Market Talk
– The U.S. dollar fell on Friday after U.S. jobs data showed a strong, but not blockbuster employment picture in December, while a separate report showed that U.S. services industry activity contracted for the first time in more than 2-1/2 years that month, offering more evidence that inflation was abating.
– Data showed on Friday that the U.S. economy added jobs at a solid clip in December, as the U.S. labour market remains tight, but Fed officials could draw some solace from a moderation in wage gains.
– The greenback extended losses after the Institute for Supply Management (ISM) said its non-manufacturing PMI dropped to 49.6 last month from 56.5 in November. It was the first time since May 2020 that the services PMI fell below the 50 threshold, which indicates contraction in the sector that accounts for more than two-thirds of U.S. economic activity.
– The euro gained 1.19% to $1.0645 and was on track for the biggest percentage daily increase since Nov. 11. The dollar fell 1.03% against the Japanese yen to 132.07. The British pound gained to a high of 1.2065.
– Gold prices edged higher to $1868.90 per ounce on Monday and hovered near a seven-month high, supported by a weaker dollar and hopes that the Federal Reserve might slow its pace of interest rate hike.
Chart Focus AUD/JPY
Key Points
1. Buy AUD/JPY recommendation.
2. Buy AUD/JPY at 91.05. Stop at 90.70 and profit target at 91.95.
3. The lifting of a coal ban and interest rate differential are both in the Aussie dollar favour.
4. Price is supported by a previous resistance turned support line with MACD also hinting at a bullish price trend.
Fundamental Comments
1. The lifting of a coal ban from China is aiding the Aussie.
2. Interest rate differential is in the AUD dollar favour.
Technical Comments
1. Price is likely to be supported by a previous resistance turned support line.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 91.00 | 90.50 | 90.15 |
| Resistance | 91.60 | 92.00 | 92.40 |
Technical Overview
USD/JPY – Price has declined to a low of 131.30 this morning which is just below the 62% Fibonacci correction point of the rally from 129.50 to 134.76. Stochastic is still declining and hinting at a price decline but MACD remains bullish. 20EMA is hinting at a bearish price trend. Watch out for the Fibonacci 62% point at 131.30. This point is likely to determine the next direction of this pair.
| Support | 131.30 | 130.70 | 130.35 |
| Resistance | 131.95 | 132.30 | 132.95 |
EUR/USD – Price has reached a low of 1.0480 on Friday but that low was accompanied by a divergence warning from the MACD indicator. We have seen a rally to 1.0688 this morning and we are likely to see this rally continue higher to 1.0712 in the next 24 hours. Stochastic is not in the overbought zone as yet and 20EMA and MACD are both hinting at a strong bullish price trend.
| Support | 1.0675 | 1.0630 | 1.0590 |
| Resistance | 1.0715 | 1.0785 | 1.0830 |
GBP/USD – Price reached a new low at 1.1842 on Friday but had rallied on the back of a weaker US dollar to a high of 1.2150 on Monday morning. Stochastic has yet to reach the overbought zone, hinting that this rally can continue. 20EMA is also hinting at a strong bullish price trend. MACD confirms the bullish price trend. The next price resistance could be at 1.2260.
| Support | 1.2110 | 1.2070 | 1.2030 |
| Resistance | 1.2165 | 1.2225 | 1.2260 |
XAU/USD – Price reached a high of $1879.20, exceeding our target at $1878. However, MACD is not showing any divergences at the moment, hinting that this price rally may continue. Stochastic is not yet in the overbought zone, hinting that price can continue its rally. 20EMA is also showing a strong bullish price trend. We think price can continue higher to $1900 in the next 48 hours. Below $1860 would negate our bullish price view.
| Support | 1869.50 | 1856.90 | 1843.70 |
| Resistance | 1885.70 | 1896.20 | 1916.45 |
EUR/AUD – We had a sell recommendation last Friday at 1.5585, which was filled when price moved to a high of 1.5592. Our profit order at 1.5415 was also filled when price reached a low of 1.5398 at the point of this writing. We made 170 pips out of this trade, covering the 3 losses we had in the first 3 trades of the year. MACD is starting to show divergence, hinting at a possible price low.
| Support | 1.5375 | 1.5335 | 1.5275 |
| Resistance | 1.5445 | 1.5495 | 1.5570 |