FX Commentary – US Dollar Surged Bets On Prolong Fed Tightening.

Market Talk
– The U.S. dollar hovered near a five-week high against major peers on Monday on rising bets for prolonged Federal Reserve policy tightening ahead of a crucial consumer price report that is scheduled for Tuesday at 8.30pm New York time.

– The yen slipped with the government set to nominate a candidate who backs the current policy settings as the new Bank of Japan governor on Tuesday. The Japanese yen slipped to a low of 132.20 on Monday morning in Asian trading.

– The euro eased 0.06% to $1.0669 on Friday and continues its decline on Monday morning to a low of $1.0654. The British pound was last trading at $1.2044, down 0.12% on the day and below the low of last Friday.

– The risk-sensitive Australian and New Zealand dollars eased with Asian equities on worries that higher U.S. rates will choke global growth. The Aussie fell 0.13% to $0.6910, having been largely flat in the previous week.  The New Zealand’s kiwi lost 0.08% to $0.6306.

– A rally in gold prices, which started in the beginning of the year, cooled over the past two weeks as markets reassessed their outlook for U.S. monetary policy and awaited more cues on the U.S. economy from key inflation data due this week.

Chart Focus GBP/USD

Key Points

1. Sell GBP/USD recommendation.

2. Sell GBP/USD at 1.2075. Stop at 1.2110 and profit target at 1.1965.

3. Rising bets for a prolonged Federal Reserve policy tightening and a higher US bond yields are both aiding the US dollar.

4. Price has moved below the 20EMA, with both the MACD and 20EMA hinting at a bearish price trend.

Fundamental Comments

1. Rising bets for a prolonged Federal Reserve policy tightening is aiding the U.S. dollar.

2. A higher US bond yields is also aiding the US dollar.

Technical Comments

1. Price has moved below the 20EMA, which is hinting at a bearish price trend.

2. MACD remains bearish and is hinting at a bearish price trend.

Key Levels


Technical Overview

USD/JPY – Price reached a low of 129.80 and we have seen a bounce back up to a high of 132.20 at the point of this writing. Both MACD and 20EMA are pointing up, hinting that price is likely to go higher. Stochastic is also hinting that price has room to go higher. The choice of the new BOJ governor is also likely to see yen weaken. We see price testing its previous high of 132.90 in the next 48 hours.


EUR/USD – Price reached a new low of 1.0654 this morning. However this new low was accompanied by a divergence warning from the MACD indicator, hinting at a possible price low. Stochastic is also hinting that price is near to its low. The 20EMA is hinting at a bearish price trend.  We think price may have reached a low and is likely to move up to 1.0785 again in the next few days. A move below 1.0654 would negate our bullish view.


USD/CHF – Price was capped by the 20EMA and declined to a low of 0.9159 on Thursday. Since this low, price has recovered and has reached a high of 0.9259 this morning.  We are likely to see a continuation of the rally to 0.9290 in the next 24 hours. The next direction will depend on the reaction at the 0.9290 high. Stochastic, 20EMA and MACD are hinting that the rally might not be able to move above the next resistance.


XAU/USD – We had a buy call on last Friday at $1858 after price declined to a low of $1852.68. Both MACD and 20EMA are hinting at a continuation of the price decline. MACD is also turning down and below the zero line, hinting at a price decline. Stochastic is hinting that price may have reached a bottom. We would recommend keeping stop at $1851 and profit order at $1885. There is a risk that our stop may be hit today.


AUD/USD – Fibonacci ratio is hinting that price is likely to move lower to 0.6850. Only a price move above 0.7045 will negate this bearish price view. 20EMA and MACD indicator are both supporting this bearish view. Both are hinting at a price decline as well. However, Stochastic is hinting at a price movement higher. We favour the bearish move as suggested by the trend indicators.


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