Market Talk
– The U.S. dollar struggled to gain a foothold on Monday and was languishing at five-month lows as traders looked past stronger than anticipated U.S. jobs data, while growing hopes of China reopening boosted risk sentiment.
– The dollar initially jumped after U.S. data showed that employers added 263,000 jobs in November, well above estimates of 200,000, but gave up the gains as a Fed official said that the pace of increases is likely to slow, but added that the U.S. central bank will likely need to raise borrowing costs to a “slightly higher” peak than envisioned in forecasts from September.
– The offshore yuan also rose nearly 1% to 6.9485 as more Chinese cities relaxed some anti-COVID measures, improving risk appetite. The Australian dollar rose 0.54% to $0.6830, while the kiwi was 0.12% higher at $0.6420.
– The euro was up 0.09% to $1.0547, having gained 1.3% last week. Sterling was last trading at $1.2298, up 0.09% on the day. The Japanese yen weakened 0.11% versus the greenback at 134.46 per dollar, having gained 3.5% on the greenback last week.
– Gold prices rose to a five-month high on Monday, as the U.S. dollar weakened slightly after more Chinese cities relaxed COVID-19 restrictions over the weekend. Fed speakers allaying market concerns about the pace of rate hikes also aided the yellow metal.
Chart Focus USD/CAD
Key Points
1. Sell USD/CAD recommendation.
2. Sell USD/CAD at 1.3410. Stop at 1.3440 and profit target at 1.3320
3. A slower pace of U.S. rate hike and an increase in crude oil price are both weighing on the U.S. dollar.
4. A break of a 3-week uptrend channel coupled with a bearish MACD is hinting at a bearish price trend.
Fundamental Comments
1. A slower pace of U.S. rate hike is likely to weigh on the US dollar.
2. An increase in crude oil price is aiding the Canadian dollar.
Technical Comments
1. Price is breaking below a 3-week uptrend channel, hinting at the starting of a price decline.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1.3380 | 1.3335 | 1.3295 |
| Resistance | 1.3415 | 1.3455 | 1.3495 |
Technical Overview
USD/JPY – The decline continued and last Friday, price reached a low of 133.61. Stochastic remains in the oversold zone and is hinting at a limited downside. MACD remains bearish but there is a divergence warning from MACD, hinting at a price bottom. However, 20EMA is hinting at a strong bearish price trend. We think price is due for a rally after a 6-week decline. The first rally should bring price to the 20EMA resistance line at 136.00 in the next few days.
| Support | 134.25 | 133.60 | 133.20 |
| Resistance | 134.80 | 135.35 | 135.95 |
EUR/USD – Price reached a high of 1.0585 this morning. Stochastic is in the overbought zone and is hinting at a limited upside. MACD is showing a divergence warning of a possible price high in the making. However, 20EMA is hinting at a strong bullish price trend. We are likely to see a short term price correction back to the 20EMA at 1.0480 in the next 2-3 days before the uptrend resumes again.
| Support | 1.0555 | 1.0510 | 1.0465 |
| Resistance | 1.0585 | 1.0615 | 1.0655 |
GBP/USD – Price reached a high of 1.2344 this morning but this price high was also accompanied by a divergence warning from the MACD indicator. This is a sign of a possible price high and a possible correction ahead. Stochastic is also hinting at a possible price high with both its lines in the overbought zone. However, 20EMA is hinting at a strong bullish price trend. We see a decline back to 1.2210 in the next 2-3 days before the uptrend resumes again.
| Support | 1.2295 | 1.2250 | 1.2225 |
| Resistance | 1.2345 | 1.2405 | 1.2455 |
XAU/USD – Price reached a high of $1809.80 this morning but this price high was also accompanied by a divergence warning from the MACD indicator, hinting at a possible price high and a possible price correction. Stochastic is also hinting at a limited upside. However, 20EMA is pointing up with a steep slope, hinting at a strong bullish price trend. We favour a correction and see price declining to the 20EMA support at $1787 in the next 48 hours.
| Support | 1794.50 | 1785.40 | 1773.60 |
| Resistance | 1802.90 | 1809.80 | 1824.85 |
AUD/JPY – We had a buy call last Friday at 92.10 but our call was wrong. The decline continues and this morning we saw a low at 91.00. Stochastic is rising but remains in the oversold zone. Stochastic is hinting at a limited downside. MACD has given a divergence warning of a possible price low but 20EMA is hinting at a strong bearish price trend. We think price may have hit a bottom and a rally to 92.30 is likely in the next 24 hours.
| Support | 91.70 | 91.20 | 90.80 |
| Resistance | 92.05 | 92.45 | 92.95 |