Market Talk
– The U.S. dollar continues its climb on Monday after data on Friday showed U.S. producer prices had risen more than expected last month, pointing to persistent inflationary pressures and a chance the Federal Reserve would keep interest rates higher for longer.
– U.S. producer prices (PPI) rose 0.3% last month, above the 0.2% forecast, slightly higher and bolstering the case for continued interest rate hikes by the Federal Reserve even if at a slower pace.
– The greenback rose 0.35% against the Japanese yen to 137.05. The yen has also benefited in recent weeks from speculation that high inflation will for the Bank of Japan into eventually changing its ultra-loose stance on monetary policy.
– The euro was lower at $1.0509. Sterling fell 0.31% to $1.2229 in Asia trade on Monday. The ECB and BoE are also expected to hike rate this coming Thursday. The Aussie edged 0.34% lower to $0.6773 while the kiwi slipped 0.34% to $0.6393.
– Gold slipped 0.5% to $1786.95 on Monday, dragged down by a firmer U.S. dollar, while investors readied for key U.S. inflation data and the Federal Reserve’s rate-hike verdict due this week.
Chart Focus USD/CHF
Key Points
1. Buy USD/CHF recommendation.
2. Buy USD /CHF at 0.9350. Stop at 0.9315 and profit target at 0.9425.
3. Expectation of a 50 basis points hike and interest rate differential are both aiding the US dollar.
4. Price may be forming a Double Bottom chart formation with MACD also hinting at a possible price low.
Fundamental Comments
1. Expectation of a 50 basis points hike is aiding the US dollar.
2. Interest rate differential is in the US dollar favour.
Technical Comments
1. Price may be forming a Double Bottom chart formation which is a sign of a price rally ahead.
2. MACD has a divergence warning hinting of a possible price low.
Key Levels
| Support | 0.9345 | 0.9310 | 0.9285 |
| Resistance | 0.9380 | 0.9425 | 0.9455 |
Technical Overview
USD/JPY – Price had failed at the 137.70 resistance in the previous week and had fallen to a low of 135.60. Price has climbed above the 20EMA this morning and we are likely to see a test of the previous resistance at 137.85 again in the next 24 hours. Stochastic is rising and hinting at a price rally. Both MACD and 20EMA are bullish and hinting at a price rally. A price move below the support at 135.60 would negate our view for a test of 137.85.
| Support | 136.60 | 136.05 | 135.60 |
| Resistance | 137.25 | 137.85 | 138.15 |
EUR/USD – Price was close to the top end of its range at 1.0600 on Friday but was unable to move above it. We have seen price decline to the 20EMA support at 1.0515. Stochastic is declining and hinting at a price decline. MACD remains bullish and is hinting at a bullish price trend. 20EMA is flat and neutral at the moment. We think price is likely to stay within the range.
| Support | 1.0505 | 1.0465 | 1.0425 |
| Resistance | 1.0545 | 1.0595 | 1.0640 |
GBP/USD – Price is currently sitting on the 20EMA line. Stochastic is pointing to a price decline but MACD remains bullish. 20EMA is currently flat and neutral. If price falls below the 20EMA line, it is likely to continue lower to the previous low at 1.2105. Ability to stay above the 20EMA is likely to send price higher to the previous high at 1.2335 in the next 48 hours. We favour the downside.
| Support | 1.2200 | 1.2155 | 1.2105 |
| Resistance | 1.2255 | 1.2285 | 1.2325 |
XAU/USD – Our view remains the same as last Friday. We think price is en-route to the test the previous high at $1809.80 in the next 1-2 days. Stochastic is declining and hinting at a price correction but MACD remains bullish and is hinting at a bullish price trend. 20EMA is flat and neutral at the moment. A price movement below $1780 would negate our bullish price view.
| Support | 1780.40 | 1765.75 | 1752.90 |
| Resistance | 1794.45 | 1809.80 | 1816.80 |
USD/CAD – We had a sell call last Friday but our call was wrong. We got stop out when price rallied to a high of 1.3690. Stochastic is rising and is hinting that the rally can continue higher. MACD has turned bullish, hinting at a bullish price trend. 20EMA is also hinting at a bullish price trend. We think price is likely to test the previous high of 1.3798 again in the next 24 hours.
| Support | 1.3625 | 1.3590 | 1.3560 |
| Resistance | 1.3675 | 1.3700 | 1.3740 |