Market Talk
– The US dollar drifted off multi-month lows on Tuesday, while the yen was perched near seven-month highs as investors held their breath for a potential policy shift at the Bank of Japan policy meeting, which is scheduled for 18 Jan 2023.
– The BOJ will hold its monetary policy meeting tomorrow. Market sees three possibilities: no policy change, a tweak similar to a move in December to widen the 10-year yield target band, and the total abandonment of yield curve control, with the latter likely to drive the most extreme market response.
– The euro reached a nine-month high on Monday at $1.0874, but was last loitering around $1.0830. The yen hit a top of 127.22 per dollar during Asia hours on Monday, before easing a little during a holiday-thinned U.S. session to sit around 128.40.
– The Australian dollar hit a five-month high just above $0.70 on Monday and was last firm at $0.6972, despite Beijing releasing a weak fourth quarter economic data. The New Zealand dollar held at $0.6394.
– Spot gold was unchanged at $1,917.24 per ounce, holding steady above the key $1,900 per ounce level during early Asian hours on Tuesday, buoyed by hopes of slower interest rate hikes by the Federal Reserve.
Chart Focus EUR/JPY
Key Points
1. Sell EUR/JPY recommendation.
2. Sell EUR/JPY at 139.55. Stop at 139.90 and profit target at 138.05.
3. Speculation the Bank of Japan (BOJ) will revise its ultra-loose monetary policy is aiding the yen.
4. Price is likely to face stiff resistance at the Fibonacci 38% correction point and the 20EMA with MACD hinting at a bearish price trend.
Fundamental Comments
1. Speculation the Bank of Japan (BOJ) will revise its ultra-loose monetary policy is aiding the yen.
2. A slower pace of interest rate hikes by the European Central Bank on signs of easing inflation is likely to weigh on the Euro.
Technical Comments
1. Price is likely to face stiff resistance at the Fibonacci 38% correction point and the 20EMA.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 139.05 | 138.50 | 137.95 |
| Resistance | 139.60 | 139.95 | 140.40 |
Technical Overview
USD/JPY – Price reached a high of $129.15 this morning but the rally was capped by 20EMA. Price was unable to move above the 20EMA hinting that the price trend is still bearish. MACD remains below the zero line which is hinting a bearish trend. Stochastic is rising and hinting at a price rally. If the price is capped by the 20EMA at $129.05, we may see a decline to the previous low support at $127.20 in the next 48 hours.
| Support | 128.45 | 128.10 | 127.55 |
| Resistance | 129.15 | 130.00 | 130.75 |
EUR/USD – Price declined to $1.0800 yesterday but was supported by 20EMA. Price has bounced up after testing the 20EMA which is hinting at a bullish price trend. MACD remains bullish but looks weak at the moment. Stochastic is declining and hinting at a price decline. As long as the price stays above 20EMA around $1.0800, we are likely to see a rally back to yesterday’s high at $1.0873 again in the 24 hours.
| Support | 1.0800 | 1.0760 | 1.0725 |
| Resistance | 1.0845 | 1.0875 | 1.0930 |
GBP/USD – Price reached a high at $1.2288 on Monday morning but declined to $1.2170 in early Tuesday morning. Both MACD and 20EMA are neutral at the moment. Stochastic is moving lower and is hinting at a price decline. Price is likely to be supported by the 20EMA. As long as the price stays above this point, we could see a rally back to yesterday’s high at $1.2288. A break below $1.2140 is likely to negate our bullish view.
| Support | 1.2170 | 1.2130 | 1.2085 |
| Resistance | 1.2225 | 1.2285 | 1.2355 |
XAU/USD – Price reached a low of $1907.97 as at the time of this writing and this could be a corrective decline. 20EMA is likely to halt the decline at $1904.85. MACD remains above the zero line and is hinting at a bullish price trend. However, stochastic is moving lower and is hinting at a price decline. We are likely to see some correction to the 20EMA at $1904.85 before the price resumes the rally to $1928.65 in the 24 hours.
| Support | 1901.25 | 1892.10 | 1879.85 |
| Resistance | 1919.50 | 1928.65 | 1939.30 |
AUD/JPY – We had a sell call on this pair yesterday at 89.90. However, price only reached a high of 89.86 and our entry price was not filled. We remain bearish on this pair. MACD and 20EMA remain bearish and are hinting at a bearish price trend. Stochastic, is rising and hinting at a price rally. We see price being capped by the Fibonacci 50% correction point and the 20EMA line around 90.10. We see price going lower to 88.60 in the next few days
| Support | 89.55 | 89.05 | 88.55 |
| Resistance | 90.10 | 90.50 | 91.05 |