Market Talk
– The U.S. dollar rose broadly on Thursday as growth concerns about the U.S. economy drove demand for the safe-haven greenback, while the yen renewed its ascent as investors doubled down on bets that the Bank of Japan would shift away from its yield curve control policy.
– Weak U.S. data released on Wednesday showed that U.S. retail sales fell by the most in a year in December and manufacturing output recorded its biggest drop in nearly two years, stoking fears that the world’s largest economy is headed for a recession.
– The euro shed 0.02% to stand at $1.0792, some distance from Wednesday’s nine-month high of $1.0887. Sterling fell 0.17% to $1.2327, away from the previous session’s one-month high of $1.2435.
– Aussie skidded 0.49% to $0.6907, after Australia employment unexpectedly dipped in December in a sign the red-hot labour market might be cooling, though the jobless rate stayed near five-decade lows. The kiwi fell 0.31% to $0.6425 after New Zealand Prime Minister Jacinda Ardern announced plans to step down no later than early February.
– Spot gold was up 0.2% at $1,907.18 per ounce; in early Asian trade on Thursday as investors weighed chances of the U.S. Federal Reserve slowing its pace of interest rate hikes after overnight U.S. data stoke fears of a U.S. recession.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.3445. Stop at 1.3415 and profit target at 1.3545
3. Renewed concerns about a US recession and a decline in crude prices are both likely to aid the safe haven U.S. dollar.
4. Price is likely to be supported by the 20EMA line as well as a previous resistance turned support line with MACD hinting at a bullish price trend.
Fundamental Comments
1. Renewed concerns about a US recession is aiding the safe haven U.S. dollar.
2. A decline in crude oil price on worry of a recession is likely to weigh on the Canadian dollar.
Technical Comments
1. Price is likely to be supported by the 20EMA line as well as a previous resistance turned support line.
2. MACD is hinting at a bullish price trend while stochastic is hinting there is room for upside movement.
Key Levels
| Support | 1.3475 | 1.3435 | 1.3390 |
| Resistance | 1.3515 | 1.3550 | 1.3595 |
Technical Overview
USD/JPY – Price moved to a high of $131.56 on Wednesday after BOJ announcement but has declined to a low of 127.84 at the point of this writing. We are likely to see a continuation of this decline to 127.21 initially and later to 126.15 in the next few days. Stochastic is in the oversold zone and hinting at a limited downside but both trend indicators, 20EMA and MACD are hinting at a strong bearish price trend.
| Support | 127.55 | 127.20 | 126.85 |
| Resistance | 128.25 | 128.95 | 129.40 |
EUR/USD – We had a sell recommendation yesterday at 1.0790 but we were wrong on this call. Price rallied to a high of 1.0887 overnight but has declined to a low of 1.0781 this morning. Stochastic is still declining and hinting at a price decline. MACD remains bearish and is hinting at a bearish price trend. 20EMA is flat and neutral at the moment. We remain bearish for 1.0725 in the next 48 hours.
| Support | 1.0765 | 1.0725 | 1.0690 |
| Resistance | 1.0805 | 1.0845 | 1.0890 |
GBP/USD – Price moved to a high of 1.2435 overnight. A previous MACD divergence warning was also negated by the overnight rally. However, price has drifted lower to 1.2315 and could be heading lower to 1.2285 where the 20EMA is likely to provide support. Stochastic is also hinting at a price decline. 20EMA and MACD are both bullish and hinting at a bullish price trend in the next 48 hours.
| Support | 1.2310 | 1.2245 | 1.2190 |
| Resistance | 1.2350 | 1.2395 | 1.2435 |
XAU/USD – Price has declined to a low of $1900.80 which is also near to the 20EMA line. Stochastic is near to the oversold zone and is hinting at a limited downside. MACD is also about to turn up and is hinting at a bullish price trend ahead. 20EMA is flat and neutral at the moment. If price is able to hold above $1900, we could see a rally to $1925.60 in the next couple of days ahead. A decline below $1900 would see price test the support at $1882.45.
| Support | 1900.80 | 1884.05 | 1874.30 |
| Resistance | 1913.85 | 1928.65 | 1939.95 |
AUD/USD – Price reached a high of 0.7061 yesterday but a softer Aussie labour data this morning has sent price down to 0.6885. Stochastic is declining and hinting at a bearish price trend. MACD and 20EMA are both bearish and are also hinting at a bearish price trend. We think the decline is likely to continue to 0.6820 in the next 48 hours. Only a price move above 0.6960 would confirm a low in price and a test of the previous high at 0.7061.
| Support | 0.6855 | 0.6800 | 0.6765 |
| Resistance | 0.6905 | 0.6960 | 0.7000 |