Market Talk
– The U.S. dollar jumped on Friday after upbeat economic data from the United States lessened the risk of recession, but also suggested the Federal Reserve would have to hike interest rate further and keep rates up for longer.
– The Labour Department’s closely watched employment report showed that nonfarm payrolls surged by 517,000 in the previous month. The department revised December data higher to show 260,000 jobs added instead of the previously reported 223,000. Average hourly earnings also rose for the second consecutive month, boosting the U.S. dollar.
– The greenback extended its rally on the yen to a three-week top of 132.60 on Monday amid reports the Japanese government had offered the job of central bank governor to the current deputy, Masayoshi Amamiya, who is considered by markets to be more dovish than some other contenders.
– The euro was huddled at $1.0791 after shedding 1.1% on Friday. Sterling fell 1.39% to $1.2055, the lowest since Jan. 6 and its worst day since Dec. 15. The Aussie was struggling at $0.6923, after slumping 2.2% on Friday while the kiwi dollar was hovering at $0.6320.
– Gold prices were muted on Monday, after plummeting 2.5% on Friday. A stronger-than-expected U.S. employment data ramped up fears that the Federal Reserve could keep hiking interest rates sending gold prices lower to $1860.45.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.3370. Stop at 1.3340 and profit target at 1.3470.
3. A strong US labour data and a decline in crude oil prices are both likely to keep the U.S. dollar strong.
4. Price is likely to be supported by the 20EMA line, with both trend indicators hinting at a bullish price trend.
Fundamental Comments
1. A strong US labour data is hinting that the Fed is likely to hike rates further, keeping the dollar strong.
2. A decline in crude oil price is likely to keep the Canadian dollar weak.
Technical Comments
1. Price is likely to be supported by the 20EMA line, which is also hinting at a bullish price trend.
2. MACD is also hinting at a bullish price trend.
Key Levels
| Support | 1.3390 | 1.3335 | 1.3295 |
| Resistance | 1.3430 | 1.3475 | 1.3520 |
Technical Overview
USD/JPY – We had a sell recommendation from last Thursday at $128.95 and on Friday, we had shifted stop to cost at 128.95 and kept profit order at 127.80. Price went up above our stop last Friday and we are out of this position without a loss. Price will need to move above 132.86. If price is unable to move above this resistance, we see price going lower to 130.00 in the next 24 hours. We are in favour of the bearish price trend.
| Support | 131.55 | 131.05 | 130.55 |
| Resistance | 132.00 | 132.40 | 132.90 |
EUR/USD – Price has declined below last week low of 1.0801, triggering a bearish price trend. We are likely to see a continuation of this bearish price trend to 1.0710 in the next 48 hours. Trend indicators, MACD and 20EMA confirm this bearish price trend but Stochastic is hinting at a limited downside. We favour the bearish price and only a move above 1.0930 would negate our bearish view.
| Support | 1.0765 | 1.0705 | 1.0650 |
| Resistance | 1.0805 | 1.0855 | 1.0890 |
GBP/USD – Price reached a low of 1.2030 this morning but looks like it may have reached a low. Both stochastic and MACD are hinting that price has reached a low. However, 20EMA is hinting at a strong bearish price trend. We tend to favour the stochastic and MACD. We think price is likely to move up today to 1.2145 or to 1.2185. From this location, we see the start of another decline.
| Support | 1.2030 | 1.1985 | 1.1935 |
| Resistance | 1.2075 | 1.2125 | 1.2185 |
XAU/USD – Price has declined below last week low of $1900.55, triggering a bearish price trend. We are likely to see a continuation of this bearish price trend to $1843 in the next few days. However, Stochastic is hinting at a price rally to $1900 to go short. Trend indicators are hinting at a bearish price trend. We have the same view as the stochastic indicator and would prefer to get into a short position on a rally towards the 20EMA line at $1900.
| Support | 1872.10 | 1860.65 | 1843.60 |
| Resistance | 1882.20 | 1900.55 | 1918.85 |
EUR/JPY – Last Friday, we had a sell call on this pair but our call was wrong. Price has moved up higher to the previous high at 142.85. If price cannot move above this resistance, we are likely to see a decline back to 141.20 in the next 48 hours. However, if price moves above the previous high at 142.85, we are likely to see a move to 143.90. We favour the bearish side and see a decline to 141.20 for the next 24 hours.
| Support | 141.85 | 141.25 | 140.75 |
| Resistance | 142.35 | 142.85 | 143.30 |