Market Talk
– The U.S. dollar gained across the board on Monday, regaining some of the lustre it lost earlier in the month, bolstered by expectations of another supersized rate increase at this week’s Federal Reserve monetary policy meeting.
– The Fed is widely expected to raise its benchmark overnight interest rate by 75 basis points to a range of 3.75% to 4.00%, its fourth such increase in a row. But for the December meeting, fed funds futures have priced in on Monday a 55% chance of a 50-bps rate increase, down from about 67% last Friday.
– Sterling fell 1.2% against the dollar to $1.1476 on Monday. The BoE is likely to deliver a 75-basis point hike at Thursday’s meeting; although analysts said longer-term rate expectations are coming under sustained pressure. The euro dropped to $0.9887 and barely reacted after data released on Monday that showed Eurozone inflation came in hotter than expected at 10.7% a fresh record high.
– The greenback firmed against the struggling Japanese yen to 148.69 yen despite Japan’s finance ministry reported it spent a record $42.8 billion on currency intervention last month to prop up the value of the yen
– Gold prices hit a 10-day low on Tuesday at $1630.70, weighed down by expectation of 75 bps interest rate hike by the Fed. Bullion prices are set to lose more ground as caution kicks in ahead of a FOMC meeting later in the week.
Chart Focus XAU/USD – Gold
Key Points
1. Sell Gold recommendation.
2. Sell Gold at $1644.85. Stop at $1652.95 and profit target at $1616.90.
3. Expectations of another super-sized rate increase by the Fed and an increase in opportunity cost in holding gold are weighing on gold.
4. Price is capped by the 20EMA with MACD hinting at a bearish price trend.
Fundamental Comments
1. Expectations of another super-sized rate increase by the Federal Reserve are aiding the U.S. dollar.
2. The rise in US Treasury yields is adding to the opportunity cost of holding gold.
Technical Comments
1. Price is capped by the 20EMA, which is also hinting at a bearish price trend.
2. MACD is bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1630.70 | 1616.95 | 1600.00 |
| Resistance | 1645.35 | 1661.40 | 1674.80 |
Technical Overview
USD/JPY – The rally stopped at 148.85 overnight and price is declining towards the 20EMA at the moment. Stochastic is in the overbought zone and is hinting at a price decline. MACD and 20EMA remains bullish at the moment. We think there could be a slight price correction lower to the 20EMA support at 147.95 and if price can stay above this support, we are likely to test the high of 148.85 again in the next 24 hours. A decline below 147.95 is likely to send price lower to 145.90.
| Support | 147.95 | 147.25 | 146.60 |
| Resistance | 148.40 | 148.85 | 149.45 |
EUR/USD – Price declined to a low of 0.9875 overnight. This was also a previous resistance turned support line and if price can hold above this line, we are likely to see another test of the previous high at 1.0093. However, a break of this support is likely to send price lower to 0.9704 in the next 2-3 days. Stochastic is supporting a price rally but both MACD and 20EMA are hinting at a price decline.
| Support | 0.9905 | 0.9850 | 0.9805 |
| Resistance | 0.9940 | 0.9995 | 1.0045 |
GBP/USD – We had a buy call last Friday at 1.1520 and yesterday, we had recommended placing stop at cost and keeping profit order at 1.1640. Price declined to a low of 1.1459 overnight and our stop was taken out. Stochastic has reached the oversold zone and is hinting at a price rally ahead. MACD is also bullish but 20EMA is bearish at the moment. If price stays below the 20EMA line at 1.1525, we are likely to visit the overnight low again.
| Support | 1.1460 | 1.1430 | 1.1365 |
| Resistance | 1.1530 | 1.1580 | 1.1625 |
AUD/USD – Price has moved above the 20EMA, changing the chart outlook to bullish. Stochastic is also turning up from the oversold zone, supporting the bullish trend. MACD is also turning bullish and indicating a price rally. Price could be moving higher to the previous high at 0.6520. However, a price move below 0.6367 would negate our bullish price view for the next few days.
| Support | 0.6410 | 0.6365 | 0.6325 |
| Resistance | 0.6450 | 0.6490 | 0.6525 |
USD/CHF – We had a buy call at 0.9945 but price did not come down to our entry level overnight. Instead, price rallied and reached a high of 1.0031. Stochastic has also reached the overbought zone and is hinting at a limited upside. MACD and 20EMA remains bullish. We think that as long as price stays above the 20EMA line at 0.9970, there is likely to be another rally 1.0070 in the next 24 hours.
| Support | 0.9970 | 0.9935 | 0.9890 |
| Resistance | 1.0005 | 1.0030 | 1.0070 |