Market Talk
– Currency trading was subdued in the lead up to Wednesday’s Fed rate decision with the U.S. dollar facing a fourth monthly loss on Tuesday. Investors’ view of a peak in U.S. interest rates could swing into view as soon as this week’s Federal Reserve meeting.
– Interest-rate futures indicate market expectations for a 25 basis point hike from the Federal Reserve to take the Fed funds rate window to 4.5%-4.75%. Pricing suggests two more 25 basis point hikes are expected, before cuts arrive later in the year.
– The euro rose as far as 1.0913 after data showed Spanish inflation running surprisingly hot in January, before the broader mood reeled it back to 1.0851. The common currency is up 1.3% this month and is loitering near a nine-month peak ahead of European Central Bank rate decisions on Thursday.
– The Aussie slipped to $0.7050 after data showed retail spending took a shock 3.9% tumble in December， far exceeding forecast of a 0.3% dip, which is a likely dragged on economic growth and trimming expectations for how much further interest rates might have to rise.
– Gold prices retreated to $1922.10 on Tuesday, coming under pressure from a stronger dollar as caution kicked in ahead of a Federal Reserve meeting this week, where the Fed is widely expected to raise interest rate by 25 basis points.
Chart Focus EUR/AUD
Key Points
1. Buy EUR/AUD recommendation.
2. Buy EUR/AUD at 1.5360. Stop at 1.5325 and profit target at 1.5480
3. A sharp drop in Aussie retail spending and a likely hike in Euro interest rate are both weighing on the Aussie dollar.
4. A Cup and Handle chart pattern and MACD are both hinting at a price reversal.
Fundamental Comments
1. Expectation of a 50 basis points hike by the European Central Bank is likely to aid the Euro.
2. A sharp drop in Aussie retail spending is weighing on the Aussie dollar.
Technical Comments
1. A Cup and Handle chart pattern is hinting at a price low and a price reversal.
2. MACD is hinting at a possible price low with divergence warning.
Key Levels
| Support | 1.5385 | 1.5345 | 1.5305 |
| Resistance | 1.5425 | 1.5485 | 1.5520 |
Technical Overview
USD/JPY – Price is consolidating in the range of 129.10 and 131.10 and looks likely to continue till FOMC announcement. Stochastic is moving higher and hinting at a price rally but both MACD and 20EMA are flat and neutral. Both trend indicators are hinting at a sideways 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 | 130.00 | 129.60 | 129.10 |
| Resistance | 130.55 | 130.90 | 131.55 |
EUR/USD – We had a buy recommendation at 1.0840 which was filled when price declined to a low of 1.0838. Stochastic is still declining and hinting at a further decline in price. MACD and 20EMA are also bearish and hinting at a bearish price trend. If price were to move below 1.0820, it could be heading lower to 1.0765. However, if it can hold above 1.0830, we have a chance to see 1.0930 again in the next couple of days.
| Support | 1.0825 | 1.0780 | 1.0735 |
| Resistance | 1.0875 | 1.0930 | 1.0960 |
GBP/USD – Price reached a high of 1.2416 on Monday and has been on a decline since that high. We think the decline is likely to continue lower to 1.2280 in the next 48 hours. Stochastic is declining and has yet to reach the oversold zone, hinting at more declines ahead. Both MACD and 20EMA are hinting at a bearish price trend. Only a price move above 1.2380 would negate our bearish view for the next 48 hours.
| Support | 1.2330 | 1.2280 | 1.2245 |
| Resistance | 1.2370 | 1.2415 | 1.2450 |
XAU/USD – Price reached a high of $1934.10 on Monday and has been on a decline. We think the decline can continue and we see price decline to $1900 in the next 24 hours. Stochastic is declining and is hinting at a price decline. Both MACD and 20EMA are also hinting at a price decline. A MACD divergence is also hinting at a possible price high. A move below $1900 would confirm a high and a move to $1886 in the next few days.
| Support | 1911.30 | 1896.55 | 1886.55 |
| Resistance | 1925.30 | 1934.70 | 1949.15 |
USD/CAD – We had a buy recommendation at 1.3330 last Friday and yesterday, we had left stop at 1.3295 and profit order at 1.3410. Price reached a high of 1.3414 this morning and our profit order was filled. We are out of this position with a profit of 80 pips. Stochastic is rising and 20EMA is also pointing to a bullish price trend. If price can go above 1.3425, it could move up to 1.3515 in the next few days.
| Support | 1.3380 | 1.3435 | 1.3295 |
| Resistance | 1.3425 | 1.3475 | 1.3520 |