Market Talk
– The U.S. dollar was on the front foot on Thursday after Federal Reserve Chair Jerome Powell signalled U.S. rates would likely rise further than expected, disappointing traders’ hopes for a change in tone, and shifting the focus to Friday’s jobs data.
– The Fed raised its benchmark funds rate by 75 basis points to 3.75-4% as widely expected. The dollar initially fell on hints in the Fed’s statement of smaller hikes ahead, but Powell’s hawkish stance during his press conference sent the US dollar higher against its peers.
– Sterling fell 0.8% on the dollar overnight to sit at $1.1378 in early deals on Thursday. Markets have priced for the BoE to deliver its biggest hike since 1989 and raise interest rates by 75 basis points later in the global day.
– The greenback’s gains knocked its New Zealand peer from a six-week high and back below its 50-day moving average to $0.5890. The Australian dollar fell 0.7% overnight and slipped further to a week-low of $0.6332 on Thursday
– Gold prices fell on Thursday, reversing recent gains as hawkish comments from Federal Reserve Chairman Jerome Powell’s comment that U.S. rates will likely end the cycle higher than previously expected has dashed hopes that interest rate hikes will end soon.
Chart Focus NZD/USD
Key Points
1. Sell NZD/USD recommendation.
2. Sell NZD/USD at 0.5830. Stop at 0.5865 and profit target at 0.5675
3. Expectation of further U.S. rate hikes and interest rate differential are both in the U.S. dollar’s favour.
4. Price has moved below the 20EMA and could be developing a Double Top chart pattern with MACD hinting at a bearish price trend.
Fundamental Comments
1. Overnight rate hike has widened the interest rate differential in the US dollar favour.
2. Powell’s comment that U.S. rates will likely end the cycle higher than previously expected is aiding the U.S. dollar.
Technical Comments
1. Price has moved below the 20EMA and could be developing a Double Top chart pattern, hinting at a price decline.
2. MACD has a divergence warning of a potential price high and is currently bearish.
Key Levels
| Support | 0.5795 | 0.5745 | 0.5700 |
| Resistance | 0.5835 | 0.5880 | 0.5940 |
Technical Overview
USD/JPY – Price declined to a low of 145.67 overnight but has bounced back up to 147.55 again. The 20EMA line at this point is currently capping the rally and if price can move above this resistance, we are likely to see price moving up to 148.85 again in the next few days. Stochastic is rising and is supporting this bullish view. Both 20EMA and MACD are also turning bullish and hinting at a price rally ahead.
| Support | 147.10 | 146.65 | 146.20 |
| Resistance | 147.65 | 148.00 | 148.40 |
EUR/USD – Price broke below the Fibonacci 62% support at 0.9850 and declined to a low of 0.9809 this morning. We are likely to see the decline continue to 0.9705 in the next couple of days. Stochastic is moving into the oversold zone but could still support further price decline. Both MACD and 20EMA are hinting at a bearish price trend. Price would need to move above 0.9895 to negate our bearish price view for the next couple of days.
| Support | 0.9800 | 0.9765 | 0.9705 |
| Resistance | 0.9840 | 0.9895 | 0.9940 |
GBP/USD – Price has moved below a support at 1.1430 and we are likely to see a continuation of this decline to 1.1255 in the next few days ahead. Stochastic is moving into the oversold zone but could still support further price decline. Both MACD and 20EMA are bearish and hinting at a bearish price trend ahead. Price will need to move above 1.1430 to negate the bearish price trend for the next few days.
| Support | 1.1375 | 1.1320 | 1.1255 |
| Resistance | 1.1435 | 1.1475 | 1.1520 |
XAU/USD – Price reached a low of $1634.53 after Powell’s comment of further rate hikes ahead. Stochastic is still declining and has yet to reach the oversold zone. Stochastic is hinting there could be more downside ahead. Both MACD and 20EMA are bearish and hinting at a bearish price trend. We see price moving down to the previous low at $1616.98 in the next couple of days.
| Support | 1630.70 | 1616.95 | 1600.00 |
| Resistance | 1640.65 | 1658.70 | 1668.55 |
EUR/JPY – We had a sell recommendation at 145.65 yesterday which was filled as price rose to a high of 145.81. Price has since declined to a low of 144.66. Stochastic is in the oversold zone and is hinting at a limited downside. However, both 20EMA and MACD are hinting at a bearish price trend head. We would recommend shifting stop lower to 145.55 while keeping profit target unchanged at 144.60.
| Support | 144.55 | 143.95 | 143.60 |
| Resistance | 145.35 | 145.95 | 146.40 |