Market Talk
– The U.S. dollar retreated across the board on Tuesday as investors looked past worries about China’s COVID flare-ups, denting demand for dollar. Market participants are waiting for clues on the outlook for inflation and monetary policy from the Federal Reserve’s minutes due on Wednesday.
– A growing number of Fed officials said in recent weeks that the central bank is likely to raise interest rates by a relatively smaller margin in December. This spurred a growing amount of bets that U.S. inflation has peaked, and that the central bank will eventually taper its pace of interest rate hikes further weakening the U.S. dollar.
– The euro rose 0.5% against the dollar to $1.0296 to snap a three-session streak of losses. Sterling was higher at $1.1885 after data showed Britain’s government borrowed less than expected in October, although the budget deficit is likely to balloon in the months ahead thanks to energy bill support measures and a slowing economy.
– Tuesday’s revival in risk appetite lifted the Australian dollar 0.6% to 0.6640, while the New Zealand dollar rose to 0.6150 as traders braced for Reserve Bank of New Zealand to deliver its biggest ever rate hike this week as it continues efforts to curb inflation.
– Gold prices edged up to $1,740.66 an ounce as a retreat in the dollar and benchmark U.S. Treasury yields was offset by a rise in equities, while investors awaited cues on the U.S. Federal Reserve’s monetary policy path.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 141.15. Stop at 140.85 and profit target at 143.00
3. Expectation of higher interest rate and current interest rate differential are in the U.S. dollar favour.
4. Price is supported by the 20EMA with MACD hinting at a bullish price trend.
Fundamental Comments
1. Expectation of higher interest rate is likely to aid the U.S. dollar.
2. Interest rate differential is in the U.S. dollar favour.
Technical Comments
1. Price is supported by the 20EMA which is hinting at a bullish price trend.
2. MACD is bullish and is hinting at a bullish price trend.
Key Levels
| Support | 141.10 | 140.50 | 140.05 |
| Resistance | 141.50 | 142.00 | 142.50 |
Technical Overview
USD/CAD – After reaching a high at 1.3494 on Monday, price has been on a decline. The 20EMA is capping price at the moment and if price is unable to move above the 20EMA, we are likely to see a decline to the previous low at 1.3299 in the next few days. Stochastic is declining and hinting at a price decline, supporting our view. However, MACD remains bullish and is hinting at a bullish price trend.
| Support | 1.3355 | 1.3300 | 1.3265 |
| Resistance | 1.3395 | 1.3435 | 1.3495 |
EUR/USD – We had a sell call yesterday at 1.0275 but we were wrong on this call. Price went above our stop to 1.0325 and looks likely it will test the previous high of 1.0395 in the next 1-2 days. Stochastic is rising and is hinting at a price rally. MACD remains in the bearish trend. 20EMA is hinting at a bullish price trend. A price move below 1.0220 would negate our bullish trend view.
| Support | 1.0300 | 1.0265 | 1.0220 |
| Resistance | 1.0340 | 1.0395 | 1.0425 |
GBP/USD – We had a sell call at 1.1855 on Monday and yesterday, we had left stop order at 1.1890 and profit target at 1.1700. Price reached a high of 1.1909 overnight and our stop was triggered. We are out of this position with loss of 45 pips. There is no clear direction and price could move sideways within the range of 1.1935 to 1.1770. Stochastic is hinting at a price rally but both MACD and 20EMA are hinting at a sideways trend.
| Support | 1.1865 | 1.1820 | 1.1775 |
| Resistance | 1.1930 | 1.1985 | 1.2025 |
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. Price is still below the 20EMA which is a bearish sign. MACD remains bearish and is hinting at a bearish price trend. Only a move above $1755 would negate our bearish view for the next few days.
| Support | 1732.50 | 1721.35 | 1712.50 |
| Resistance | 1746.85 | 1758.40 | 1769.95 |
NZD/USD – Despite a 75 basis points hike by the Reserve Bank of New Zealand, price has been not able to move above the recent high at 0.6205. There is still a chance of a breakout above 0.6205 as stochastic is rising and hinting at a price rally. Both MACD and 20EMA remain bullish and both are hinting at a bullish price trend. A move below the previous low at 0.6090 would negate our bullish view.
| Support | 0.6165 | 0.6115 | 0.6080 |
| Resistance | 0.6205 | 0.6250 | 0.6285 |