Market Talk
– The U.S. dollar found some support on Wednesday after stubbornly high U.S. inflation suggested interest rates are going to remain high for longer than investors had expected. Remarks from central bank officials also have investors worried about interest rate going to be higher for longer.
– Headline U.S. CPI was 0.5% in January mostly due to higher rental and food costs. That was in line with forecasts, though the annual figure of 6.4% was a bit more than expected and traders busily unwound bets on rate falling toward the end of 2023.
– The U.S. dollar climbed to a six-week high of 133.30 yen and sat not far below that at 132.73 early in the Asia session. The euro was bumpy but ultimately unable to advance on the greenback and stayed at $1.0734. Sterling was boosted overnight by strong wages data and last bought $1.2178.
– The Aussie edged back to $0.6949, having been as far as $0.7030 at one stage overnight. The RBA’s recent hawkish turn has seen markets scramble to re-price the risk of several more hikes, with the cash rate, currently at 3.35%, now seen peaking around 4.20% compared to 3.60% a month ago.
– Gold prices was little changed on Wednesday at $1850.20 as mixed inflation data for January brewed some uncertainty over the U.S. economy and the path of monetary policy, with the dollar also showing a muted reaction to the readings.
Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation.
2. Sell EUR/USD at 1.0730. Stop at 1.0760 and profit target at 1.0655.
3 U.S. inflation data overnight has suggested interest rates are going to remain high which is likely to keep the U.S. dollar strong, together with interest rate differential.
4. Price had failed to move above a resistance point with MACD hinting at a bearish price trend ahead.
Fundamental Comments
1. U.S. inflation overnight has suggested interest rates are going to remain high for longer than investors had expected, keeping the U.S. dollar strong.
2. Interest rate differential is in the U.S. dollar favour.
Technical Comments
1. Price had failed to move above a resistance point and is likely to test the bottom of the range.
2. MACD has turned bearish and is hinting at a bearish price trend ahead.
Technical Overview
USD/JPY – Our view yesterday was wrong. Price has moved above 133.00 negating our bearish view. Price is likely to proceed higher but the upside is likely to be limited as indicated by the stochastic indicator. The MACD indicator is also hinting at a weak uptrend. Only 20EMA is hinting at a strong bullish uptrend. We believe the upside could be limited to 134.75 in the next couple of days.
| Support | 133.10 | 132.55 | 132.00 |
| Resistance | 133.60 | 134.05 | 134.55 |
USD/CHF – Price reached a low of 0.9137 overnight, and we have seen a rally to 0.9246 at the point of this writing. We think price is likely to proceed higher to the previous week’s high at 0.9290 in the next 24 hours. A move above this resistance would be bullish and hint at a move to 0.9315. However, inability to move above 0.9290 would hint at a decline in price back to 0.9125 again. We prefer the up move.
| Support | 0.9215 | 0.9180 | 0.9135 |
| Resistance | 0.9260 | 0.9290 | 0.9360 |
GBP/USD – Price had move below the 20EMA after reaching an overnight high at 1.2268. The decline is likely to continue to initially 1.2032 and subsequently to 1.1960 in the next few days. Stochastic is hinting at a price decline. Trend indicators, 20EMA and MACD, are also hinting at a price decline. Only a price move above 1.2218 would negate our bearish view.
| Support | 1.2075 | 1.2025 | 1.1960 |
| Resistance | 1.2125 | 1.2165 | 1.2220 |
XAU/USD – Price declined to a low of $1850.40 yesterday and has moved below this low at the point of this writing. The current low at $1841.84 has also negated the MACD divergence given yesterday. With 20EMA and stochastic indicator, hinting at a bearish price trend as well, we are expecting price to move lower to the next support point at $1823.55 in the next few days.
| Support | 1840.45 | 1825.05 | 1814.15 |
| Resistance | 1853.15 | 1865.80 | 1878.70 |
AUD/JPY – We had a buy call yesterday at 91.60 but price only declined to a low of 91.72 and our entry order was not filled. Price rallied overnight to a high of 93.02 and the rally may be over. Stochastic has given a divergence warning of a possible price high. However, 20EMA and MACD are still hinting at a bullish price trend. If price stays above the 20EMA, we may see another test of the high at 93.02.
| Support | 92.00 | 91.55 | 90.95 |
| Resistance | 92.50 | 92.80 | 93.30 |