Market Talk
– The U.S. dollar climbed on Monday as protests against COVID restrictions in China rattled financial markets, sending the yuan sliding and pushing nervous investors toward the safe-haven greenback.
– The COVID protests have flared and spread to several cities. Worries over the unprecedented wave of civil disobedience in a country where in-person protests are rare, the rising COVID cases as well as how Beijing will react to the situation kept investors on edge.
– The offshore yuan fell to an over two-week low in Asian trading, and was last roughly 0.6% lower at 7.24 per dollar. The Australian dollar, often used as a liquid proxy for the yuan, slid more than 1% to $0.6687. The kiwi slumped 0.65% to $0.6206.
– The yen was up about 0.5% to 138.46 per dollar gaining on the back of its safe haven status as well as a mix performance from US Treasury. The euro fell 0.43% to $1.0357, while sterling was down 0.51% at $1.2027
– Gold prices retreated on Monday morning as the U.S. dollar regained its strength as a safe haven as protests in China flared. With market pricing in a 50 basis points hike next month, holding cost is making the yellow metal expensive to investors.
Chart Focus GBP/USD
Key Points
1. Buy GBP/USD recommendation.
2. Buy GBP/USD at 1.2030. Stop at 1.1995 and profit target at 1.2150
3. Divergence monetary policy is likely to aid the British pound against the U.S. dollar.
4. Price is likely to be supported by the 20EMA with MACD hinting at a bullish price trend.
Fundamental Comments
1. The prospect of the Federal Reserve slowing monetary policy tightening is likely to weigh on the U.S. dollar.
2. High UK inflation is likely to lead to higher UK interest rate, aiding the British pound.
Technical Comments
1. Price is supported by the 20EMA which is also hinting at a bullish price trend.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 1.2025 | 1.1985 | 1.1925 |
| Resistance | 1.2075 | 1.2125 | 1.2155 |
Technical Overview
USD/JPY – Price was capped by the 20EMA at 139.59 last Friday and has declined to 138.16 at the point of this writing. Our view remands the same as last Friday. We think price is likely to continue lower to 137.70 in the next couple of days ahead. Stochastic is near to the oversold zone and MACD remains bearish. 20EMA is also hinting at a bearish price trend. Only a move above 139.60 would negate our bearish price view.
| Support | 138.05 | 137.65 | 137.15 |
| Resistance | 138.65 | 139.00 | 139.55 |
EUR/USD – Price has declined over the past 48 hours and could be heading lower to test the support at 1.0221 as stochastic is hinting at a possible price decline. 20EMA is also hinting at a price decline but MACD remains bullish and is hinting at a price rally. Price could be caught in a range of 1.0480 to 1.0221 in the next few days. A break in either direction is likely to hint at the next directional move.
| Support | 1.0340 | 1.0295 | 1.0225 |
| Resistance | 1.0385 | 1.0420 | 1.0480 |
XAG/USD – Last Friday, we had a buy call at $21.15 which was filled this morning when price reached a low of $21.03. Our view remains unchanged from last Friday. We would recommend keeping stop at $20.80 and profit order at $22.10. Stochastic is declining and is hinting at a price decline but MACD remains bullish and is hinting at a bullish price trend. 20EMA is neutral at the moment.
| Support | 21.10 | 20.90 | 20.55 |
| Resistance | 21.40 | 21.70 | 22.05 |
XAU/USD – Price has been moving in a tight range for the past 48 hours while trying to find the next directional move. Price has stayed below the Fibonacci 50% of the decline from $1786.15 to $1731.45 at $1758.10 but is sitting on the 20EMA. We would prefer to watch the upside range at $1761 and the support at $1731 for directional clues. Follow in the direction of the breakout.
| Support | 1745.95 | 1731.45 | 1721.35 |
| Resistance | 1760.80 | 1770.80 | 1785.60 |
NZD/USD – Price reached a high of 0.6288 last Thursday and has been declining. The decline has reached a low of 0.6190 this morning. This could be a corrective decline and if price can stay above 0.6175, we can expect a rally to test the previous high of 0.6288 again in the next couple of days as MACD remains bullish and is hinting at a bullish price trend. 20EMA is neutral while stochastic is hinting at a price decline.
| Support | 0.6185 | 0.6150 | 0.6110 |
| Resistance | 0.6220 | 0.6255 | 0.6290 |