Market Talk
– The U.S. dollar gained against the yen, the euro and the pound on Monday after data showed that U.S. services industry activity unexpectedly picked up in November, prompting speculation the Federal Reserve may lift interest rates more than recently projected.
– The Institute for Supply Management (ISM) said its non-manufacturing PMI increased to 56.5 last month from 54.4 in October, indicating that the services sector, which accounts for more than two-thirds of U.S. economic activity, remained resilient in the face of rising interest rates.
– The Australian dollar gained on Tuesday after the country’s central bank raised interest rates by 25 basis points to 3.10% and stuck with a prediction of further hikes ahead; quashing any thought it was near to pausing. This helps to lift the Aussie to 0.6731, retracing some of the overnight loss.
– The greenback climbed against the yen to 136.61 yen, bouncing from last Friday’s three-and-a-half month low of 133.62. Sterling was down at $1.2178 on Tuesday morning after reaching an overnight high of 1.2345. The euro slid to $1.0494, having earlier climbed to $1.0585, its highest level since June 28.
– Gold prices beat a sharp retreat on Monday as the dollar rebounded on bets that strong U.S. economic readings may give the Federal Reserve fodder to accelerate rate hikes. Spot gold dipped 1.6% to $1,769.14 per ounce after touching its highest since July 5 at $1,809.91.
Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation.
2. Sell EUR/USD at 1.0495. Stop at 1.0525 and profit target at 1.0410.
3. Speculation of more US interest rate hikes and interest rate differential are both in the U.S. dollar favour.
4. Price has moved off the high and below the 20EMA with confirmation from the MACD hinting at a bearish price trend.
Fundamental Comments
1. Speculation the Federal Reserve may lift interest rates more than recently projected, after a strong US data is aiding the U.S. dollar.
2. Interest rate differential is in the U.S. dollar favour.
Technical Comments
1. Price has moved off the high and below the 20EMA, hinting at a bearish price trend.
2. MACD is warning with a divergence warning hinting at a price high.
Key Levels
| Support | 1.0465 | 1.0425 | 1.0390 |
| Resistance | 1.0505 | 1.0545 | 1.0595 |
Technical Overview
USD/JPY – Price continues its recovery from last Friday’s low of 133.61. We think price is likely to continues higher to 137.70 where it is likely to encounter resistance. Stochastic is close to the overbought zone, hinting at a limited upside. MACD is rising and is hinting at a price rally ahead. 20EMA has turned bullish and is hinting at a bullish price trend. Price will need to move above 137.70 to continue its rally; if it fails to overcome this resistance, we are likely to see a decline back to the previous low at 133.61.
| Support | 136.85 | 136.30 | 135.75 |
| Resistance | 137.45 | 137.70 | 138.45 |
AUD/USD – Price reached a low of 0.6686 overnight, which was also above the lower channel line of a 3-week rising channel, keeping this uptrend intact. As long as price stays above this channel, we can see a price rally to 0.6800 again in the next 24 hours. However, a break of this channel support is likely to send price low to 0.6585 in the next few days. Stochastic is near to the oversold zone, hinting at a limited downside but both MACD and 20EMA are hinting at a bearish price trend.
| Support | 0.6685 | 0.6635 | 0.6585 |
| Resistance | 0.6735 | 0.6795 | 0.6835 |
GBP/USD – Price had reached a high of 1.2344 on Monday and has been declining. This high was also accompanied by a divergence warning from the MACD indicator, hinting at a possible price high. We think this decline is likely to continue towards 1.2050 in the next 2-3 days. Stochastic is declining, hinting at a continuation of the price decline. 20EMA is turning bearish, hinting there is more downside ahead.
| Support | 1.2150 | 1.2110 | 1.2065 |
| Resistance | 1.2225 | 1.2275 | 1.2320 |
XAU/USD – Price had reached a high of $1809.80 on Monday and has been declining. This high was also accompanied by a divergence warning from the MACD indicator, hinting at a possible price high. Price is currently at $1767 which is also the Fibonacci 50% of the rally from $1725.35 to the high at $1809.80. We think price is likely to decline below this support to the previous low at $1738 in the next 24 hours.
| Support | 1765.75 | 1752.90 | 1738.80 |
| Resistance | 1776.15 | 1792.90 | 1809.50 |
USD/CAD – We had a sell call yesterday at 1.3410 which turned out to be wrong. Price rallied after U.S. data came out stronger than expected. Stochastic is rising and is hinting at a price rally. MACD is also hinting at a price rally. 20EMA is rising with a steep slope, hinting at a strong bullish price trend. We see price testing the previous high of 1.3645 again in the next 24 hours.
| Support | 1.3565 | 1.3520 | 1.3475 |
| Resistance | 1.3605 | 1.3645 | 1.3680 |