Market Talk
– The U.S. dollar soared on Thursday, led by strong gains against the yen, sterling, and commodity currencies, as investors fretted about the risk of recession with the Federal Reserve likely to raise interest rates well into next year.
– Recession fears intensified that the Federal Reserve’s battle against inflation using aggressive interest rate hikes could lead to a recession. Adding to global recession worries, the Bank of England and the European Central Bank further indicated an extended hiking cycle on Thursday.
– The euro hit $1.0737, the highest since June 9, after the ECB hike interest rate by 50 basis points, before falling back to $1.0629. Sterling fell sharply and was down nearly 2% to 1.2183, as investors believe the BOE is nearing the end of its rate hikes.
– The Aussie was at $0.6700 after diving 2.4% overnight, its biggest fall since March 2020, to as low as $0.6677 heightened fears of an impending recession next year. The kiwi dollar was hovering at $0.6336, having also plunged 1.8% overnight to as low as $0.6321.
– Gold prices were flat at $1776.85 per ounce on Friday, having retreated 1.5% on Thursday, pressured by expectations of higher interest rates for a longer period by the U.S. Federal Reserve. Recession fears helped to cushion gold price decline.
– We will be taking a 2-week break. Update will resume on 3 Jan 2023.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.2260. Stop at 1.2295 and profit target at 1.2110.
3. Expectation of more US interest rate hikes next year and interest rate differential are both likely to aid the U.S. dollar.
4. Price is likely to face a strong resistance at the 20EMA line and MACD is hinting at a bearish price trend.
Fundamental Comments
1. Expectation of more US interest rate hikes next year is likely to aid the U.S. dollar.
2. Interest rate differential is in the U.S. dollar favour.
Technical Comments
1. Price is likely to face resistance at the 20EMA as well as a previous support turned resistance line.
2. MACD is bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1.2175 | 1.2130 | 1.2085 |
| Resistance | 1.2225 | 1.2270 | 1.2315 |
Technical Overview
USD/JPY – Price reached a high of 138.17 overnight and has declined lower. We think the price correction should be support at the 20EMA line support at 136.60. From here, we see another price rally to test the previous high of 138.17 again in the next 48 hours. Stochastic is rising and has not yet reached the overbought zone, hinting there could be more upside. Both 20EMA and MACD are bullish and hinting at a bullish price trend.
| Support | 136.95 | 136.55 | 135.95 |
| Resistance | 137.65 | 138.15 | 138.75 |
EUR/USD – Price reached a high of 1.0737 and has pulled back to 1.0592 this morning. If price is supported at this location, there is chance of another test of the overnight high at 1.0737. Stochastic is declining and hinting at a price decline. MACD and 20EMA remain bullish and both are hinting at a bullish price trend. We think price is likely to move lower to 1.0545 in the next 24 hours.
| Support | 1.0620 | 1.0590 | 1.0560 |
| Resistance | 1.0670 | 1.0735 | 1.0775 |
AUD/USD – Price declined to a low of 0.6675 overnight, which was just above the previous week low of 0.6667. Stochastic is in the oversold zone and is hinting at a limited downside. However both 20EMA and MACD are hinting at a bearish price trend. We think price may correct higher but is likely to be capped by the 20EMA line at 0.6760. We are expecting another test of the previous week’s low at 0.6667 in the next 24 hours.
| Support | 0.6675 | 0.6640 | 0.6610 |
| Resistance | 0.6710 | 0.6760 | 0.6810 |
XAU/USD – We had a sell call at $1797 yesterday but price only reached a high of $1795.28 and our order was not filled. Price has decline to a low of $1773.00 but we think there is likely to be another decline to 1765.75 in the next 24 hours. Stochastic is hinting at a limited downside. MACD is bearish and hinting at a bearish price trend. 20EMA is also hinting at a bearish price trend.
| Support | 1773.00 | 1765.75 | 1752.75 |
| Resistance | 1786.15 | 1796.35 | 1812.95 |
NZD/USD – We had a buy call on Wednesday at 0.6425 which was filled. Yesterday we had recommended placing stop at 0.6395 and profit target at 0.6510. Our stop was triggered when price declined to a low of 0.6318. Stochastic is in the oversold zone and is hinting at a limited downside. However, both MACD and 20EMA are hinting at a bearish price trend. We think price is likely to be resisted at the 20EMA line at 0.6395 and from there we could see another decline to 0.6295.
| Support | 0.6340 | 0.6305 | 0.6270 |
| Resistance | 0.6375 | 0.6400 | 0.6430 |