Market Talk
– The U.S. dollar steadied on Wednesday, while the yen slumped after BOJ maintained its ultra-low interest rates, including its 0.5% cap for the 10-year bond yield, defying market expectations it would phase out its massive stimulus programme in the wake of rising inflationary pressure.
– Bank of Japan kept intact its yield curve control (YCC) targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, by a unanimous vote. The central bank also made no change to its guidance that allows the 10-year bond yield to move 50 basis points either side of its 0% target.
– Sterling led gains versus the dollar, hitting a five-week high after data showed the pace of pay growth in Britain, closely watched by the Bank of England as it gauges how much higher to raise interest rates, accelerated again. Sterling was last trading at $1.2274. The euro was down 0.03% to $1.0785.
– The Australian dollar fell 0.04% at $0.6980, while the kiwi rose 0.03% versus the U.S. currency at $0.6430 after data on Tuesday showed China’s economic growth slumped in 2022 to the weakest rate in nearly half a century.
– Spot gold was unchanged at $1,907.59 per ounce, on Wednesday as the dollar held firm, although expectations of slower pace of interest rate hikes by the U.S. Federal Reserve limited losses in zero-yielding yellow metal. Spot silver was steady at $23.91.
Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation.
2. Sell EUR/USD at 1.0790. Stop at 1.0820 and profit target at 1.0705.
3. ECB tighter monetary policy may have been priced in and interest rate differential is still in the US dollar favour.
4. Price has a Triple Top chart pattern, hinting at a price decline with MACD giving divergence warnings of a possible price high.
Fundamental Comments
1. A 4-month rally may have priced in the ECB rate hikes in the next 6 months.
2. Interest rate differential is in the US dollar favour.
Technical Comments
1. Price has a Triple Top chart pattern, hinting at a price decline.
2. MACD had given divergence warnings of a potential high in place.
Key Levels
| Support | 1.0765 | 1.0725 | 1.0690 |
| Resistance | 1.0805 | 1.0845 | 1.0875 |
Technical Overview
USD/JPY – Price moved to a high of $131.56 this morning after breaking above yesterday’s high of $129.15, confirming a low in place. 20EMA and MACD are both hinting at a bullish price trend. Stochastic is rising and hinting at a price rally as well. We are expecting price to continue its rally to 134.50 in the next few days after BOJ keep its ultra-loose monetary policy in place. Only a move below 129.05 would negate our bullish view.
| Support | 130.50 | 129.95 | 129.45 |
| Resistance | 131.20 | 131.90 | 132.35 |
AUD/USD – Price moved to a high of 0.7018 on Monday but this high was accompanied by a divergence warning from the MACD indicator, hinting at a potential price high in the making. Price is likely to break above Monday’s high in the next 24 hours but if there is another divergence, price could be moving lower. Stochastic, MACD and 20EMA are hinting at a bullish price. A move below 0.6940 would hint at a price high and a reversal move for 0.6875.
| Support | 0.6985 | 0.6930 | 0.6885 |
| Resistance | 0.7020 | 0.7060 | 0.7115 |
GBP/USD – Price moved to a high of 1.2999 overnight but this high was accompanied by a divergence warning from the MACD indicator, hinting at a potential price high in the making. Stochastic is moving into the overbought zone, hinting at a limited upside. 20EMA remains bullish and is hinting at a bullish price trend. The rally could be limited to 1.2355. A move below 1.2225 would confirm a top in place and hints at a bearish price trend.
| Support | 1.2260 | 1.2220 | 1.2170 |
| Resistance | 1.2300 | 1.2355 | 1.2395 |
XAU/USD – Price had reached a high of $1928.65 on Monday and has been declining. Price is likely to continue its decline to $1883 in the next few days. Stochastic has yet to reach the oversold zone, hinting at a further price decline. 20EMA has turned bearish and is hinting at a bearish price trend. MACD is about to turn bearish as well. Only a move above $1920 would negate our bearish view for the next few days.
| Support | 1895.95 | 1884.05 | 1897.95 |
| Resistance | 1908.40 | 1919.50 | 1928.65 |
EUR/JPY – We had a sell recommendation at $139.55 yesterday which was filled. Unfortunately, price declined to a low of 139.15 overnight before a rally this morning send price above our stop loss at $139.90. We are out of this position with a 35 pips loss. Stochastic is pointing higher and is hinting at a price rally. 20EMA is hinting at bullish price trend. MACD remains bearish and hints at a bearish price trend
| Support | 140.95 | 140.40 | 139.85 |
| Resistance | 141.65 | 142.20 | 142.80 |