Market Talk
-The US dollar was broadly lower against its peers on Tuesday ahead of a keenly anticipated inflation report, while the yen strengthened as surprise pick Kazuo Ueda was nominated to be the next governor of Bank of Japan.
– Markets are looking to the U.S. consumer price index (CPI) data for further clues on Federal Reserve’s policy outlook, with the headline number expected to rise 0.5% in January, according to a Reuters poll, after falling 0.1% in December.
– The euro was up 0.14% at $1.0735, having risen 0.435% in the previous session. The British pound was last trading at $1.2147, up 0.10% on the day, after rising 0.68%.
– The Japanese yen strengthened 0.46% to 131.82 per dollar on Tuesday, having slipped 0.7% in the previous session. Market has already factored in the likely appointment of the new BOJ governor. The Australian dollar added 0.10% to $0.697, while the kiwi fell 0.06% to $0.6350.
– Spot gold was up 0.2% at $1,857.22 per ounce on Tuesday as the dollar retreated, with investors bracing for U.S. inflation data that could determine the Federal Reserve’s next moves in its monetary policy plans.
Chart Focus AUD/JPY
Key Points
1. Buy AUD/JPY recommendation.
2. Buy AUD/JPY at 91.60. Stop at 91.30 and profit target at 92.45
3. Divergent monetary policy and interest rate differential are both in the Aussie dollar favour.
4. Price is likely to be supported by the 20EMA line with MACD hinting at a bullish price trend.
Fundamental Comments
1. Divergent monetary policy is aiding the Aussie dollar.
2. Interest rate differential is in the Aussie dollar favour.
Technical Comments
1. Price is likely to be supported by the 20EMA line.
2. MACD remains bullish and is hinting at a bullish price trend.
Technical Overview
USD/JPY – From a low of 129.80 and we have seen a bounce back up to a high of 132.90 on Monday. MACD and Stochastic are both hinting that price could have reached a high and a decline is likely in the days ahead. The 20EMA line at 131.65 is currently the first support for price. A break of this support is likely to send price lower to 130.30 in the next 24 hours. Only a price move above 133.00 would negate our bearish view.
| Support | 131.60 | 131.15 | 130.60 |
| Resistance | 132.35 | 132.90 | 133.35 |
EUR/USD – Price reached a new low of 1.0654 on Monday and this low was accompanied by a divergence warning from the MACD indicator, hinting at a possible price low. Stochastic is also giving the same hint. We think price is likely to move higher in the next 48 hours to 1.0790. An ability to move above 1.0790 is likely to send price higher to 1.0885 in the next few days. A move below 1.0660 would negate our bullish view.
| Support | 1.0705 | 1.0660 | 1.0620 |
| Resistance | 1.0750 | 1.0790 | 1.0850 |
GBP/USD – We had a sell call at 1.2075 yesterday but our call was wrong. Price had reached a low of 1.2030 and has bounced up higher to 1.2151 this morning. Stochastic is hinting at a price rally. 20EMA is also hinting at a price rally but MACD is hinting at a sideways movement. We think price is likely to continue its rally to 1.2190 in the next 24 hours. Above 1.2195, the next target would be 1.2230.
| Support | 1.2110 | 1.2075 | 1.2030 |
| Resistance | 1.2155 | 1.2190 | 1.2230 |
XAU/USD – We had a buy call last Friday at $1858 and yesterday we had recommended keeping stop at $1851 and profit order at $1885. Our stop loss order was triggered yesterday. Price declined to a low of $1850.40 yesterday. However, this low was accompanied by a divergence warning from the MACD, hinting at a possible price low. If price can hold above the previous day’s low we see price moving up to $1868 in the next 24 hours.
| Support | 1850.45 | 1840.45 | 1825.05 |
| Resistance | 1866.70 | 1878.70 | 1890.15 |
USD/CNH – Price has reached a high of 6.8386 on Monday and has been on a decline. We think the decline is likely to continue as both MACD and stochastic indicator are hinting at a possible price high with divergence warnings. We think price is likely to move lower to the 6.7730 in the next 48 hours. If price can move below this support, we are likely to see the decline continue to 6.7350 in the next few days.
| Support | 6.8160 | 6.8040 | 6.7950 |
| Resistance | 6.8280 | 6.8385 | 6.8525 |