Market Talk
– The U.S. dollar was on the back foot on Thursday, even as the Federal Reserve kept to its hawkish rhetoric after raising rates by half a percentage point, as investors were doubtful over how much the central bank would commit to putting the brakes on growth to curb inflation.
– The Fed moved to a slower pace of rate hikes of 50 basis points after 4 consecutive hikes of 75 basis points. Fed Chair Jerome Powell said overnight that the Fed will deliver more interest rate increases next year despite a possible recession in the U.S., with rates expected to peak above 5% and poured cold water somewhat on Wall Street expectations for a rate cut in the second half of next year.
– The euro hovered near their six-month highs in early Asia trade on Thursday at 1.0647, after touching a 6-month high at 1.0695 in the previous session. Sterling was last 0.1% lower at $1.2415, following a 0.5% overnight gain. Both BOE and ECB are due to deliver a 50 basis points hike later in the day.
– The dollar slipped 0.06% against the Japanese yen to 135.40. The Aussie was last 0.05% lower at $0.6860, The kiwi fell 0.05% to $0.6456, though it was similarly not far off the six-month peak of $0.6513 it hit this week.
– Gold prices slipped 0.7% to $1,794.22 per ounce, retreating further from a more than five-month high at $1824.37 scaled on Tuesday; after U.S. Federal Reserve Chair Jerome Powell said more interest rate hikes would come next year after the Fed delivered a half a percentage point hike in U.S. interest rate.
Chart Focus XAU/USD – Gold
Key Points
1. Sell Gold recommendation.
2. Sell Gold at $1797. Stop at $1808 and profit target at $1767.
3 Powell’s comments of more interest rate hikes to come next year and a higher termination point for interest rate are both likely to hurt gold.
4. Price’s movement below the 20EMA together with stochastic and MACD are hinting at a bearish price trend.
Fundamental Comments
1. Powell’s comments of more interest rate hikes to come next year is likely to weigh on gold.
2. Expectation of a higher termination point for interest rate is likely to weigh on gold.
Technical Comments
1. Price has moved below the 20EMA and could be about to break the trend, hinting at a bearish price trend.
2. Stochastic and MACD are turning down, hinting at a bearish price trend.
Key Levels
| Support | 1785.40 | 1777.45 | 1765.75 |
| Resistance | 1795.80 | 1812.95 | 1824.25 |
Technical Overview
USD/JPY – Price reached a low of 134.50 overnight and stochastic is in the oversold zone and is hinting at a price rally ahead. MACD has a bullish crossover and is also hinting at a price rally. However 20EMA is still bearish and hinting at a price decline. If price can move above 136.00, we are likely to see a price movement to test the previous high at 138.00 in the next few days.
| Support | 135.45 | 134.95 | 134.65 |
| Resistance | 135.95 | 136.30 | 136.90 |
EUR/USD – Price continued its rally to a high at 1.0695 but stochastic is already in the overbought zone and is hinting at a price decline ahead. However, both MACD and 20EMA are bullish and hinting at a bullish price trend. We think the next direction could be decided by the ECB press conference later today. If price can remain above 1.0595, we remain bullish but a move below is likely to hint at a decline to 1.0445.
| Support | 1.0640 | 1.0605 | 1.0560 |
| Resistance | 1.0695 | 1.0730 | 1.0775 |
GBP/USD – Price may be forming a small Double Top chart pattern and a decline below the support line at 1.2340 would confirm the chart pattern and call for a decline to 1.2230 in the next few days. Stochastic is in the overbought zone and is hinting at a price decline. MACD is hinting with divergence of a possible price high in the making. However, 20EMA remains bullish and is hinting at a bullish price trend. We are bearish on this pair.
| Support | 1.2375 | 1.2340 | 1.2295 |
| Resistance | 1.2405 | 1.2445 | 1.2480 |
NZD/USD – We had a buy call on Wednesday at 0.6425 which was filled when price decline to a low of 0.6400. Our view remains unchanged from the previous day. Stochastic is in the middle of its range and is neutral. However, both MACD and 20EMA are bullish and hinting at a bullish price trend. We see price going up to 0.6510 in the next 24 hours. We would recommend keeping stop at 0.6395 and profit target at 0.6510.
| Support | 0.6425 | 0.6390 | 0.6355 |
| Resistance | 0.6455 | 0.6485 | 0.6515 |
AUD/JPY – We had a buy call on Tuesday at 92.70 which was filled. Yesterday, we had recommended keeping stop at 92.35 and profit order at 93.80. Price declined to a low of 92.05, triggered our stop at 92.30. Stochastic is moving lower, hinting at a price decline. MACD remains bullish but is weak. 20EMA is neutral at the moment. The decline has also managed to stay above the Fibonacci 62% correction point, hinting at a price rally ahead.
| Support | 92.30 | 92.00 | 91.65 |
| Resistance | 92.75 | 93.05 | 93.45 |