Market Talk
– The U.S. dollar started the week on the front foot, boosted by defensive buying as investors remained on edge following a spike in COVID-19 cases in some cities in China that prompted Beijing to tighten restrictions.
– China’s capital Beijing reported two COVID-19 deaths for Nov. 20, with the city’s most populous district urging residents to stay at home on Monday, extending a request from the weekend. The rising cases have cast doubt on the hopes of an early easing in strict pandemic restrictions sending the yuan down to $7.1700.
– The euro fell to $1.0302 after hawkish comments from the Federal Reserve officials helped the safe-haven U.S. dollar while sterling was last traded at $1.1851, down 0.30% on the day. Both the euro and sterling had hit multi-month highs against the dollar earlier this week after inflation data showed an easing in U.S. price pressures.
– The Japanese yen weakened 0.04% versus the greenback at 140.42 per dollar on the back of rising US Treasury yields. The Australian dollar fell 0.25% versus the greenback at $0.6650, while the kiwi was down 0.21% at $0.6140.
– Gold prices moved little on Monday but hovered around key support levels as markets sought more clarity on the path of U.S. monetary policy in the coming months, while silver prices were muted as more COVID disruptions in China appeared set to dent demand.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.1855. Stop at 1.1890 and profit target at 1.1700
3. Hawkish remarks from Federal Reserve officials and rising U.S. bond yields are aiding the U.S. dollar.
4. Price has moved below 20EMA line with MACD hinting at a bearish price trend.
Fundamental Comments
1. Hawkish remarks from Federal Reserve officials are aiding the U.S. dollar
2. Rising U.S. bond yields are aiding the U.S. dollar.
Technical Comments
1. Price has moved below 20EMA line after being capped at the Fibonacci 62% correction point.
2. MACD is hinting at a bearish price trend.
Key Levels
| Support | 1.1835 | 1.1760 | 1.1700 |
| Resistance | 1.1875 | 1.1925 | 1.1965 |
Technical Overview
USD/JPY – We got this pair direction wrong last Friday as price failed to move above the 20EMA. However, price has since stayed above the 20EMA and we think there is a possibility of a rally to 142.45 in the next few days. Stochastic is moving towards the overbought zone, hinting there could be more upside. MACD is also above the zero line, hinting at a bullish price trend and a price rally ahead.
| Support | 140.10 | 139.65 | 139.15 |
| Resistance | 140.75 | 141.30 | 141.65 |
EUR/USD – Price has moved below the 20EMA hinting at a bearish price trend ahead. MACD had earlier given a divergence warning of a possible price high. We think price could be on its way to the next support level at 1.0090 in the next few days. However, stochastic is in the oversold zone hinting at a limited upside. 20EMA has turned bearish and MACD is also hinting at a bearish price trend. Only a price move above 1.0410 would negate the bearish trend.
| Support | 1.0270 | 1.0220 | 1.0160 |
| Resistance | 1.0335 | 1.0395 | 1.0435 |
USD/CHF – We had a buy call last Friday at 0.9500 but price only reached a low of 0.9504 and our entry order was not filled. Price has since moved higher to 0.9555 and we are expecting the rally to continue higher to 0.9620 in the next 1-2 days ahead. Stochastic is inside the overbought zone, hinting at a limited upside. MACD and 20EMA both remain bullish and are hinting at a bullish price trend.
| Support | 0.9525 | 0.9485 | 0.9430 |
| Resistance | 0.9580 | 0.9620 | 0.9655 |
XAU/USD – Our view remains the same as last Friday. We see price going from current $1746 to our target at $1721 in the next couple of days. This decline is the 3rd part of the correction. There is a possibility that price may reverse around $1737 as Stochastic is already in the oversold zone for the second time. MACD is also showing sign of a turnaround but 20EMA remains bearish and is hinting at a bearish price trend.
| Support | 1740.30 | 1725.95 | 1715.65 |
| Resistance | 1754.95 | 1769.95 | 1786.15 |
USD/CAD – We had a buy call on Thursday at 1.3330 which was filled. We had recommended keeping stop at 1.3295 while keeping profit target at 1.3470 last Friday. For today, we are recommending lifting stop higher to 1.3370 while keeping profit order at 1.3470. Stochastic is rising and is hinting at a price rally. MACD and 20EMA are also hinging at a price rally ahead. Only a price move below 1.3295 would negate the bullish price view.
| Support | 1.3395 | 1.3360 | 1.3315 |
| Resistance | 1.3445 | 1.3475 | 1.3520 |