Market Talk
– The safe-haven U.S. dollar was rocked by a risk on sentiment across markets as investors digested positive euro zone data and optimism about an eventual economic reopening in China ahead of an inflation data on Thursday and mid-term election that will determine the control of Congress.
– Market focus is shifting to U.S. midterm elections later in the day, with a Republican victory and consequently gridlock in Congress forecast. Some analysts say that outcome could be positive for bonds and negative for the dollar if it leads to less fiscal stimulus.
– The euro was up 0.69% to $1.0029, its highest level since Oct. 27, buoyed by a survey that showed investor morale in euro zone improved in November and data that showed German industrial production grew in September, beating analysts’ forecast.
– The growth-sensitive Australian slipped to $0.6449 weighed down by weakness in the Chinese Yuan as China grips with increasing COVID cases. The kiwi was at $0.5916, after earlier touching a seven-week high of $0.5951.
– Spot gold prices were slightly lower at $1674.69 per ounce, though losses were limited by a weaker dollar, while investors looked forward to U.S. inflation data later this week that could influence the size of Federal Reserve rate-hike.
Chart Focus USD/CHF
Key Points
1. Sell USD/CHF recommendation.
2. Sell USD/CHF at 0.9945. Stop at 0.9980 and profit target at 0.9875
3. Expectation of a slower pace of Fed interest rate hikes and a risk on sentiment are both weighing on the U.S. dollar.
4. Price is likely to be capped by the 20EMA with MACD hinting at a bearish price trend.
Fundamental Comments
1. A risk on sentiment is weighing on the U.S. dollar.
2. Expectation of a slower pace of Fed interest rate hikes is weighing on the U.S. dollar.
Technical Comments
1. Price is likely to be capped by the 20EMA with the 20EMA hinting at a strong bearish price trend.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 0.9895 | 0.9840 | 0.9795 |
| Resistance | 0.9925 | 0.9980 | 1.0020 |
Technical Overview
USD/JPY – Price broke below the range and declined to a low of 146.05 but has moved back into the range again instead of declining to 145.57. We are likely to see a continuation of this range movement, at least for today. The range is from 146.05 to the high at 148.85. Stochastic is in the oversold zone, hinting at a price return back into the higher end of the range. Both MACD and 20EMA remains bearish.
| Support | 146.50 | 146.05 | 145.65 |
| Resistance | 147.15 | 147.55 | 148.15 |
EUR/USD – Price reached a high of 1.0033 overnight and has been declining since reaching this high. We are likely to see the decline continues towards the 20EMA line support at 0.9935 as stochastic is in the oversold zone and is hinting at a price decline. However, the trend, as indicated by the 20EMA and the MACD indicator remain bullish and hinting at a bullish price trend. A move below the 20EMA will negate our bullish price view for the next 2-3 days.
| Support | 0.9980 | 0.9940 | 0.9900 |
| Resistance | 1.0035 | 1.0090 | 1.0125 |
GBP/USD – We had a sell call yesterday at 1.1340 but we were wrong on this call. Price rallied to a high of 1.1541, taking out our stop at 1.1380. Stochastic is in the overbought zone and is hinting at a limit upside. However 20EMA is hinting at a strong bullish price trend ahead. MACD is also bullish and pointing to a price rally. If price stays above 1.1415, we are likely to see a test of 1.1645 in the next couple of days.
| Support | 1.1470 | 1.1420 | 1.1370 |
| Resistance | 1.1540 | 1.1595 | 1.1645 |
XAU/USD – Price reached a high of $1681.85 overnight, potentially forming a Double Top chart pattern with last Friday’s high on the 4-hourly chart. A break of the Double Top’s support line at $1666.50 is likely to send price lower to $1651.50 in the next 24 hours. Stochastic is in the overbought zone and hinting at a price decline but both 20EMA and MACD are hinting at a strong bullish price trend.
| Support | 1666.25 | 1654.40 | 1640.65 |
| Resistance | 1681.85 | 1690.50 | 1700.25 |
NZD/USD – Price reached a high of 0.5951 which was just shy of the previous week’s high at 0.5939. There is a possibility of a Double Top chart pattern forming and a price move below 0.5740 would confirm the top being in place. Stochastic is in the overbought zone, hinting at a price decline. However, but both 20EMA and MACD are hinting at a strong bullish price trend. A price move above 0.5951 would hint at a continuation of the uptrend.
| Support | 0.5895 | 0.5845 | 0.5795 |
| Resistance | 0.5950 | 0.5990 | 0.6025 |