Market Talk
– The U.S. dollar was on the front foot on Monday, supported by a strong run of economic data out of the United States that traders bet, will keep the Federal Reserve on its monetary policy tightening path for longer than initially expected.
– A slew of data out of the world’s largest economy in recent weeks pointing to a still-tight labour market, sticky inflation, robust retail sales growth and higher monthly producer prices, have raised market expectations that the U.S. central bank has more to do in taming inflation, and that interest rates would have to go higher.
– Geopolitical tensions were ever present with North Korea firing more missiles and talk of Russia ramping up attacks in Ukraine before Friday’s one- year anniversary of the invasion, sending the Aussie lower to $0.6866. The kiwi slipped 0.17% to $0.6232, with eyes on the Reserve Bank of New Zealand’s interest rate decision on Wednesday.
– The euro was stuck at $1.0676, having touched a six-week low of $1.0613 on Friday. The Euro was supported by two European Central Bank policymakers said on Friday that interest rates in the euro zone still have some way to rise, pushing up market pricing for the peak ECB rate.
– Gold prices hovered around a six-week low on Monday, moving little as traders awaited more cues on U.S. monetary policy from a slew of Federal Reserve speakers this week, as well as the minutes of the central bank’s February meeting.
Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation.
2. Buy EUR/USD at 1.0685. Stop at 1.0655 and profit target at 1.0785.
3. Hawkish remarks from ECB officials and an increase in peak ECB rate are aiding the euro dollar.
4. Price had moved off the low with bullish candlestick patterns, hinting at a price rally, with MACD hinting at a possible price low.
Fundamental Comments
1. Hawkish remarks from ECB officials are aiding the euro dollar.
2. An increase in the peak ECB rate is likely to hint at a narrow of interest rate differential, which is likely to aid the euro.
Technical Comments
1. Price had moved off the low with bullish candlestick patterns, hinting at a price rally.
2. MACD had a divergence warning, hinting at a possible price low.
Key Levels
| Support | 1.0660 | 1.0610 | 1.0570 |
| Resistance | 1.0705 | 1.0755 | 1.0790 |
Technical Overview
USD/JPY – Price reached a high of 135.10 last Friday, exceeding our target of 134.75. However, this high was accompanied by a divergence warning from the MACD indicator, hinting at a possible price high. Stochastic is also hinting at a price decline ahead but 20EMA is hinting at a bullish price trend. We think that price has peaked and is likely to decline lower to the 132.90 in the next 48 hours.
| Support | 133.90 | 133.55 | 132.95 |
| Resistance | 134.50 | 134.80 | 135.10 |
USD/CHF – Price reached a high of 0.9331 last Friday and has declined back to the 20EMA support area at 0.9250. If price can stay above 0.9250, we are likely to see another rally to 0.9330. However, if price stay below 0.9250, we are likely to see a decline to 0.9160 in the next 48 hours. Stochastic and 20EMA are both hinting at a price decline while MACD is hinting at a rally to 0.9330. We prefer to see a decline to 0.9160.
| Support | 0.9210 | 0.9180 | 0.9135 |
| Resistance | 0.9255 | 0.9290 | 0.9330 |
GBP/USD – Price reached a low of 1.1914 last Friday but this low was accompanied by a divergence warning from the MACD indicator, hinting at a possible price low. Price has since rallied and had reached a high of 1.2045 this morning. Stochastic is hinting at a continuation of this price rally. We think the rally can continue up to 1.2120 in the next 48 hours. Only a move below 1.1914 would negate our bullish price view.
| Support | 1.2015 | 1.1960 | 1.1915 |
| Resistance | 1.2070 | 1.2120 | 1.2175 |
XAU/USD – Price reached a low of $1818.85 last Friday and this could be a temporary low. MACD has also given a divergence warning of a possible price low. Stochastic and 20EMA are supporting this view as well. Price is currently testing an important resistance. If price can move above $1845.10, we are likely to see a rally to $1865. However, a failure to move above this resistance would likely result in a decline to test the previous low at $1818.85.
| Support | 1837.20 | 1826.40 | 1818.85 |
| Resistance | 1849.80 | 1865.80 | 1879.15 |
AUD/USD – Price reached a low of 0.6810 last Friday and this low was accompanied by a divergence warning from the MACD indicator, hinting at a possible price low. Stochastic and 20EMA are both hinting at a price rally. MACD is hinting at a price decline ahead. We favour a rally to 0.6980 in the next 48 hours. Only a move below 0.6810 would negate our bullish view for the next 48 hours.
| Support | 0.6885 | 0.6855 | 0.6810 |
| Resistance | 0.6935 | 0.6975 | 0.7025 |