Market Talk
– The U.S. dollar was pinned near five-week lows on Wednesday ahead of the conclusion of the U.S. Federal Reserve’s policy meeting, with investors awaiting clarity on the path the central bank is likely to take in the wake of global banking turmoil.
– CME FedWatch tool showed markets are now pricing in about a 14% chance of the Fed not increasing rates, with a roughly 86% chance of a 25 basis point hike. The Fed will announce its decision on Thursday morning 2am Singapore time.
– The euro was at $1.0767, hovering around a five-week high of $1.0789 scaled overnight. The yen weakened 0.04% to 132.59 a dollar, whereas sterling was last trading at $1.2221, up 0.06% on the day.
– The Australian dollar was at $0.6684, after falling 0.7% to as low as $0.6650 overnight, despite a broad improvement in risk appetite. The kiwi dollar was changing hands at $0.6189, having also eased 0.8% as far as $0.6168 overnight.
– Gold prices moved in a tight range on Wednesday, stabilizing after a sharp drop in the prior session as markets hunkered down ahead of a Federal Reserve interest rate decision, while easing fears of a banking crisis spelt lesser safe haven demand for the yellow metal.
Chart Focus EUR/AUD
Key Points
1. Buy EUR/AUD recommendation.
2. Buy EUR/AUD at 1.6045. Stop at 1.6015 and profit target at 1.6190
3. A solution to Credit Suisse and an aggressive ECB are both likely to aid the euro.
4. Price is likely to be supported by the 20EMA with MACD hinting at a bullish price trend.
Fundamental Comments
1. The end of Credit Suisse saga is likely to aid the euro.
2. With the ECB on a aggressive hike path, the interest differential is likely to narrow and favours the euro.
Technical Comments
1. Price is likely to be supported by the 20EMA line, which is also hinting at a bullish price trend.
2. MACD is bullish and is hinting at a bullish price trend.
Key Levels
| Support | 1.6070 | 1.6005 | 1.5940 |
| Resistance | 1.6125 | 1.6195 | 1.6225 |
Technical Overview
USD/JPY – Price had reached a low of 130.53 on Monday and this low was accompanied by a divergence warning from the MACD indicator hinting at a possible price low. 20EMA has also turned around and is hinting at a price rally. However, stochastic is in the overbought zone and is hinting at a limited upside. We think price is likely to be supported by the 20EMA and we see a rally to 133.80 in the next few days.
| Support | 132.05 | 131.60 | 131.00 |
| Resistance | 132.75 | 133.20 | 133.80 |
EUR/USD – Price continued its rally and had reached a high of 1.0787 overnight. However, stochastic is hinting at a limited upside and MACD is also hinting at a possible price high. Only the 20EMA is hinting at a bullish price trend. We think price has reached a temporary high at 1.0787. We see a decline in price back to 1.0575 in the next few days. A move above 1.0790 would negate our bearish view and calls for a test of 1.1030.
| Support | 1.0755 | 1.0720 | 1.0670 |
| Resistance | 1.0790 | 1.0845 | 1.0885 |
GBP/USD – Price had reached a high of 1.2284 last Monday and this high was accompanied by a divergence warning from the MACD indicator, hinting at a possible price high. Stochastic is declining from the overbought zone and is hinting at a price decline. However, both MACD and 20EMA are hinting at a bullish price trend. We think a high is in place and we see a decline to 1.2050 in the next few days. A move above 1.2284 would negate our bearish view.
| Support | 1.2205 | 1.2165 | 1.2115 |
| Resistance | 1.2250 | 1.2290 | 1.2345 |
XAU/USD – We think price has reached a high on Monday at $2009.75. A Spinning Top candlestick price pattern is also hinting at a possible price high. MACD on the 4-hourly chart is showing a divergence and is also hinting at a possible price high. Price has also moved below the 20EMA, adding to the bearish price trend. We see price going lower to $1885 in the next few days. Only a move above $1966 would negate our bearish price view.
| Support | 1935.40 | 1922.25 | 1907.50 |
| Resistance | 1952.05 | 1968.50 | 1983.15 |
NZD/USD – Price had reached a high of 0.6280 on Monday and a decline has seen price reached a low of 0.6166. Stochastic is in the oversold zone and is hinting at a price rally. MACD is about to crossover the zero line and is hinting at a price rally as well. 20EMA is currently hinting at a neutral price trend. We think price is likely to be capped at 0.6235 and we see a decline back to 0.6165 in the next 24 hours.
| Support | 0.6195 | 0.6165 | 0.6135 |
| Resistance | 0.6230 | 0.6280 | 0.6310 |