Market Talk
– The U.S. dollar lost ground against its peers on Tuesday as investor hopes for slower hikes were renewed by Fed Vice Chair Lael Brainard’s comments that it will likely slow its tightening pace soon as it figures out how high borrowing costs need to go and for how long in order to bring down inflation.
– The euro was down against the dollar at $1.0342, after earlier rising to a three-month high of $1.0368. ECB board member Fabio Panetta said on Monday that the central bank must keep raising rates but needs to avoid over tightening, as doing so could destroy productive capacity and deepen an economic downturn.
– Sterling fell ahead of British Chancellor Jeremy Gaunt’s autumn statement on Thursday when he is expected to set out tax rises and spending cuts. The pound was down 0.55% at $1.1770, having risen 4% in the previous two sessions, touching on Friday its highest level since late August.
– The Japanese yen slipped to 140.48 against the dollar after the world’s third-largest economy shrank at an annualized rate of 1.2% in the third quarter, as high inflation weighed heavily on business and consumer spending.
– Gold prices hovered near three-month highs at $1770.70 on Tuesday as mixed signals from Federal Reserve officials on the path of U.S. interest rates kept the dollar pinned to recent lows.
– There will be no Daily FX Commentary tomorrow. Commentary will resume on Thursday.
Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation.
2. Sell USD/JPY at 141.00. Stop at 141.40 and profit target at 138.75.
3. Fed Lael Brainard’s comments and a decline in US Treasury yield 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. Fed Vice Chair Lael Brainard’s comment about slowing the tightening pace is likely to weigh on the U.S. dollar.
2. A decline in US Treasury yield is aiding the Japanese yen.
Technical Comments
1. Price is likely to be capped by the 20EMA line, which is also hinting at a bearish price trend.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 140.10 | 139.60 | 139.10 |
| Resistance | 140.80 | 141.65 | 142.35 |
Technical Overview
NZD/USD – We had a buy recommendation yesterday at 0.6025 but price only declined to a low of 0.6060 and our entry order was not filled. Price has reached a high of 0.6120 this morning and we are likely to see this rally continues higher to the next resistance at 0.6160. Stochastic is in the overbought zone but both MACD and 20EMA are hinting at a strong bullish price trend. Only a price decline below 0.5950 would negate our bullish price view.
| Support | 0.6095 | 0.6050 | 0.6015 |
| Resistance | 0.6130 | 0.6165 | 0.6220 |
EUR/USD – Price is hovering near the previous week’s high at 1.0363 and 20EMA is hinting at a bullish price trend. There is a strong resistance line at 1.0365-70 level and if price can move above this resistance, we are likely to see 1.0485 in the next couple of days. Stochastic is in the overbought zone but MACD is bullish. If price is capped by the resistance line, we are likely to see a decline back to 1.0090 again.
| Support | 1.0310 | 1.0270 | 1.0220 |
| Resistance | 1.0365 | 1.0415 | 1.0450 |
GBP/USD – Price reached a high of 1.1854 last Friday and since that high, price has been consolidating with the 20EMA providing support at 1.1705. If price is supported above the 20EMA, we are likely to see another test of the high at 1.1854 but a decline below the support is likely to send price lower to 1.1595. Stochastic is hinting at a price decline but both 20EMA and MACD are hinting at a bullish price trend.
| Support | 1.1770 | 1.1715 | 1.1650 |
| Resistance | 1.1815 | 1.1855 | 1.1905 |
XAU/USD – Price reached a high of $1774.70 and has been holding around the high. However, stochastic is in the overbought zone for a prolong period of time now and is hinting at a price decline. MACD and 20EMA remain bullish and are hinting at a bullish price trend. We think price is likely to decline back to the 20EMA before another attempt at the resistance again. A break of $1774 is likely to send price higher to $1800.
| Support | 1766.90 | 1753.20 | 1743.35 |
| Resistance | 1774.70 | 1782.75 | 1799.15 |
XAG/USD – We had a sell recommendation at $21.90 last Friday and yesterday, we had recommended lowering stop to breakeven at 21.90 while keeping profit order at 21.00. Overnight price declined to a low of $21.28 but price has rallied to a high of $22.12 this morning. We are out of this position at our entry price. Stochastic is inside the overbought zone and both MACD and 20EMA are hinting at a bullish price trend. We think price can continue its rally to the next resistance at $22.49.
| Support | 21.85 | 21.30 | 20.85 |
| Resistance | 22.15 | 22.50 | 22.95 |