Market Talk
– The U.S. dollar slipped against the euro on Wednesday, but its losses were capped as traders were hesitant to make any big bets ahead of next week’s central bank meetings, including the Federal Reserve and the European Central Bank.
– With much of Asia observing Lunar New Year holidays and a lack of any big U.S. data releases on Wednesday has contributed to sluggish trading conditions but there could be a big move tonight with the release of US 4Q GDP data.
– The euro edged higher at $1.0913, not far from the nine-month high of $1.0927 touched on Monday. Sterling advanced after data showed British manufacturers unexpectedly lowered their prices in December, which suggested inflation may be easing, ahead of next week’s Bank of England policy meeting.
– The greenback was down at 129.61 yen, having hit a near eight-month low of 127.21 on Jan. 16. The Australian dollar surged to a more than five-month high on Wednesday after inflation data came in hotter than expected, bolstering the case for further rate increases from the RBA. The Australian dollar was last up 0.76% to $0.7099.
– Gold reversed course to edge up on Wednesday as the greenback weakened and investors kept a close eye on a slew of upcoming U.S. economic data that could influence the Federal Reserve monetary policy meeting next week.
Chart Focus EUR/JPY
Key Points
1. Buy EUR/JPY recommendation.
2. Buy EUR/JPY at 141.10. Stop at 140.70 and profit target at 142.70
3. Divergent monetary policy and interest rate differential are both likely to aid the Euro.
4. Price is supported by the Fibonacci 38% correction point as well as the 20EMA line with MACD hinting at a bullish price trend.
Fundamental Comments
1. Divergent monetary policy is likely to aid the Euro.
2. Interest rate differential is in the Euro favour.
Technical Comments
1. Price is supported by the Fibonacci 38% correction point as well as the 20EMA line.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 141.10 | 140.70 | 140.45 |
| Resistance | 141.75 | 142.25 | 142.85 |
Technical Overview
USD/JPY – Price broke below the support at 129.60 but only reached a low of 129.10. Stochastic is in the oversold zone and is hinting at limited downside. MACD is also flat and neutral and is near to its zero line. The 20EMA line is also hinting at a weak price trend. Price may continue its sideways movement. There are also two strong supports at 128.00 and 127.15 that could support price and keep price inside a sideway consolidation for the next few days.
| Support | 129.00 | 128.40 | 127.95 |
| Resistance | 129.60 | 130.10 | 130.60 |
EUR/USD – Price continues its rally and is now close to the week’s high at 1.0927. We think price can move above this resistance to the next strong resistance at 1.1045 in the next 1-2 days. Stochastic is rising and is hinting at a price rally. The 20EMA is also hinting at a bullish price trend. However, MACD could be forming a divergence, warning of a potential price high. The rally to 1.1045 could be the final rally before a decline.
| Support | 1.0895 | 1.0835 | 1.0790 |
| Resistance | 1.0930 | 1.0980 | 1.1040 |
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. After a decline to 1.2262, price has climbed up higher to 1.2417. The rally may continue higher to 1.2450 as stochastic is moving higher and hinting at a price rally. Both MACD and 20EMA are also bullish and hinting at a bullish price trend.
| Support | 1.2380 | 1.2340 | 1.2280 |
| Resistance | 1.2420 | 1.2455 | 1.2490 |
XAU/USD – We had a sell recommendation yesterday at $1935, but our call was wrong and we got stopped out overnight. Price rose to a high of $1949.15 and looks like it can continue to move higher. Stochastic may be in the overbought zone but is still rising and hinting at a price rally. MACD and 20EMA are both bullish and hinting at a bullish price trend. The next price resistance lies at $1958.30.
| Support | 1939.60 | 1925.40 | 1911.30 |
| Resistance | 1958.30 | 1972.50 | 1981.30 |
AUD/USD – Price reached a high of 0.7128 this morning but this high was accompanied by a divergence warning from the MACD indicator, hinting at a potential price high in the making. Stochastic is also in the overbought zone, hinting at a price decline. However, 20EMA remains bullish and is hinting at a bullish price trend. We think price had reached a high and a move below 0.7055 would confirm the high and hint at a price movement to 0.6990 in the next few days.
| Support | 0.7090 | 0.7060 | 0.7025 |
| Resistance | 0.7130 | 0.7180 | 0.7230 |