Market Talk
– The U.S. dollar on Monday slid to a seven-month low against the euro as traders bet recent economic data would prompt the Federal Reserve to slow the pace of interest rate hikes, while riskier currencies benefited from China reopening its borders.
– The euro was up 0.96% at $1.0747, its highest level versus the greenback since June 9, adding to Friday’s 1.17% increase. Sterling surged 0.87% to $1.2197 against the dollar, building on Friday’s 1.5% rally.
– The Japanese yen failed to gain despite Treasury yields slipping to a 3-week low amid ongoing expectations that the Federal Reserve will slow its pace of rate hikes. The yen was last at 131.48 on Tuesday morning in Asian trading.
– The Aussie stood at $0.6907, having hit a five-month peak of $0.6950 overnight, amid hopes for a rebound in China’s reopening economy. The kiwi dollar had levelled out at $0.6364, after reaching a one-month top of $0.6411.
– Gold prices cooled slightly to $1870.45 per ounce on Tuesday after hitting an eight-month high on Monday, as a weak dollar’s boost was offset by Federal Reserve officials reiterating their aggressive stance against inflation.
Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.6875. Stop at 0.6850 and profit order at 0.6945.
3. Expectation of a slower pace of interest rate hike and re-opening of China are both likely to aid the Aussie dollar.
4. Price is likely to be supported by the previous resistance turned support line with MACD hinting at a bullish price trend.
Fundamental Comments
1. Expectation of a slower pace of interest rate hike is likely to weigh on the U.S. dollar.
2. Re-opening of China and a lift of a coal ban are both likely to aid the Aussie dollar.
Technical Comments
1. Price is likely to be supported by the previous resistance turned support line.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 0.6900 | 0.6870 | 0.6825 |
| Resistance | 0.6950 | 0.6985 | 0.7010 |
Technical Overview
USD/JPY – Price declined to a low of 131.30 on Monday which was just below the 62% Fibonacci correction point of the rally from 129.50 to 134.76. If price can stay above the 62% correction point, we are likely to see another test to 134.75 but if price were to be capped at 132.15, price is likely to decline to 129.50. Stochastic is in the oversold zone and MACD is about to turn up but 20EMA remains bearish. We prefer to remain bearish for 129.50.
| Support | 131.50 | 131.00 | 130.50 |
| Resistance | 132.15 | 132.60 | 133.20 |
EUR/USD – Price moved to a high of 1.0760 on Monday and looks likely to continue higher. However, stochastic is in the overbought zone and is hinting at a price decline. 20EMA and MACD are both bullish and hinting at a bullish price trend. We are likely to see a price correction to 1.0690 and from this support, we are likely to see the bullish price trend resumes it rally to 1.0815 in the next few days.
| Support | 1.0720 | 1.0680 | 1.0645 |
| Resistance | 1.0760 | 1.0790 | 1.0815 |
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 Tuesday’s morning. Stochastic is in the overbought zone and is hinting at limited upsides. However, both MACD and 20EMA are bullish and hinting at a bullish price trend. We are in favour of a price rally to 1.2205 in the next few days ahead. A break below 1.2060 would negate our bullish view.
| Support | 1.2150 | 1.2110 | 1.2070 |
| Resistance | 1.2180 | 1.2210 | 1.2240 |
XAU/USD – Price reached a high of $1881.36 on Monday and the rally looks like it can continue higher. There are no divergences warnings from the MACD or stochastic indicators. Both MACD and 20EMA are hinting at a strong bullish price trend. However, the stochastic indicator is in the overbought zone. 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 |
AUD/JPY – We can a buy recommendation yesterday at 91.05, which was filled when price declined to a low of 90.84. Our view remains unchanged. We would recommend keeping stop at 91.70 and profit order at 91.95. Stochastic is declining after reaching the overbought zone but 20EMA is still hinting at a bullish price trend. MACD could be forming a divergence warning with price and this is our biggest worry.
| Support | 90.85 | 90.45 | 90.15 |
| Resistance | 91.30 | 91.80 | 92.05 |