Market Talk
– The U.S. dollar was parked below recent peaks on Tuesday, as a three-week rally faded with investors looking to the minutes of the latest Federal Reserve meeting for further monetary policy clues. Trading activity was muted with the US closed due to President’s Day holiday.
– The yield on 10-year Treasury notes was up 3.5 basis points to 3.863%, after touching a three-month high of 3.929% on Friday. The yen weakened 0.12% to 134.40 per dollar. The Aussie was hovering at $0.6896, having risen 0.5% overnight to as high as $0.6920 helped by big gains in China’s stock markets on reopening hopes.
– The kiwi dollar was off 0.2% at $0.6241, after climbing 0.2% overnight ahead of a central bank meeting on Wednesday. Markets are pricing a 50 basis points hike to bring New Zealand’s benchmark interest rate to 4.75%.
– The euro was little changed against the dollar at $1.0669, just above Friday’s six-week low of $1.0612 supported by European Central Bank policymakers’ hawkish remarks. Sterling was steady at $1.2024.
– Gold prices were pinned just above six-week lows on Tuesday, with traders holding off big bets in anticipation of more cues on monetary policy from the minutes of the Federal Reserve’s February meeting. Spot gold was flat at $1,841.59 an ounce in Tuesday morning Asian trading.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 134.10. Stop at 133.80 and profit target at 135.10.
3. Expectations of the Fed on a monetary policy tightening path for longer than initially expected and interest rate differential are aiding the U.S. dollar.
4. Price is supported by the 20EMA with stochastic indicator hinting at a bullish price trend.
Fundamental Comments
1. Interest rate differential is in the U.S. dollar favour.
2. Investors’ expectations of the Fed on a monetary policy tightening path for longer than initially expected are aiding the U.S. dollar.
Technical Comments
1. Price is supported by the 20EMA which is also hinting at a bullish price trend.
2. Stochastic has a bullish crossover and is hinting at a bullish price trend.
Key Levels
| Support | 134.30 | 133.90 | 133.55 |
| Resistance | 134.65 | 135.10 | 135.60 |
Technical Overview
USD/CHF – Price reached a high of 0.9331 last Friday and has declined below to the 20EMA support area at 0.9245 on Tuesday morning. If price stays below 0.9250, we are likely to see a decline to 0.9160 in the next 24 hours. However, both stochastic and MACD are hinting at a price rally ahead. If price can move above 0.9245, we could see a test of the previous high at 0.9330. We prefer the rally to 0.9330.
| Support | 0.9210 | 0.9180 | 0.9135 |
| Resistance | 0.9250 | 0.9290 | 0.9330 |
EUR/USD – We had a buy recommendation yesterday at 1.0865, which was filled when price reached a low of 1.0667 this morning. Stochastic, 20EMA, and MACD are all hinting at a price decline in the near future. There is a possibility our call could be taken out today. We would recommend keeping stop at 1.0655 and profit order at 1.0785. A move below 1.0655 would hint at a decline to 1.0610.
| Support | 1.0650 | 1.0610 | 1.0570 |
| Resistance | 1.0685 | 1.0720 | 1.0765 |
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 on Monday morning. A U.S. holiday had kept overnight range tight. Price will need to move above 1.2045 to continue the rally, else it risk a decline back to 1.1910 again.
| Support | 1.2010 | 1.1960 | 1.1915 |
| Resistance | 1.2045 | 1.2075 | 1.2145 |
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 currently hinting at a price decline ahead. If price stays below the resistance at $1847, we could see a decline in price back to test the previous low at $1818 in the next 24 hours. A move above $1847 would hint at a rally to $1865.
| Support | 1836.60 | 1818.70 | 1803.70 |
| Resistance | 1847.35 | 1860.05 | 1871.95 |
NZD/USD – Price has reached a low of 0.0.6193 on Friday. There was a rally to 0.6260 but the rally was been halted by the declining 20EMA line. If price fails to move above this high, we are likely to see a decline back to 0.6193 again in the next 24 hours. MACD and 20EMA are both hinting at a price decline. However, stochastic indicator is hinting at a price rally. We prefer to see a decline to 0.6193.
| Support | 0.6225 | 0.6190 | 0.6155 |
| Resistance | 0.6260 | 0.6295 | 0.6325 |