a price rally ahead. MACD has also remained bullish and is hinting at a bullish price trend. As long as price stays above the Fibonacci 50% correction point, there is a good chance of another test of 1.0095 but with a likely rate hike by the Fed, the danger is to the downside.
| Support | 0.9925 | 0.9890 | 0.9845 |
| Resistance | 0.9965 | 1.0000 | 1.0045 |
GBP/USD – We had a buy call last Friday at 1.1520, which was filled when price declined to a low of 1.1503. We would recommend placing stop at cost and keeping profit order at 1.1640 for today. Stochastic is rising and hinting there is more upside ahead for this pair. MACD remains bullish and is hinting at a price rally. 20EMA is pointing up and hinting at a bullish price trend.
| Support | 1.1580 | 1.1515 | 1.1470 |
| Resistance | 1.1625 | 1.1695 | 1.1740 |
XAU/USD – We had a buy recommendation last Tuesday at $1645 and on Friday, we had place stop at $1648 and profit order at $1675. Price declined to a low $1637.88, taking out our stop. However, we still make $3 out of this trade as we had shifted our stop order higher. Stochastic is in the oversold zone but both MACD and 20EMA has turned bearish. We think price could be moving lower to $1615 if support at $1637.88 is broken.
| Support | 1637.55 | 1626.80 | 1614.65 |
| Resistance | 1649.60 | 1661.40 | 1674.80 |
NZD/USD – Price managed to stay above the 20EMA line last Friday, despite the strong U.S. dollar trend. Stochastic is near to the oversold zone, hinting at a price rally ahead. MACD remains bullish and is hinting at a bullish price trend. 20EMA is also hinting at a bullish price trend. We think price is likely to move higher to test the previous high of 0.5870 in the next 1-2 days. A price move below 0.5780 would negate our bullish view.
| Support | 0.5795 | 0.5765 | 0.5725 |
| Resistance | 0.5835 | 0.5880 | 0.5930 |