Market Talk
– The U.S. dollar tumbled to a nearly nine-month low against the euro on Thursday after U.S consumer prices fell for the first time in more than 2-1/2 years in December, offering hope that inflation was now on a sustained downward trend prompting bets that the Federal Reserve will be less aggressive with rate hikes going forward.
– U.S. data showed the consumer price index (CPI) dipped 0.1% last month, marking the first decline in the data since May 2020, when the economy was reeling from the first wave of COVID-19 infections.
– The greenback was down 0.83% versus the euro at $1.0845 on Friday morning. The euro has been supported by hawkish messaging from European Central Bank officials, with four on Wednesday calling for additional rate increases.
– The yen gained as much as 2.7% against the dollar, hitting a 6-1/2-month low against the Japanese currency. The Aussie dollar climbed to a fresh five-month high of $0.6984 while the kiwi dollar stood at $0.6389, after touching a new one-month top of $0.6416 overnight.
– Spot gold was up 0.1% at $1,897.92 per ounce on Friday and was on track for a fourth weekly gain, supported by a weaker dollar and expectations of slower interest rate hikes by the U.S. Federal Reserve.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.3360. Stop at 1.3330 and profit target at 1.3445.
3. A decline in crude oil price and interest rate differential are both in the U.S. dollar favour.
4. Price may have reached a price low with MACD hinting with a divergence of a possible price low.
Fundamental Comments
1. A decline in crude oil price is likely to weigh on the Canadian dollar.
2. Current interest rate differential is in the US dollar favour.
Technical Comments
1. Price is likely to be supported by the week’s 2 lowest price lows.
2. A divergence warning from the MACD indicator is hinting that the week’s lowest point could be a price bottom.
Key Levels
| Support | 1.3345 | 1.3310 | 1.3275 |
| Resistance | 1.3395 | 1.3445 | 1.3485 |
Technical Overview
USD/JPY – We had a sell call yesterday at $132.15 but the order was not filled as the price only reached a high of $131.89. Price is unable to move above the 20EMA which hinting that the price trend is still bearish. MACD remains below the zero line which is hinting bearish trend. We remain bearish in our view. We see the decline continue to the next low at $126.35. A move above $128.85 would negate our bearish view.
| Support | 128.50 | 127.80 | 126.95 |
| Resistance | 129.80 | 130.50 | 131.20 |
EUR/USD – Price is currently consolidating after the breakout rally to a high of $1.0867 from the Flag chart pattern. 20EMA remains bullish and is hinting at a bullish price trend. However, MACD has a divergence warning of a possible price high. Stochastic is pointing downwards, hinting at a price decline. Price is likely to have a correction to 1.0800 before the rally resumes for 1.0930 in the next few days.
| Support | 1.0830 | 1.0790 | 1.0755 |
| Resistance | 1.0870 | 1.0900 | 1.0940 |
GBP/USD – Price broke above this week’s high at $1.2225 and reached a high of $1.2245 yesterday. Both MACD and 20EMA remain bullish but MACD looks weak at the moment. Stochastic is moving higher but is almost near the overbought zone which is hinting at a limited upside. Currently, the price is capped at the Fibonacci 62% correction point from the high of $1.2445 to the low at $1.1840. Price may need to break above $1.2210 to resume its upside momentum to $1.2300.
| Support | 1.2160 | 1.2110 | 1.2070 |
| Resistance | 1.2245 | 1.2300 | 1.2355 |
XAU/USD – Price reached a high of $1901.23 yesterday but this high is accompanied by a divergence warning from the MACD indicator. Price is still above the 20EMA and MACD has remained above the zero line. Both trend indicators are hinting at a possible bullish price trend. Stochastic is supporting the bullish trend as well as the stochastic is still moving higher. We may see some correction to the 20EMA at $1880 before the price resumes its uptrend to $1910.00.
| Support | 1885.00 | 1867.00 | 1850.00 |
| Resistance | 1901.25 | 1915.05 | 1928.70 |
AUD/USD – Price is currently consolidating and forming a potential Flag chart pattern. Stochastic is at the overbought zone which is hinting at a limited upside. However, both 20EMA and MACD remain bullish and hinting at a bullish price trend. We remain bullish. If price is able to break out above the Flag chart pattern; we are likely to see the price retest this week’s high at $0.6983
| Support | 0.6945 | 0.6895 | 0.6860 |
| Resistance | 0.6985 | 0.7015 | 0.7045 |