Market Talk
– The dollar rebounded on Thursday as a better-than-expected retail sales data and hawkish remarks from Kansas City Fed President Esther George renewed fears of more hawkish Federal Reserve monetary policy tightening. The euro gained as geopolitical concerns eased over a missile blast in Poland.
– The Commerce Department reported that retail sales rose 1.3% last month topping estimates for the 1.0% gain expected. The retail sales control group – which has a larger impact on U.S. GDP, rose 0.7% beating expectations for a 0.3% rise.
– The euro was up 0.33% at $1.0388 but still below the four-and-a-half month peak of $1.0481 it touched on Tuesday when U.S. producer price inflation data was below expectations. The Japanese yen was more resilient, trading little changed at 139.50 per dollar.
– Britain is set to announce a new budget on later in the day with expectations for tax hikes and spending cuts. Market focus is on what the timing of government spending cuts might mean for inflation and rates.
– Gold prices fell from a key resistance level on Thursday as the metal’s safe haven demand diminished on waning fears of an escalation in the Russia-Ukraine conflict and hawkish remarks from Fed official as well as a better-than-expected retail sales data
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation
2. Buy USD/CAD at 1.3330. Stop at 1.3295 and profit target at 1.3470.
3. Hawkish remark from a Fed official and a better-than-expected retail sales data has renewed fears of more hawkish Federal Reserve monetary policy tightening aiding the U.S. dollar.
4. Price may have completed a Double Bottom chart pattern with MACD hinting at a bullish price trend.
Fundamental Comments
1. Hawkish remarks from Kanas City Fed President Esther George renewed fears of more hawkish Federal Reserve monetary policy tightening aiding the U.S. dollar.
2. A better-than-expected retail sales data has renewed fears of more hawkish Federal Reserve monetary policy tightening aiding the U.S. dollar.
Technical Comments
1. Price may have completed a Double Bottom chart pattern with MACD divergence, hinting at a price low and a rally ahead.
2. MACD is hinting at a bullish price trend.
Key Levels
| Support | 1.3325 | 1.3270 | 1.3225 |
| Resistance | 1.3360 | 1.3390 | 1.3425 |
Technical Overview
USD/JPY – We had call at 141.00 on Tuesday but price only reached a high of 140.60 and our entry order was not filled. Price has declined to a low of 137.66 on Tuesday and has recovered to a high of 139.77 this morning. The rally is currently capped by the 20EMA line at 139.75 and if price fails to move above this point, we are likely to see another decline to 137.77. MACD and 20EMA remain bearish while stochastic is neutral.
| Support | 139.15 | 138.70 | 138.30 |
| Resistance | 139.75 | 140.30 | 140.75 |
EUR/USD – Price reached a high of 1.0480 on Tuesday and has been hovering around the 20EMA for the past 2 days. 20EMA is currently supporting price at 1.0340 and a move below this support is likely to send price lower to 1.0270. Ability to hold above the 20EMA support could send price higher to 1.0480 again. MACD and 20EMA remain bullish but stochastic is declining and hinting at a price decline.
| Support | 1.0335 | 1.0280 | 1.0215 |
| Resistance | 1.0395 | 1.0440 | 1.0480 |
GBP/USD – Price reached a high of 1.2029 on Tuesday and the decline off the high has been supported by the 20EMA line at 1.1835. As long as price stays above this line, we are likely to see another test of the high at 1.2029 again but a decline below this line is likely to send price lower to 1.1720. MACD has given a divergence warning but remains bullish. 20EMA line is also bullish while stochastic is neutral at the moment.
| Support | 1.1865 | 1.1825 | 1.1745 |
| Resistance | 1.1920 | 1.1965 | 1.2030 |
XAU/USD – Price reached a high of $1786.15 and has been hovering around the 20EMA line. We are likely to see a move below the 20EMA in the next 24 hours as MACD had given a divergence earlier and stochastic is hinting at a price decline. If price declines below the 20EMA, price could be on its way to $1721.35 which is the Fibonacci 38% correction point of the rally from $1616.55 to the high at $1786.15.
| Support | 1753.20 | 1743.40 | 1734.85 |
| Resistance | 1770.25 | 1786.15 | 1799.15 |
AUD/USD – Price reached a high of 0.6796 on Tuesday and has been declining since that high. 20EMA is currently supporting price at 0.6710 and the 20EMA has so far halted the price decline. However MACD has given a divergence warning earlier of a possible price high. Stochastic has been declining and has yet to reach the oversold zone. We think price is likely to decline below the 20EMA line to 0.6590 in the next couple of days.
| Support | 0.6695 | 0.6640 | 0.6590 |
| Resistance | 0.6740 | 0.6795 | 0.6830 |