Market Talk
– The U.S. dollar held its ground on Wednesday, in spite of downward pressure from lower bond yields and higher stocks, as traders waited on this week’s U.S. consumer price data to see whether it will confirm that inflation is in retreat.
– Federal Reserve chair Jerome Powell did not give any policy clues during a panel discussion in Stockholm overnight, and with other Fed officials saying their next moves will be data-dependent; investors are keenly focused on U.S. CPI data.
– The Australian dollar nudged about 0.3% higher to $0.6912 after data showed the annual pace of inflation increased to 7.3% in November, leaving room for more rate hikes. The New Zealand dollar also crept up 0.2% to $0.6380.
– The euro was up 0.1% against the greenback to $1.0741, just below a seven-month high of $1.0760 hit on Monday. Sterling dipped 0.18% to $1.2158, just below Monday’s three-week top. The yen was steady at 132.23 despite U.S. government bond yields, which have been attracting investors to the dollar, fell overnight.
– Gold prices were flat at $1876.49 per ounce on Wednesday, as traders awaited key U.S. inflation data due this week to gauge the Federal Reserve’s rate hike stance.
Chart Focus GBP/USD
Key Points
1. Buy GBP/USD recommendation.
2. Buy GBP/USD at 1.2130. Stop at 1.2095 and profit target at 1.2225.
3. A decline in U.S. bond yields and expectation of a slower pace of rate hikes are weighing on the US dollar.
4. Price is likely to be supported by the 20EMA with MACD hinting at a bullish price trend.
Fundamental Comments
1. A decline in U.S. bond yields is weighing on the U.S. dollar.
2. Expectations of a slower pace of US rate hikes are weighing on the US dollar.
Technical Comments
1. Price is likely to be supported by the 20EMA.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 1.2125 | 1.2080 | 1.2030 |
| Resistance | 1.2185 | 1.2210 | 1.2250 |
Technical Overview
USD/JPY – Price reached a low of $131.38 yesterday which was still above the Fibonacci 62% correction point. While Stochastic is rising and hinting at a price rally, the 20EMA is neutral at the moment. MACD is also neutral but looks weak at the moment. As long as the price stays above the Fibonacci 62%, we are likely to see the price rally back to $134.75. Below 131.38, price is likely to go to 129.50.
| Support | 132.00 | 131.50 | 131.00 |
| Resistance | 132.65 | 133.00 | 133.40 |
EUR/USD – Price reached a low of $1.0711 on Tuesday and has moved higher this morning. It is currently trying to break above Monday’s high of 1.0760. Stochastic remains in the overbought zone and is hinting at a limited upside. However, both the 20EMA and MACD are bullish and hinting at a bullish price trend. If price can move above 1.0760, we are likely to see a test of the previous high at 1.0930.
| Support | 1.0710 | 1.0680 | 1.0645 |
| Resistance | 1.0760 | 1.0790 | 1.0815 |
AUD/USD – We had a buy call yesterday at 0.6875, which was filled when price declined to a low of 0.6858. Our view remains the same as yesterday. We would recommend moving stop to cost at 0.6875 and profit target at 0.6945. Stochastic is declining after reaching the overbought zone but MACD is bullish and is hinting at a bullish price trend. 20EMA is also hinting at a bullish price trend. Only a move below 0.6855 would negate our bullish view.
| Support | 0.6900 | 0.6860 | 0.6825 |
| Resistance | 0.6950 | 0.6985 | 0.7010 |
XAU/USD – Price broke above the Pennant pattern this morning and we are likely to see a price move to $1910 in the next 1-2 days. While stochastic is in the overbought zone and hinting at a price decline, MACD remain bullish and hinting at a bullish price trend. 20EMA is also hinting at a bullish price trend. We are bullish but a price move below $1867 would negate our bullish view.
| Support | 1878.50 | 1867.70 | 1856.90 |
| Resistance | 1892.25 | 1910.00 | 1928.70 |
AUD/JPY – We can a buy recommendation on Monday at 91.05 which was filled and yesterday we had recommended keeping stop at 91.70 and profit order at 91.95. For today, we would recommend bringing stop to cost at 91.05 and lowering profit target to 91.80. Stochastic has a bullish crossover, hinting at a price rally. MACD and 20EMA are both bullish and are hinting at a bullish price trend.
| Support | 91.20 | 90.75 | 90.45 |
| Resistance | 91.80 | 92.05 | 92.40 |