Market Talk
– The U.S. dollar fell sharply on Thursday after U.S. consumer prices rose less than expected in October to suggest underlying inflation is cooling, data that Wall Street cheered as it may allow the Federal Reserve to get less aggressive with interest rate hikes.
– U.S.CPI rose 0.4% in October to match the prior month’s increase, the Labour Department said. The annualized increase in headline inflation slid below 8% for the first time in eight months. Excluding volatile food and energy components, the CPI increased 0.3% on a month-over-month basis after gaining 0.6% in September.
– The U.S. Treasury market rallied, pushing down the yield on the benchmark 10-year note, which was on pace for its largest single day’s decline since March 2009. The Japanese yen climbed to its biggest single-day rise since 2008
– The euro rose 1.93% to $1.0221 while the British pound traded at $1.1714 and notched its biggest daily advance since 1985. The Canadian dollar also gained to 1.3306 on the back of a crude oil price increase as fears of a U.S. recession eased.
– Gold prices stuck to a 2-½ month high on Friday and were set for their best week in over eight months as signs of cooling U.S. inflation drove up hopes that the Federal Reserve will trim its pace of interest rate hikes in the coming months.
Chart Focus XAG/USD – Silver
Key Points
1. Sell Silver recommendation.
2. Sell Silver at $21.90. Stop at $22.15 and profit target at $21.00.
3. A slowdown in the China economy and a 16% price rally over two weeks periods are both likely to weigh on Silver.
4. Price could be forming a Rising Wedge chart pattern and MACD is warning of a possible price high with divergence.
Fundamental Comments
1. A slowdown in the China economy due to strict COVID regulation is likely to weigh on Silver
2. A 16% rally in Silver’s price over a two week period is likely to result in a price correction.
Technical Comments
1. Price could be forming a Rising Wedge chart pattern which is a hint of a possible price high.
2. MACD is warning with divergence of a possible price high.
Key Levels
| Support | 21.45 | 21.05 | 20.50 |
| Resistance | 21.85 | 22.10 | 22.45 |
Technical Overview
USD/JPY – Price declined to a low of 140.19 on the back of a decline in U.S. Treasury yields. Stochastic has yet to reach the oversold zone, hinting that price has more room to fall. 20EMA is pointing down with a steep slope, hinting at a strong bearish price trend. MACD is also hinting at a strong bearish price trend. We are likely to see a price decline again to test the overnight low at 140.19 after a short consolidation.
| Support | 141.30 | 140.80 | 140.20 |
| Resistance | 142.00 | 142.45 | 143.15 |
EUR/USD – We had a buy call at 1.0015 yesterday but we were stop out of this trade at 0.9985 when price declined to a low of 0.9935. Price had moved up to a high of 1.0234 this morning on the back of a cooler inflation data. We are expecting the rally to continue higher to 1.0365 in the next few days. Stochastic is rising and has not reached the overbought zone. Both MACD and 20EMA are hinting at a bullish price trend.
| Support | 1.0175 | 1.0125 | 1.0090 |
| Resistance | 1.0235 | 1.0270 | 1.0320 |
GBP/USD – Price reached an overnight high of 1.1730 and is currently near to the overnight high. Stochastic is in the overbought zone, hinting at a limited upside. However, 20EMA is pointing up with a steep slope, hinting at a strong bullish price trend. MACD is also hinting at a strong bullish price trend. We are likely to see price break above the overnight high and a rally to 1.1875 in the next couple of days.
| Support | 1.1645 | 1.1595 | 1.1530 |
| Resistance | 1.1705 | 1.1760 | 1.1830 |
XAU/USD – Price reached a high of $1764.37 this morning. Price may have reached a high as stochastic is in the overbought zone. MACD indicator is also losing momentum and is hinting at a limited upside. However, 20EMA is pointing up with a steep slope and hinting at a strong bullish price trend. The next price resistance lies at $1771.70. We think this resistance may cap the rally and force a price correction lower to $1728 before the rally resumes again.
| Support | 1752.40 | 1740.40 | 1729.05 |
| Resistance | 1764.30 | 1771.70 | 1782.10 |
USD/CAD – We had a buy call Wednesday at 1.3435 which was filled and yesterday had recommended shifting stop higher to 1.3495 while keeping profit target at 1.3550. Price reached a high of 1.3561 before the U.S. CPI data. We are out of this position with a profit of 115 pips. Price reached a low of 1.3291 and MACD could be forming a divergence with price, hinting of a potential price low.
| Support | 1.3290 | 1.3260 | 1.3215 |
| Resistance | 1.3320 | 1.3360 | 1.3395 |