Market Talk
– The US dollar clung to modest gains against its major peers on Thursday, bolstered by strong economic data that continues to suggest the U.S. Federal Reserve’s monetary policy tightening could be extended if it is to bring down the highest inflation in decades.
– On Thursday, the Labour Department said the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, reflecting tight labour market conditions while U.S. GDP increased 2.7% in the fourth quarter showing the economy grew solidly in the fourth quarter.
– The euro reached a low of $1.0576 in late New York trading while Sterling also eased to $1.1991. The yen was last trading at 134.66, as the incoming head of Japan’s central bank soothed fears of an early end to super-easy monetary policy, nudging bond yields lower globally.
– The Aussie nudged back up to $0.6822, after touching a trough of $0.6783 overnight. The kiwi dollar rose to $0.6236, benefiting from a steep rise in domestic bond yields. The RBNZ had raised interest rate by 50 basis points on Wednesday.
– Gold prices rose slightly on Friday to $1823.84, but were set for a fourth consecutive week of decline amid growing uncertainty over U.S. monetary policy. Investors are waiting for more cues from the Core PCE Price Index, a reading on the Federal Reserve’s preferred inflation gauge, later in the day.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.2035. Stop at 1.2075 and profit target at 1.1930
3. Strong U.S. economic data continues to suggest the Federal Reserve’s monetary policy tightening could be extended and interest rate differential are both aiding the U.S. dollar.
4. Price is likely to be capped by the Fibonacci 50% correction point and the 20EMA with MACD hinting at a bearish price trend.
Fundamental Comments
1. Strong U.S. economic data continues to suggest the Federal Reserve’s monetary policy tightening could be extended is aiding the US dollar.
2. Interest rate differential is in the U.S. dollar favour.
Technical Comments
1. Price is likely to be capped by the Fibonacci 50% correction point and the 20EMA.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1.1990 | 1.1960 | 1.1910 |
| Resistance | 1.2035 | 1.2075 | 1.2145 |
Technical Overview
USD/JPY – Price reached a high of 135.22 on Tuesday and seems to have lost its upward momentum. We saw a price decline to 134.07 this morning and we are expecting the decline to continue lower to 133.60 in the next 24 hours. The 20EMA line at 134.65 is likely to cap any rally. Currently, the stochastic, the MACD and 20EMA are all hinting at a price decline. Above 134.95 would negate our bearish price view.
| Support | 134.50 | 134.05 | 133.60 |
| Resistance | 134.90 | 135.25 | 135.95 |
EUR/USD – Price reached a new low at 1.0576 overnight and again there was a divergence warning from the MACD hinting at a possible price low. Stochastic is also hinting at a possible price low but 20EMA is still hinting at a price decline. We think the price decline is likely to be limited and we are looking at a price rally to 1.0665 in the next 48 hours.
| Support | 1.0575 | 1.0540 | 1.0485 |
| Resistance | 1.0615 | 1.0665 | 1.0705 |
USD/CAD – Price reached a high of 1.3580 on Thursday but this high was accompanied by divergence warnings from both the stochastic and MACD indicators, hinting at a possible price high. 20EMA is hinting at a bullish price trend but we think price may have reached a high. If price falls below the 1.3525, we are likely to see price 1.3440 in the next few days ahead.
| Support | 1.3540 | 1.3500 | 1.3460 |
| Resistance | 1.3580 | 1.3620 | 1.3665 |
XAU/USD – We had a buy recommendation yesterday at $1825.50. However price went below our stop at $1818.00 to a low of $1817.43, triggering our stop order. Stochastic and MACD are both hinting at a possible price low and a price rally ahead. 20EMA remains bearish and is hinting at a bearish price trend. We are expecting price to stay above the previous day’s low and move higher to $1847.55 in the next few days.
| Support | 1817.45 | 1803.70 | 1791.10 |
| Resistance | 1827.75 | 1838.70 | 1847.45 |
AUD/USD – Price reached a low of 0.6780 overnight and this low was accompanied by a divergence warning from the MACD indicator, hinting at a possible price low. Stochastic is also hinging at possible price low but 20EMA is hinting at a bearish price trend. We favour a price rally to 0.6920 in the next 72 hours. However, failure to move above the falling 20EMA line at 0.6380 is likely to send price lower to 0.6750 in the next 24 hours.
| Support | 0.6780 | 0.6750 | 0.6715 |
| Resistance | 0.6825 | 0.6865 | 0.6900 |