Market Talk
– The U.S. dollar was little changed to marginally higher on Wednesday as the Federal Reserve’s mantra that interest rates will stay higher for longer overshadowed the notion that the U.S. central bank will soon pause its tightening cycle as the economy slows.
– Powell said rates might need to move higher if the U.S. economy remained strong, but reiterated “disinflation” is underway on Tuesday and Fed official echoed that dual message, with Governor Christopher Waller saying the battle to reach the Fed’s 2% inflation target will be a long fight.
– The euro was modestly lower at $1.0724 after falling to $1.0668 last Tuesday, after hawkish comments from two German officials from the ECB, supported the euro. Sterling rose to $1.2070, recovering from Tuesday’s one-month trough of $1.1960.
– The Aussie was back at 0.6927, having failed to clear resistance around 0.6996 overnight. The Aussie has found some support from a hawkish turn by the RBA which surprised many this week by signalling further rate increases ahead, quashing any talk of a pause in its tightening cycle.
– Gold prices fell slightly on Thursday as traders weighed hawkish signals on monetary policy from the Federal Reserve. Gold was trading at $1879.45 on Thursday while silver was last at $22.38.
Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation.
2. Sell USD/JPY at 131.40. Stop at 131.80 and profit target at 129.40.
3. Powell’s comment and a decline in US Treasury yields are both weighing on the US dollar.
4. A Flag chart pattern and the MACD indicator are both hinting at a price decline.
Fundamental Comments
1. Powell’s “disinflation” comment has put a cap on US interest rate hike and is likely to weigh on the US dollar.
2. A decline in US Treasury yields has aid the Japanese yen.
Technical Comments
1. A Flag chart pattern is hinting at a price decline.
2. MACD is also hinting at a price decline.
Key Levels
| Support | 130.70 | 130.20 | 129.80 |
| Resistance | 131.55 | 132.25 | 132.90 |
Technical Overview
USD/CHF – Price has been capped by the 20EMA for the past 2 days. We think that if price fails to move above 0.9235, are we likely to see a decline back to the previous low of 0.9070 in the next few days. A move below the previous day low at 0.9177 would confirm the decline for 0.9070. A move above 0.9240 would negate our bearish price view. Both MACD and 20EMA are hinting at a price decline.
| Support | 0.9175 | 0.9125 | 0.9085 |
| Resistance | 0.9215 | 0.9245 | 0.9285 |
EUR/USD – Price could be forming a bottoming process on the chart. Both the MACD and the stochastic indicators are supporting this view. If price can move above 1.0765, we are likely to see a price rally to the previous important chart point at 1.0805. However, should price fails to move above 1.0765, we are likely to see this base building process continues for another 24 hours. We favours the upside move.
| Support | 1.0705 | 1.0670 | 1.0630 |
| Resistance | 1.0745 | 1.0795 | 1.0835 |
GBP/USD – Price is currently testing its resistance point at 1.2110. If price can move above this point, it is likely to move higher to 1.2260 in the next few days. Both MACD and 20EMA are hinting that price is likely to break above this resistance and move higher to 1.2260. However, failure to move above 1.2110 could result in a decline back to the week’s low at 1.1960. We favour the rally to 1.2260.
| Support | 1.2055 | 1.2005 | 1.1960 |
| Resistance | 1.2110 | 1.2180 | 1.2250 |
XAU/USD – Price has been consolidating in a range of $1860.65 to $1884.15 since the beginning of this week. We are likely to see price moves out of this range within the next 24 hours. We favour a move above $1884.15 to $1909. Stochastic is hinting at a price rally. MACD and 20EMA are turning around and hinting at a change from a price decline to a price rally. Failure to move above 1$884.15 would hint at a continuation of the range.
| Support | 1873.40 | 1860.65 | 1843.60 |
| Resistance | 1884.15 | 1896.55 | 1909.50 |
USD/CAD – We had a sell recommendation of this pair yesterday but our call was wrong. Price continues to move higher and we are close to the previous high at 1.3475. If price can move above this high, we are likely to see a rally to 1.3520. If price is unable to move above the high, we could see a decline back to 1.3300. 20EMA is hinting at a bullish trend but MACD and stochastic are hinting at a sideways movement.
| Support | 1.3420 | 1.3370 | 1.3340 |
| Resistance | 1.3460 | 1.3520 | 1.3570 |