Market Talk
– The U.S. dollar eased on Tuesday as markets bet a Federal Reserve tightening cycle may be nearing an end, while the Japanese yen surged to a six-month high on expectations of tighter Japanese monetary policy in the months ahead.
– The yen jumped 0.7% in Asia, hitting a seven-month high of 129.50 against the dollar. The yen has been on a rally since early-December, when the BOJ unexpectedly struck a more hawkish tone, which ramped up expectations that it could tighten its ultra-loose policy in 2023.
– The euro slipped to $1.0683, but was not far from its highest levels since June. While the euro area economy is heading for a recession, concerns about gas supply over the winter have eased, meaning a downturn may not be as bad as feared a few months ago.
– A batch of surveys showed China business activities shrank at the sharpest pace in nearly three years as COVID-19 infections swept through production lines sending the Aussie lower to $0.6791 and the kiwi dollar to $0.6305.
– Gold prices hit a six-month high on Tuesday, up 0.8% in thin trading, with the market’s attention turning to minutes from the U.S. Federal Reserve’s latest policy meeting due this week. Spot silver rose 1.1% to $24.25.
Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation.
2. Buy EUR/USD at 1.0650. Stop at 1.0620 and profit target at 1.0715.
3. A slower pace of Fed tightening and a less severe downturn in Europe are both likely to aid the Euro.
4. Price is likely to be supported with MACD hinting at a bullish price trend.
Fundamental Comments
1. A slower pace of Fed tightening is weighing on the U.S. dollar.
2. A less severe downturn in Europe is likely to aid the Euro dollar.
Technical Comments
1. Price is likely to be supported by the 20EMA as well as the rising trend line, keeping the uptrend intact.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 1.0650 | 1.0605 | 1.0575 |
| Resistance | 1.0680 | 1.0715 | 1.0740 |
Technical Overview
USD/JPY – Price reached a low of 129.50 this morning but this low was accompanied by a MACD divergence warning. This is a hint that price could have reached a low. Stochastic is also in the oversold zone and is hinting at a limited downside. However 20EMA is hinting at a strong bearish price trend. We think there could be a corrective rally in the next 24 hours to 131.40 before the downtrend resumes again.
| Support | 129.50 | 128.90 | 128.65 |
| Resistance | 130.15 | 130.60 | 137.00 |
AUD/USD – Price slipped from last Friday’s high of 0.6820 to a low of 0.6771 this morning. We think this is a correction of the previous week’s rally. The correction should find support at 0.6740 and we could see a rally back to 0.6835 again after the correction. Stochastic is declining from the overbought zone, hinting at a price decline. However, both MACD and 20EMA are bullish and hinting at a bullish price trend.
| Support | 0.6770 | 0.6740 | 0.6705 |
| Resistance | 0.6820 | 0.6850 | 0.6890 |
GBP/USD – Price has been trading within a range for the past 2 weeks and we think price is likely to stay within the range of 1.1990 to 1.2120 for the next 48 hours or until there is a price break out of this range. Stochastic is in the middle of its range and is hinting at a sideways movement. MACD is flat and neutral and is hinting at a range as well. 20EMA is also flat and hinting at a range.
| Support | 1.2050 | 1.1990 | 1.1940 |
| Resistance | 1.2085 | 1.2125 | 1.2185 |
XAU/USD – Price continued its rally from the previous week and reached a high of $1844.15 this morning. There is no divergence warning from the MACD indicator, which means price is likely to continue higher in the next 48 hours. Stochastic is close to the overbought zone but 20EMA is hinting at a strong bullish price trend. We think price can test the resistance at $1878.45 in the next 48 hours.
| Support | 1832.20 | 1818.45 | 1803.10 |
| Resistance | 1847.75 | 1857.40 | 1869.60 |
NZD/USD – Price reached a low of 0.6295 this morning after declining from last Friday’s high of 0.6371. Stochastic is near to the oversold zone and is hinting at a possible price rally. MACD remains bullish and could be turning up again, hinting at a price rally. 20EMA is neutral and flat at the moment. We think price is likely to find support at 0.6300 which is also the Fibonacci 50% support zone. From this support, we could see a rally to 0.6410 in the next few days.
| Support | 0.6295 | 0.6260 | 0.6225 |
| Resistance | 0.6335 | 0.6370 | 0.6410 |