Market Talk
– The U.S. dollar weakened against major currencies on Wednesday amid concerns that rising interest rates could push the U.S. economy into recession, while a loosening of China’s COVID restrictions boosted the yuan.
– Data on Wednesday showed U.S. worker productivity data beat forecasts but extended a weak trend, further muddying a debate on how far and how fast U.S. interest rates will rise. Market has been anticipating the Fed will soon slow its rate tightening pace, but recent upbeat U.S. employment, services and factory data has added uncertainty over the Fed policy outlook.
– The U.S. dollar was unchanged against the Canadian dollar after the Bank of Canada hiked its benchmark overnight interest rate by 50 basis points to 4.25%, the highest level in almost 15 years, and signaled the tightening campaign was near an end.
– The euro was up 0.3% at $1.0507. The euro has risen recently on signs that Europe’s economic downturn may be less bad than previously feared. The dollar was down 0.5% against the Japanese yen. The British pound was last trading at 1.2188.
– Spot gold held its ground at $1,784 per ounce in early Asian trade on Thursday, after a pullback in the dollar and U.S. bond yields as investors anticipate slower rate hikes from the U.S. Federal Reserve at its policy meeting next week.
Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.6715. Stop at 0.6685 and profit target at 0.6790.
3. A loosening of China’s COVID restrictions and anticipation of a slower pace of rate hike are both likely to weigh on the U.S. dollar.
4. Price ability to stay above the Fibonacci 62% correction point is a sign of a correction with Stochastic and MACD also hinting at a bullish price trend.
Fundamental Comments
1. A loosening of China’s COVID restrictions is boosting risk sentiment and weighing on the safe haven U.S. dollar.
2. Anticipation of a slower pace of rate hikes from the U.S. Federal Reserve is likely to weigh on the U.S. dollar.
Technical Comments
1. The price decline has managed to stay above the Fibonacci 62% correction point, hinting that the decline is just a correction.
2. Stochastic is rising while MACD is turning bullish. Both momentum indicators are hinting at a bullish price trend ahead.
Key Levels
| Support | 0.6710 | 0.6665 | 0.6635 |
| Resistance | 0.6740 | 0.6785 | 0.6835 |
Technical Overview
USD/JPY – Price reached a high of 137.85 on Wednesday and went into a decline. The decline was supported by the 20EMA and if price can stay above the 20EMA, we are likely to test the high of 137.85 again but a movement below the 20EMA is likely to send price lower to 134.20 in the next few days. Stochastic is declining and is hinting at a price decline. However, both MACD and 20EMA are hinting at a price rally.
| Support | 136.70 | 136.15 | 135.70 |
| Resistance | 137.25 | 137.70 | 138.45 |
EUR/USD – In our last update on Tuesday, we had a sell call at 1.0495 but our call was wrong. Price moved to a high of 1.0549 on Thursday before declining to 1.0505. Price is currently in the middle of a range and is also sitting just above the 20EMA, which is hinting at a sideways movement. MACD is also flat and neutral. Stochastic is hinting at a price rally. We think price is likely to trade from 1.0600 to 1.0440 until there is a breakout. Follow in the direction of the breakout.
| Support | 1.0490 | 1.0445 | 1.0390 |
| Resistance | 1.0550 | 1.0595 | 1.0640 |
GBP/USD – Price was supported by the 20EMA overnight and 20EMA is also hinting at a bullish price trend. Stochastic is also rising and hinting at a price rally. MACD is turning bullish and is also hinting at a price rally ahead. We think price is likely to move higher to 1.2345 in the next few days. However a move below the 20EMA at 1.2175 is likely to send price lower to the previous low at 1.2105.
| Support | 1.2175 | 1.2145 | 1.2105 |
| Resistance | 1.2235 | 1.2270 | 1.2345 |
XAU/USD – Price rallied to a high of $1790.40 yesterday and the correction was able to stay above the 20EMA line at $1780.70. Stochastic is rising and is hinting at a rising price trend. MACD is also hinting at a price rally. 20EMA is bullish as well. We think price is likely to test the previous Monday’s high of $1809.80 again in the next few days. However a price move below $1773 would negate our bullish price view.
| Support | 1780.70 | 1765.75 | 1752.90 |
| Resistance | 1790.40 | 1801.75 | 1809.80 |
NZD/USD – Price has managed to bounce off the support at 0.6300 for most part of this week. Stochastic is currently rising and is hinting at a bullish price trend. 20EMA is rising and is hinting at a bullish price trend. MACD is turning bullish. We think price is likely to test the Monday’s high of 0.6440 in the next few days. A price move below 0.6300 would negate our bullish view and calls for a decline to 0.6150.
| Support | 0.6335 | 0.6300 | 0.6250 |
| Resistance | 0.6385 | 0.6440 | 0.6470 |