Market Talk
– The U.S. dollar slid on Tuesday after data showed U.S. business activity contracted for a troubling seventh straight month in January while the Euro hit a nine-month peak against the dollar after euro zone business activity made a surprise return to modest growth in January.
– While U.S. business activity shrank in January, the downturn moderated across both the manufacturing and services sectors for the first time since September and business confidence strengthened since the turn of the year, limiting the greenback’s decline.
– The euro steadied at $1.0888, near Monday’s nine-month high of $1.0927. Data on Tuesday showed that euro zone business activity made a modest growth in January, indicating the downturn in the bloc may not be as deep as feared. Expectations of further rate increases from the ECB also aided sentiment.
– The Aussie rose to $0.7092, its highest since August, after a shock surge in inflation to a 33-year high last quarter added to the case for the Reserve Bank of Australia to continue raising interest rates. The kiwi slid to $0.6469, after New Zealand’s annual inflation of 7.2% in the fourth quarter came in below its central bank’s 7.5% forecast.
– Gold prices steadied near a nine-month high on Wednesday near $1930.55 as fears of a looming U.S. recession kept safe haven demand elevated amid increased expectations that the Federal Reserve will slow its pace of interest rate hikes in the coming months.
Chart Focus XAU/USD – Gold
Key Points
1. Sell Gold recommendation.
2. Sell Gold at $1935. Stop at $1944 and profit target at $1901.
3. Expectation of another interest rate hike by the Fed next week, although at a slower pace, is likely to weigh on the yellow metal.
4. Price may be forming a Double Top chart pattern with MACD confirming a possible price high in the making.
Fundamental Comments
1. Expectation of another interest rate hike by the Fed next week, although at a slower pace is likely to weigh on the yellow metal.
2. A US$40 rally in the past 1 week may have run its course ahead of an expected rate hike by the Fed.
Technical Comments
1. Price may be forming a Double Top chart pattern, which is a sign of a potential price high in the making.
2. A bearish divergence warning from the MACD indicator is hinting at a possible price high.
Key Levels
| Support | 1925.40 | 1911.30 | 1900.80 |
| Resistance | 1935.15 | 1942.30 | 1958.95 |
Technical Overview
USD/JPY – Price could be forming a consolidation pattern, in the form of a Triangle chart pattern at the moment. For the past 1 week, price has a smaller daily range movement. Stochastic has been declining, hinting at a price decline. However, both MACD and the 20EMA are bullish and are hinting at a price rally. We see the topside at 131.10 capping the rally while price is likely to be support by the support at 129.60 for the next 48 hours.
| Support | 130.10 | 129.70 | 129.35 |
| Resistance | 130.60 | 131.10 | 131.55 |
EUR/USD – Price has moved up to a nine-month high of $1.0927 on Monday. The rally was followed by a sharp price decline. However, the decline was halted by the 20EMA line and price is likely to test the high of 1.0927 again within the next 24 hours. Stochastic is supporting this view by hinting at a price rally. MACD remains bullish. The 20EMA is also hinting at a bullish price trend. A move below 1.0830 would negate our bullish view.
| Support | 1.0875 | 1.0830 | 1.0790 |
| Resistance | 1.0925 | 1.0980 | 1.1035 |
GBP/USD – Price reached a high of 1.2447 on Monday but this high was accompanied by a divergence warning from both the MACD and the stochastic indicator. This is a strong sign that price may have reached a temporary high. However, stochastic is hinting at a short-term price rally while both the 20EMA and MACD are hinting at a bearish price trend in the next 48 hours.
| Support | 1.2295 | 1.2260 | 1.2210 |
| Resistance | 1.2345 | 1.2390 | 1.2445 |
AUD/USD – The Aussie rose to $0.7092, its highest since August, after inflation data pointed to further rate hikes by the RBA in the coming month. Stochastic is in the overbought zone and is hinting at a price decline. However, 20EMA is pointing up with a steep slope, hinting at a strong bullish price trend. MACD is also hinting at a bullish price trend. We think price is likely to move higher to the next resistance level at 0.7280 in the next few days.
| Support | 0.7090 | 0.7050 | 0.6995 |
| Resistance | 0.7125 | 0.7190 | 0.7245 |
USD/CAD – Price is near to Monday’s low and looks like this low will be tested and broken in the next 24 hours. While stochastic is near to the oversold zone and is hinting at a limited downside, 20EMA is pointing down with a steep slope hinting at a strong bearish price trend. MACD is also bearish and hinting at a bearish price trend. A break of 1.3320 is likely to send price lower to 1.3225 in the next 24 hours.
| Support | 1.3320 | 1.3275 | 1.3220 |
| Resistance | 1.3365 | 1.3410 | 1.3445 |