Market Talk
– The US dollar made a strong start to 2023, after a surprise slowdown in German inflation in early European trading in the previous day, rallied bunds and sent the common currency sliding. Investors are also waiting for the release of the previous month FOMC meeting minutes for clues to the pace of US interest rate hikes.
– The euro also fell almost 1% to $1.0567 after German state inflation data showed that German inflation eased for a second month in a row in December due to falling energy prices and the government’s one-off payment of household energy bills.
– British manufacturers are starting 2023 on the back foot, after they reported one of their sharpest falls in activity since the 2008-09 recession last month, reflecting a sharp fall in new orders and ongoing job cuts and sending the British pound to a low of 1.1899 overnight.
– The Australian and New Zealand dollars were licking their wounds on Wednesday after a sharp rally in the U.S. dollar wrong footed the market. However, both currencies managed to move off their low with the Aussie dollar hovering at 0.6800 and the Kiwi at 0.6273.
– Gold prices were listless around $1,838.69 per ounce, during early Asian hours on Wednesday after hitting a six-month peak in the previous session, as investors awaited minutes from the Federal Reserve’s December policy meeting that could offer hints on the U.S. central bank’s tightening path.
Chart Focus USD/CHF
Key Points
1. Buy USD/CHF recommendation.
2. Buy USD/CHF at 0.9305. Stop at 0.9270 and profit target at 0.9395
3. A robust US labour market and interest rate differential are both aiding the U.S. dollar.
4. Price is likely to be supported at the Fibonacci and 20EMA support point with MACD hinting at a bullish price trend.
Fundamental Comments
1. A robust employment picture is viewed as giving the Fed more room to raise interest rates, aiding the U.S. dollar.
2. Interest rate differential is in the U.S. dollar favour.
Technical Comments
1. Price is likely to find support at the 20EMA line which is also near to the Fibonacci 50% correction point of the previous price rally.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 0.9315 | 0.9270 | 0.9225 |
| Resistance | 0.9355 | 0.9400 | 0.9455 |
Technical Overview
USD/JPY – Price reached a low of 129.50 yesterday but this low was accompanied by a MACD divergence warning. This is a hint that price could have reached a low. Stochastic is rising from the oversold zone and is hinting at a price rally. However, 20EMA is likely to cap this corrective rally and induced a decline back to the overnight low at 129.50. Both 20EMA and MACD are hinting at a bearish price trend.
| Support | 130.60 | 130.05 | 129.50 |
| Resistance | 131.05 | 131.45 | 131.85 |
EUR/USD – We had a buy recommendation yesterday at 1.0650 but we were wrong on this call. A softer German inflation data sent the single currency to a low of 1.0518. Stochastic is near to the oversold zone but both MACD and 20EMA are hinting at a bearish price trend. We think price may do a corrective rally but this rally is likely to be capped by the 20EMA at 1.0600 and from this point; we could see another decline below the previous day’s low.
| Support | 1.0560 | 1.0515 | 1.0480 |
| Resistance | 1.0595 | 1.0650 | 1.0690 |
GBP/USD – Price fell to a low of 1.1899 overnight on the back of a poor UK manufacturing data. The rally off the low is likely to be capped by the falling 20EMA line at 1.2020 which is also near to the previous low support. Stochastic is near to the oversold zone, hinting at a limited downside but both MACD and 20EMA are hinting at a bearish price trend. We see price testing the overnight low again in the next 24 hours.
| Support | 1.1955 | 1.1920 | 1.1895 |
| Resistance | 1.2025 | 1.2085 | 1.2125 |
XAU/USD – Price continued its rally from the previous week and reached a high of $1849.85 yesterday. Price is currently near to the high and is likely to test the high again. There is no divergence warning from the MACD indicator, which means price is likely to continue higher in the next 24 hours. Stochastic is in the overbought zone but 20EMA and MACD are both hinting at a strong bullish price trend. We think price can test the resistance at $1878.45 in the next 24 hours.
| Support | 1838.50 | 1827.30 | 1818.45 |
| Resistance | 1849.85 | 1863.90 | 1878.45 |
AUD/USD – Price slipped from Tuesday’s high of 0.6833 to a low of 0.6687 but has recovered and is close to the week’s high at the point of this writing. Stochastic has a bullish crossover and is hinting at a price rally. MACD has turned bullish and 20EMA is also bullish and hinting at a bullish price trend. We think price can move above 0.6833 to the next resistance point at 0.6880 in the next 24 hours.
| Support | 0.6790 | 0.6740 | 0.6690 |
| Resistance | 0.6835 | 0.6865 | 0.6895 |