Market Talk
– The U.S. dollar hovered near a one-month peak on Tuesday as traders raised their forecasts of U.S. Federal Reserve interest rate levels needed to tame inflation, as a stubbornly resilient labour market remains largely immune to aggressive rate hikes.
– U.S. Treasury yields have risen on the back of higher rate expectations with benchmark 10-year yields last at 3.6305%, sending the Japanese yen pinned near Monday’s one-month low of 132.90 per dollar.
– The British pound tumbled to a one-month low of $1.2006 in the previous session. It was last 0.09% higher at $1.2033. The euro gained 0.06% to $1.0733, having slid to $1.0709 in the previous session, the lowest since Jan. 9.
– Reserve Bank of Australia raised its cash rate 25 basis points to a decade-high of 3.35% on Tuesday and reiterated that further increases would be needed, a more hawkish policy tilt than many had expected. The Aussie shot up to 0.6940, recouping overnight losses.
– Gold prices steadied at $1873 per ounce, near a one-month low on Tuesday amid continued pressure from strength in the greenback and rising Treasury yields. Focus is turning to economic cues from a talk by Federal Reserve Chair Jerome Powell later in the day after stronger-than-expected U.S. jobs data saw markets broadly shift their expectations for interest rate hikes by the Fed.
Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation.
2. Sell EUR/USD at 1.0795. Stop at 1.0825 and profit target at 1.0705.
3. Expectations of more interest rate hikes from the Fed and rising yield are aiding the U.S. dollar.
4. Price is likely to be capped by the strong resistance with MACD hinting at a bearish price trend.
Fundamental Comments
1. Expectations of more interest rate hikes from the Fed are aiding the U.S. dollar.
2. Rising US Treasury yield is weighing on the Euro dollar.
Technical Comments
1. Price is likely to be capped by the previous support turned resistance line and the 20EMA line.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1.0705 | 1.0670 | 1.0630 |
| Resistance | 1.0745 | 1.0795 | 1.0835 |
Technical Overview
USD/JPY – Price was unable to move above 132.90 and we have seen a price decline to 132.13 at the point of this writing. We are likely to see the decline continues to 131.55 in the next 24 hours. Stochastic and MACD are both hinting at a price decline after reaching an extreme level. 20EMA continues to hint at a bullish price trend. We favour a decline to 131.55 before a rally takes price higher above 133 in the next few days ahead.
| Support | 131.95 | 131.55 | 131.05 |
| Resistance | 132.40 | 132.90 | 133.30 |
USD/CAD – We had a buy call yesterday at 1.3370 but price only declined to a low of 1.3400 and our entry order was not filled. Price had reached a high of 1.3475 overnight and has turned down. Stochastic and MACD are both also hinting that price could move lower. However, 20EMA is hinting at a bullish price trend. We think any price decline could be supported at 1.3375 and we can see another rally in the next few days to 1.3520.
| Support | 1.3395 | 1.3345 | 1.3295 |
| Resistance | 1.3445 | 1.3480 | 1.3520 |
GBP/USD – Price reached a low of 1.2005 overnight and the decline has stopped for the moment with price hovering around the overnight low. We think this pause in decline is only temporary and a decline to 1.1900 is likely in the next few days. Trend indicators, both MACD and 20EMA are hinting at a bearish price trend. Price will need to move above 1.2130 to negate this bearish price trend for the next few days.
| Support | 1.2005 | 1.1950 | 1.1905 |
| Resistance | 1.2075 | 1.2125 | 1.2180 |
XAU/USD – Price has declined below last week low of $1900.55, reaching an overnight low of $1860.65. We are likely to see a continuation of this bearish price trend to $1843 in the next 48 hours. While both trend indicators are confirming the bearish price trend, stochastic is hinting at a corrective price rally to get into a short position. The corrective rally can bring price higher to $1881.70. From this price level, we see a decline to $1843.
| Support | 1871.60 | 1860.65 | 1843.60 |
| Resistance | 1881.70 | 1896.55 | 1909.50 |
AUD/USD – Price has declined to a low of 0.6854 overnight. A 25 basis points hike by the RBA has lifted price to 0.6950 this morning. Price is likely to face a strong resistance at 0.6975. We do not think price can move above this resistance. We think price is likely to decline back to 0.6855 again in the next few days. Both MACD and 20EMA are hinting at a strong bearish price trend. Stochastic is hinting at a price rally to 0.6975 to get into a short position.
| Support | 0.6905 | 0.6855 | 0.6790 |
| Resistance | 0.6950 | 0.6995 | 0.7045 |