Market Talk
– The US dollar fell, tracking a slide in U.S. Treasury yields, as investors consolidated gains after the greenback’s recent rise and looked ahead for the release of jobs data and consumer prices for February later in the week.
– The British pound held steady on Tuesday, retaining gains overnight after Britain struck a new trade deal with the European Union, which brightened the outlook for the post-Brexit UK economy and signalled improved relations between London and the bloc.
– Sterling jumped on the back of the news to clock a 1% gain in the previous session, and rose to a high of $1.2069 on Tuesday. The euro similarly got a lift and was last 0.05% higher at $1.0614, after rising 0.6% on Monday.
– The Japanese yen steadied at 136.23. Incoming Bank of Japan (BOJ) Governor Kazuo Ueda has thus far offered few clues on whether the BOJ could exit its massive stimulus imminently, although he indicated that he had ideas on such a move.
– Gold prices kept to a tight range on Tuesday after recovering slightly from their weakest level this year, as concerns over rising interest rates and anticipation of key U.S. economic readings this week kept traders largely to the sidelines.
Chart Focus USD/CNH
Key Points
1. Buy USD/CNH recommendation.
2. Buy USD/CNH at 6.9475. Stop at 6.9310 and profit target at 6.9880.
3. Recent strong U.S. data and rising U.S. interest rate outlook are both aiding the U.S. dollar.
4. Price is likely to be supported by the 20EMA line with MACD hinting at a bullish price trend.
Fundamental Comments
1. Rising U.S. interest rate outlook is likely to aid the U.S. dollar.
2. Recent strong US data are aiding the U.S. dollar.
Technical Comments
1. Price is likely to be support by the 20EMA line, which is also hinting at a bullish price trend.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 6.9450 | 6.9270 | 6.9080 |
| Resistance | 6.9675 | 6.9895 | 7.0020 |
Technical Overview
USD/JPY – Price reached a high of 136.55 on early Monday morning despite earlier divergence warnings from the MACD indicator. Since the high, price has been moving in a tight range from 135.85 to 136.55. Stochastic is hinting at a price decline but both MACD and 20EMA are hinting at a price rally. We think price is likely to continue in this range with no market moving news on this pair for the next 48 hours.
| Support | 135.85 | 135.35 | 134.75 |
| Resistance | 136.55 | 136.90 | 137.35 |
EUR/USD – Price continued its decline to a low of 1.0532 on Monday morning and we saw a rally to a high of 1.0619 on Monday night. Is this a confirmation of a low in place and a reversal in trend? We do not think so as price failed to move above a previous price low. This is hinting at another attempt to the Monday’s low at 1.0532. Stochastic is hinting at a price rally but both MACD and 20EMA are both hinting at a price decline.
| Support | 1.0575 | 1.0535 | 1.0490 |
| Resistance | 1.0620 | 1.0665 | 1.0705 |
GBP/USD – Price reached a low of 1.1921 and rallied on the back of a trade deal with the EU to a high of 1.2067. Stochastic is hinting at a limited upside but both 20EMA and MACD are hinting at a continuation of this rally. If price can stay above the 20EMA at 1.2015, we see a rally to 1.2145. A failure to move above 1.2015 could result in a return to the previous low at 1.1920 in the next 48 hours.
| Support | 1.2015 | 1.1970 | 1.1920 |
| Resistance | 1.2065 | 1.2105 | 1.2150 |
XAU/USD – Price reached a low of $1806.29 overnight and stochastic is hinting at a price rally. However, both MACD and 20EMA are hinting at a continuation of this price decline. We think price may have reached a temporary bottom. If price can move above the 20EMA at $1820, it could hint at a possible price low and a rally to $1847. Failure to surpass this resistance could result in a slow grind to test $1800.
| Support | 1806.25 | 1791.10 | 1783.90 |
| Resistance | 1820.70 | 1833.80 | 1847.55 |
AUD/JPY – We had a buy call yesterday at 91.15 but price only reached a low of 91.31 and our entry order was not filled. Price has also rallied overnight to a high of 91.97. Stochastic is hinting at a continuation of this rising price trend but 20EMA is currently capping this rally. If price can move above the 20EMA line at 91.85, we are likely to see a rally to 92.95 but failure could result in a fall to 91.15.
| Support | 91.55 | 91.15 | 90.45 |
| Resistance | 91.95 | 92.25 | 93.00 |