Market Talk
– The U.S. dollar fell across the board on Thursday, moving in line with lower Treasury yields, as investors stuck to their views that the Federal Reserve does not need to raise interest rates any more than it should as inflation is starting to get under control.
– A higher-than expected U.S. jobless claims number further compounded the dollar’s losses, as the report suggested labour market weakness that can help bring down inflation. Initial claims rose 13,000 to a seasonally adjusted 196,000, above economists forecast of 190,000.
– The euro climbed 0.2% as well to $1.0733, while sterling rose 0.3% against the greenback to $1.2114, with both boosted by improving risk sentiment across markets. The dollar rose 0.1% against the Japanese yen to 131.57 yen.
– The Australian dollar, often seen as a proxy for risk sentiment, rose 0.8% to US$0.6973 as the safe-haven U.S. currency dipped in line with a rally in equities and other so-called “risk-friendly” assets, helped by strong company earnings.
– Gold prices hovered around a one-month low on Friday amid pressure from rising short-term yields, and were headed for a second consecutive weekly loss as markets reassessed their expectations of more interest rate hikes from the Federal Reserve.
Chart Focus XAU/USD – Gold
Key Points
1. Buy Gold recommendation.
2. Buy Gold at $1858. Stop at 1851.00 and profit target at 1885.
3. A weak US dollar and a decline in Treasury yields are both aiding the yellow metal.
4. A candlestick price pattern and a divergence in the MACD indicator is hinting at a possible price low being formed.
Fundamental Comments
1. A weak US dollar is aiding the yellow metal.
2. A decline in US Treasury yields is aiding gold with a lower holding cost.
Technical Comments
1. A possible Hammer candlestick pattern is hinting at a possible price low being formed
2. MACD is confirming a possible price low with a divergence.
Key Levels
| Support | 1852.65 | 1843.55 | 1831.40 |
| Resistance | 1866.25 | 1878.70 | 1890.15 |
Technical Overview
USD/JPY – We had a sell recommendation yesterday at 131.40 which was filled. Our stop at 131.80 was also filled when price reached a high of 131.88. Stochastic and 20EMA are both hinting at a price rally. Price is likely to face a stiff resistance at 131.85. If price can move above 131.85, we are likely to see a rally to 132.90 in the next 48 hours. However, failure to move above 131.85 is likely to send price back to 129.15.
| Support | 131.30 | 130.70 | 130.20 |
| Resistance | 131.85 | 132.25 | 132.90 |
EUR/USD – Price could be forming a bottoming process on the chart. Both the MACD and the 20EMA are supporting this view. If price can move above 1.0790, we are likely to see a price rally to the previous important chart point at 1.0875. However, should price fails to move above 1.0790, 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 reached a high of 1.2194 overnight and has retraced back to the 20EMA support at 1.2100. If price can stay above 1.2090, we are likely to see another test of the overnight high at 1.2195. However, failure to hold above 1.2090 would mean the high is in place and price is likely to decline to 1.1960 in the next few days. All three indicators are hinting at a decline to 1.1960. We are also in favour of 1.1960.
| Support | 1.2090 | 1.2055 | 1.2005 |
| Resistance | 1.2140 | 1.2195 | 1.2250 |
XAG/USD – Price may have reached a low at $21.82. MACD is hinting with divergence of a possible price low. Stochastic is also hinting of a possible price rally. We think price is likely to move higher to test the 20EMA line at $22.25. If price can move above this point, it is likely to confirm the low and hint at a low to 22.60 in the next few days. A move below 21.82 would negate our bullish view.
| Support | 21.80 | 21.45 | 21.15 |
| Resistance | 22.15 | 22.40 | 22.70 |
USD/CHF – Price was capped by the 20EMA and declined to a low of 0.9159 overnight. Price has managed to recover above the 20EMA line at 0.9210. If price can stay above the 20EMA line at 0.9210, it would hint at a low is in place and price is likely to test the high of 0.9290 again in the next 48 hours. However, failure to hold above 0.9210 would hint at a decline to 0.9060 in the next few days.
| Support | 0.9210 | 0.9160 | 0.9120 |
| Resistance | 0.9250 | 0.9285 | 0.9315 |