Market Talk
– The U.S. dollar distanced itself from an eight-month low on Monday ahead of a slew of central bank meetings later in the week, though gains were capped by dovish re-pricing of the U.S. Federal Reserve’s rate-hike expectations as compared to more hawkish counterparts.
– The euro rose to $1.0874, drawing support from continued hawkish rhetoric by ECB policymakers and ebbing fears of a deep recession, ahead of policy meetings from the Fed and the European Central Bank (ECB). Sterling was at $1.2405 ahead of a Bank of England (BoE) later this week.
– The Australian dollar fell 0.3% to $0.7088 but was on track for a monthly gain of nearly 4%, after the shock that Australia’s inflation rate shot up to a 33-year high in the previous quarter, caused traders to ramp up bets that the RBA will have to tighten interest rates further.
– The Japanese yen jumped close to 0.2% to 129.62 per dollar. Core consumer prices in Japan’s capital for the month of January marked the fastest annual gain in nearly 42 years, data on Friday showed, keeping the Bank of Japan under pressure to phase out its economic stimulus.
– Spot gold was steady at $1931.25 per ounce on Monday ahead of the U.S. Federal Reserve’s rate decision later in the week, where Fed policymakers are expected to hike US interest rate by 25 basis points.
Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation.
2. Buy EUR/USD at 1.0840. Stop at 1.0810 and profit target at 1.0925
3. A divergent monetary policy between the ECB and the Fed is likely to aid the Euro dollar.
4. Price is likely to be supported by the previous week’s low with stochastic hinting at a price rally.
Fundamental Comments
1. The ECB is expected to hike rate by 50 basis points while the Fed is expected to hike rate by 25 basis points
2. This narrowing of interest rate differential is likely to aid the Euro.
Technical Comments
1. Price is likely to be supported by the previous week’s low.
2. Stochastic is near to the oversold zone and is hinting at a price rally ahead.
Key Levels
| Support | 1.0835 | 1.0790 | 1.0760 |
| Resistance | 1.0875 | 1.0930 | 1.0960 |
Technical Overview
USD/JPY – Price is consolidating in the range between 129.10 and 131.10. Stochastic is in the middle of its range and is neutral at the moment. MACD is also neutral but looks weak at the moment. Price has moved below the 20EMA, hinting at a possible bearish price trend. Unless price can move above 131.10 or go below 129.10, we are expecting price to stay within this range in the next 24 hours.
| Support | 129.10 | 128.70 | 128.35 |
| Resistance | 129.60 | 129.95 | 130.30 |
USD/CAD – We had a buy recommendation at 1.3330 last Friday was filled when the price reached a low of 1.3298. Stochastic is in the oversold zone and is hinting at a limited downside. 20EMA is bearish and is hinting at a bearish price trend. However, MACD showing a divergence warning of a possible price low. We would recommend keeping stop at 1.3295 and profit order at 1.3410.
| Support | 1.3295 | 1.3260 | 1.3220 |
| Resistance | 1.3350 | 1.3400 | 1.3430 |
GBP/USD – Price moved to a low at $1.2339 last Friday but was supported by 20EMA. Stochastic is moving lower and hinting at a price decline. Price has moved up above the 20EMA and MACD has remained above the zero line. Both trend indicators are hinting at a possible bullish price trend. Currently, the price is in a sideway trend, ranging from 1.2260 to 1.2446. Unless price can move above this range, we are expecting price to trade sideways within the range in the next 24 hours.
| Support | 1.2360 | 1.2315 | 1.2260 |
| Resistance | 1.2425 | 1.2455 | 1.2490 |
XAU/USD – Price reached a low of $1916.59 last Friday and moved to a high at $1934.09 this morning. Stochastic is rising and hinting at a price rally. MACD is pointing up and hinting at a bullish price trend. Price has moved above the 20EMA, hinting at a change in trend. As long as the price stays above the 20EMA at $1930, we are likely to see a rally back to $1949.15 again in the next couple of days. A break below $1909.65 is likely to negate our bullish view.
| Support | 1923.55 | 1911.30 | 1896.55 |
| Resistance | 1934.70 | 1949.15 | 1958.30 |
EUR/JPY – We had a buy recommendation at 141.10 last Thursday which was filled. Last Friday, we had recommended lifting stop higher to 140.85 while keeping our profit order at 142.70. Price moved to a low of 140.54 this morning and triggered our stop. Stochastic is moving lower and hinting at a price decline. Price has moved below the 20EMA and MACD has remained below the zero line which both hinting at a possible bearish price trend.
| Support | 140.50 | 139.95 | 139.55 |
| Resistance | 140.95 | 141.30 | 141.75 |