Market Talk
– The U.S. dollar traded little changed on Tuesday after strong consumer price data revived the likelihood that the Federal Reserve will hike interest rates next week as fears of turmoil spreading in the banking sector faded.
– U.S. data released overnight showed the Consumer Price Index rose 0.4% last month after accelerating 0.5% in January. In the 12 months through February, the CPI increased 6.0%, a slower pace than the 6.4% annualized gain in January, but still far off the Fed’s 2% target.
– The euro edged up to $1.0739, ahead of a ECB monetary policy meeting on Thursday, which is expected to hike interest rate by 50 basis point. Sterling was down 0.05% at $1.2175 after jumping 1.22% on Monday. Data on Tuesday showed UK pay growth slowed in the three months to January.
– The Japanese yen weakened to 134.13 per dollar. The Australian and New Zealand dollars were buoyant on Wednesday after China’s latest economic data confirmed activity was recovering from pandemic damage
– Gold prices edged lower on Wednesday after falling from a six-week high in the prior session, as a mixed reading on U.S. inflation brewed some uncertainty over the Federal Reserve’s stance on monetary policy, while concerns over a banking crisis in the country persisted, helping to limit bullion loss.
Chart Focus USD/CNH
Key Points
1. Sell USD/CNH recommendation.
2. Sell USD/CNH at 6.9225. Stop at 6.9490 and profit target at 6.8320.
3. A strong Chinese Industrial Output data and a reduction in hike expectation by the Fed are both likely to weigh on the U.S. dollar.
4. Price is likely to face a strong resistance with MACD hinting at a bearish price trend.
Fundamental Comments
1. A strong Chinese Industrial Output data is likely to aid the CNH
2. A reduction in hike expectation by the Federal Reserve is likely to weigh on the U.S. dollar.
Technical Comments
1. Price is likely to be capped by the 20EMA as well as the Fibonacci 62% correction point.
2. A MACD divergence is hinting at a price high and a decline in price.
Key Levels
| Support | 6.8710 | 6.8425 | 6.8190 |
| Resistance | 6.9030 | 6.9290 | 6.9465 |
Technical Overview
USD/JPY – Price continued its recovery from Monday’s low of 132.27 and is approaching the Fibonacci 62% correction point of the decline from 136.99 to the low at 132.27. Stochastic is hinting at a price rally but both MACD and 20EMA are hinting at a possible price decline. We think price is likely to be capped by the Fibonacci 62% correction point at 135.20. We see a decline from here to 132.30 again in the next few days.
| Support | 134.40 | 133.95 | 133.25 |
| Resistance | 134.90 | 135.35 | 135.80 |
EUR/USD – Price could be forming a Rising Wedge chart pattern which is a hint of a possible price top. Stochastic is also hinting at a limited upside. However, 20EMA is hinting at a strong bullish price trend. MACD is also bullish and hinting at a price rally. We think price could be forming a high and the upside could be limited to 1.0805 and from there we are likely to see a decline to 1.0650 in the next few days.
| Support | 1.0725 | 1.0680 | 1.0635 |
| Resistance | 1.0765 | 1.0805 | 1.0850 |
GBP/USD – Price reached a high of 1.2203 overnight. Stochastic is also hinting at a possible price high but both 20EMA and MACD are hinting at a continuation of the price rally. We think price is likely to have a mini correction to 1.2140 and from here, we could see another rally to 1.2265 in the next few days. However, a decline below 1.2100 could hint at a bigger corrective decline to 1.1955.
| Support | 1.2135 | 1.2095 | 1.2050 |
| Resistance | 1.2200 | 1.2265 | 1.2305 |
XAU/USD – Price reached a high of $1914.60 on Monday and we have seen a decline which is likely to continue towards the 20EMA at $1885.15 in the next few days. From there, we are likely to see another rally that is likely to take price higher above $1914.60. Stochastic is in the overbought zone and is hinting at a price correction. MACD and 20EMA are hinting at a continuation of the bullish price trend.
| Support | 1894.80 | 1880.90 | 1870.75 |
| Resistance | 1903.15 | 1914.60 | 1927.50 |
NZD/USD – Yesterday, we had a buy call at 0.6175 but price only reached a low of 0.6179, missing our entry price. Overnight, price had rallied to a high of 0.6263. The rally target may have been reached and if this is the case, we are likely to see a decline to 0.6145 in the next 48 hours. Stochastic is hinting at a price decline but both MACD and 20EMA are both hinting at a bullish price trend.
| Support | 0.6210 | 0.6160 | 0.6120 |
| Resistance | 0.6275 | 0.6310 | 0.6385 |