Market Talk
– The dollar looked set to post its best week in over a month on Friday on expectations that U.S. rates could peak higher, while sterling was on the ropes as investors revised their rate projections after a shift in tone from the Bank of England.
– The number of Americans filing new claims for unemployment benefits unexpectedly fell to a seasonally adjusted 217,000 for the week ended Oct. 29, while nonfarm productivity, which measures hourly output per worker, rose at a 0.3% annualized rate last quarter after slumping at a 4.1% pace in the April-June quarter.
– The pound dropped to a two-week low against the dollar at $1.1165 after the Bank of England raised rates but warned of a “very challenging outlook”. BoE raised rate to 3% from 2.25% in its largest single increase since 1989, as it battles the twin forces of a slowing economy and red-hot inflation.
– The dollar rose 0.2% against the yen to 148.205 yen, as traders continue to watch for any further official intervention to shore up the battered Japanese currency. The euro fell 0.6% against the dollar to $0.9758.
– Spot Gold rose 0.1% on Friday to $1,631.88 an ounce recovering slightly from a sharp falls, after the Fed hike interest rate leading to steep losses in gold, as the opportunity cost of holding the yellow metal increased.
Chart Focus AUD/JPY
Key Points
1. Sell AUD/JPY recommendation.
2. Sell AUD/JPY at 93.95. Stop at 94.30 and profit target at 93.00.
3. Concerns over zero-COVID policy and decline in equity market is shifting focus to the safe haven yen.
4. Price is capped by the 20EMA with MACD hinting at a bearish price trend.
Fundamental Comments
1. Decline in the equity market has decreased risk appetite and shifted focus to the safe haven yen.
2. Concerns over slowing demand in China due to zero-COVID policy is likely to weigh on the Aussie dollar.
Technical Comments
1. Price is capped by the 20EMA which is also hinting at a bearish price trend.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 93.45 | 92.95 | 92.45 |
| Resistance | 94.00 | 94.65 | 95.00 |
Technical Overview
USD/JPY – The range over the past few days has decreased and this could be a sign of consolidation. Stochastic is in the overbought zone and both MACD and 20EMA are flat and neutral at the moment. We think price is likely to move within a range of 146.80 to 148.85 in the next couple of days ahead. NFP later in the global day could move price out of this range. We would recommend following the direction of the breakout.
| Support | 147.80 | 147.25 | 146.80 |
| Resistance | 148.20 | 148.85 | 149.45 |
EUR/USD – Price reached a low of 0.9729 overnight and currently price is moving higher from the overnight low. However, we think price is likely to be capped by the 20EMA resistance at 0.9825 and another decline to the previous low at 0.9729 is likely in the next 1-2 days. Stochastic is in the oversold zone but both MACD and 20EMA are both bearish and hinting at a bearish price trend.
| Support | 0.9760 | 0.9705 | 0.9675 |
| Resistance | 0.9790 | 0.9840 | 0.9895 |
GBP/USD – Price reached a low of 1.1148 overnight on recession forecast by the BoE despite a 75 bps rate hike. The trend is bearish and we think price is likely to be capped by the 20EMA line at 1.1335 and another test of the previous low at 1.1060 is likely in the next few days. Stochastic is in the oversold zone but 20EMA is pointing down with a steep slope, hinting at a strong bearish price trend. MACD is also hinting at a bearish price trend.
| Support | 1.1190 | 1.1130 | 1.1095 |
| Resistance | 1.1240 | 1.1295 | 1.1335 |
XAU/USD – Price tested the previous low of $1616.98 overnight and reached a fresh low of $1616.55. However, a strong bounce of the overnight low is hinting at a potential price bottom. The rally is likely to continue towards $1668 in the next 24 hours. Stochastic is rising from the oversold zone and hinting at a price rally. 20EMA has turned bullish but MACD remains bearish. If price failed to move above $1668, it could turn back towards $1616.55 again.
| Support | 1640.65 | 1630.70 | 1616.55 |
| Resistance | 1653.35 | 1668.55 | 1682.50 |
EUR/JPY – We had a sell recommendation at 145.65 on Wednesday which was filled. Yesterday, we had left stop at 145.55 and profit target at 144.60. Our profit order was filled when price declined to a low of 144.02. We are out with a 105 pips profit. Stochastic is in the oversold zone but both MACD and 20EMA are bearish. We think price is unlikely to move above the 20EMA resistance line at 145.25 and price is likely to test the low of 144.02 again and lower in the next few days.
| Support | 144.05 | 143.60 | 143.05 |
| Resistance | 144.75 | 145.25 | 145.95 |