Market Talk
– The U.S. dollar climbed on Monday as sentiment soured after China said it is sticking with its strict COVID restrictions, quashing hopes of an imminent reopening in the world’s second-largest economy which had earlier fired a broad rally in riskier assets.
– The greenback had tumbled last Friday after the U.S. nonfarm payrolls report for October showed the world’s largest economy created more new jobs than expected, but also flashed signs of a slowdown with a higher unemployment rate and lower wage inflation.
– Sterling edged lower to $1.1324, while the euro to $0.9930, reversing their roughly 2% jump on Friday on U.S. data that raised optimism the Federal Reserve would be less aggressive on rate hikes going forward. Against the Japanese yen, the dollar was up 0.26% at 147.05.
– The Aussie was last down 0.66% at $0.6427, while the kiwi fell 0.7% to $0.5887. The two currencies were huge beneficiaries of a broad rally on Friday – rising nearly 3% – as speculation that China could soon end its COVID restrictions gathered pace and buoyed risk appetite.
– Gold prices fell on Monday, after a 3% surge last Friday on US NFP data that raised optimism the Federal Reserve would be less aggressive on rate hikes going forward, reversing some steep gains from the prior session as China’s recommitment to its zero-COVID policy ramped up concerns over slowing economic growth and boosted the dollar.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation
2. Sell GBP/USD at 1.1340. Stop at 1.1380 and profit target at 1.1180
3. Fear of a UK recession and interest rate differential are both likely to weigh on the British pound.
4. Price is capped by the 20EMA with MACD hinting at a bearish price trend.
Fundamental Comments
1. Fear of a UK recession is likely to weigh on the British pound.
2. Interest rate differential is in the greenback’s favour.
Technical Comments
1. Price is capped by the 20EMA which is hinting at a bearish price trend.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1.1295 | 1.1240 | 1.1185 |
| Resistance | 1.1340 | 1.1380 | 1.1435 |
Technical Overview
USD/JPY – The range over the past few days has decreased and this could be a sign of consolidation. The broad range is from 146.55 to the top at 148.85. Stochastic is in decline and MACD remains bearish. These could be a sign of a bearish trend ahead. 20EMA is also bearish and hinting at a bearish price trend. If price break below 146.50, we are likely to see a decline to 145.57 in the next 48 hours.
| Support | 146.95 | 146.55 | 146.20 |
| Resistance | 147.40 | 147.80 | 148.15 |
EUR/USD – The rally off the low at 0.9729 has stalled at the Fibonacci 62% correction point at 0.9955 The Fibonacci is from the high at 1.0092 to the low at 0.9729. Stochastic is rising and is near to the overbought zone but is able to support a continuation of this rally. 20EMA is bullish. MACD could be about to turn bullish but remains bearish currently. Watch the Fibonacci 62% point at 0.9955 for clues to the next direction.
| Support | 0.9910 | 0.9860 | 0.9795 |
| Resistance | 0.9965 | 1.0000 | 1.0040 |
AUD/JPY – We had a sell call last Friday at 93.95. We were wrong on this call. Price shot up to a high of 95.06 last Friday and our stop was triggered. This morning, despite a sour risk sentiment, price has managed to stay above the 20EMA, keeping the short-term bullish trend intact. However, Stochastic is in the overbought zone and MACD is still bearish. Both indicators are hinting at a possible price high.
| Support | 94.10 | 93.65 | 93.15 |
| Resistance | 94.75 | 95.25 | 95.70 |
XAU/USD – Price reached a high of $1681.50 last Friday and has been declining since that high. Stochastic is in the overbought zone and is hinting at a limited upside. MACD is bullish and hinting at a bullish price trend. 20EMA is also hinting at a bullish price trend. If price can stay above $1655, there is a good chance that we can see another test of the previous high at $1681.50 again in the next 48 hours.
| Support | 1667.05 | 1654.40 | 1640.65 |
| Resistance | 1681.50 | 1690.50 | 1700.25 |
NZD/USD – Price reached a high of 0.5935 which was just shy of the previous high at 0.5939. There is a possibility of a Double Top chart pattern forming. Price will need move above 0.5940 to keep the bullish trend. Failure to move above 0.5940 is likely to send price lower to test the Double Top’s neckline at 0.5740 in the next 48 hours. Stochastic is near to the overbought zone while MACD and 20EMA remains bullish.
| Support | 0.5875 | 0.5845 | 0.5795 |
| Resistance | 0.5910 | 0.5940 | 0.5975 |