Market Talk
– The U.S. dollar rose against most major currencies on Monday, recouping recent losses, as fresh COVID-19 curbs in China fuelled worries over the global economic outlook and made traders shift their bets to the safe haven U.S. dollar.
– The greenback found additional support after Federal Reserve Bank of San Francisco President, Mary Dale, said Monday that the U.S. central bank could lift its overnight target rate above 5% if inflation does not cool off, even though that’s not her expected outcome for monetary policy.
– The Australian dollar, viewed as a liquid proxy for risk appetite and the China yuan, sank 1.1% to a more than 1-week low of $0.6584. The greenback rose 1.2 % against the Japanese yen to 142.08 yen, on pace for its largest one-day gain since Sept. 6.
– Sterling slip to $1.1822 against a strengthening U.S. dollar and as investors braced for further weakness for the pound ahead of public finances data due on Tuesday and flash PMI numbers on Wednesday. The euro fell 0.86 % against the greenback to $ 1.0235
– Gold prices rose on Tuesday, but remained pinned near two-week lows as the greenback extended its gains. Hawkish signals from some Federal Reserve members also supported the dollar, as investors await minutes from the Fed’s November meeting, due to be released on Wednesday, for any hints about the outlook for interest rates.
Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation.
2. Sell EUR/USD at 1.0275. Stop at 1.0310 and profit target at 1.0150.
3. Fresh COVID-19 curbs in China and hawkish signals from some Federal Reserve members are aiding the U.S. dollar.
4. Price is likely to be capped by the falling 20EMA with MACD hinting at a bearish price trend.
Fundamental Comments
1. Fresh COVID-19 curbs in China fuelled worries over the global economic outlook and are aiding the safe-haven U.S. dollar.
2. Hawkish signals from some Federal Reserve members are aiding the U.S. dollar.
Technical Comments
1. Price is likely to be capped by the falling 20EMA and the previous support turned resistance line.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1.0220 | 1.0190 | 1.0145 |
| Resistance | 1.0275 | 1.0315 | 1.0375 |
Technical Overview
USD/JPY – Price had stayed above the 20EMA and has moved higher to 142.24 overnight. We think there is a possibility of a rally to 142.45 in the next 24 hours. The next resistance lies at 143.15. Stochastic has reached the overbought zone and is hinting at a limited upside. MACD remains bullish but is weak. 20EMA is hinting at a bullish price trend. Only a move below 140.70 would negate our bullish view.
| Support | 141.35 | 140.80 | 140.10 |
| Resistance | 142.05 | 142.45 | 143.15 |
AUD/USD – Price has declined to a low of 0.6584 overnight and we think price is likely to be heading to 0.6535 in the next few days. Price is likely to be capped by the falling 20EMA and from there we are likely to see the decline to 0.6535. This target is also the Fibonacci 50% of the rally from 0.6271 to the high at 0.6803. Stochastic is in the oversold zone but both MACD and 20EMA are hinting at a bearish price trend.
| Support | 0.6585 | 0.6535 | 0.6495 |
| Resistance | 0.6625 | 0.6665 | 0.6695 |
GBP/USD – We had a sell call at 1.1855 yesterday but our entry order was filled this morning when price reached a high of 1.1863. Stochastic has a bullish crossover and MACD is about to have a bullish crossover as well. Both are hinting of a price rally ahead. The decline has also stayed above a uptrend line starting from 3 Nov. Price could move either direction at the moment. We would recommend keeping stop at 1.1890 and profit target at 1.1700.
| Support | 1.1835 | 1.1760 | 1.1700 |
| Resistance | 1.1875 | 1.1925 | 1.1965 |
XAU/USD – Our view remains the same as yesterday. We see price going to the Fibonacci 38% of the rally from 1616.55 to the high at $1786.15 at $1721.35 in the next couple of days. Stochastic is rising from the oversold zone but we think this will only trigger a small corrective rally that should be capped by the 20EMA at $1749.35. MACD remains bearish and is hinting at a bearish price trend.
| Support | 1732.50 | 1721.35 | 1712.50 |
| Resistance | 1746.85 | 1758.40 | 1769.95 |
USD/CAD – We had a buy call on Thursday at 1.3330 which was filled. Yesterday, we had recommended lifting stop higher to 1.3370 while keeping profit order at 1.3470. Overnight, price reached a high of 1.3495 and our profit order was filled. We are out with a 140 pips profit. MACD is showing signs of a possible top forming while stochastic is in the overbought zone and is hinting at a price decline.
| Support | 1.3410 | 1.3365 | 1.3315 |
| Resistance | 1.3455 | 1.3495 | 1.3540 |