Market Talk
– The U.S. dollar was pinned near seven-week lows on Thursday after the U.S. Federal Reserve sounded close to calling time on interest rate hikes after announcing a 25 basis points hike, which markets think are more or less over.
– The US central bank raised its benchmark funds rate by 25 basis points, as expected, but dropped language about “ongoing increases” being needed in favour of “some additional” rises, as it watches how wobbling confidence in banks affects the economy.
– The euro touched a seven-week high of $1.0912 on Wednesday, while the yen, which closely follows U.S. yields, fell 0.7% to a six-week low of 130.50. The Australian and New Zealand dollars rose 0.7% and 0.8% respectively to track back toward Wednesday’s peaks.
– Sterling also hovered near a seven-week high as British inflation unexpectedly rose, leaving it at an eye-watering 10.4% and heaping pressure on the Bank of England to raise rates and sound hawkish at its meeting later in the global day.
– Gold prices rose on Thursday, hovering below the key $2,000 level amid expectations that the Federal Reserve will have limited headroom to hike interest rates further, which also pulled the dollar lower.
Chart Focus USD/CAD
Key Points
1. Sell USD/CAD recommendation.
2. Sell USD/CAD at 1.3690. Stop at 1.3720 and profit target at 1.3555.
3. An end of the Fed hike cycle is likely to weigh on the U.S. dollar.
4. A chart pattern and a bearish MACD are both hinting at a price decline ahead.
Fundamental Comments
1. With the U.S. Federal Reserve close to calling time on interest rate hikes, the US dollar is likely to be weak.
2. A decline in US Treasury yields is likely to weigh on the US dollar.
Technical Comments
1. Price could be forming a Descending Triangle chart pattern, which is a hint of a price decline ahead.
2. MACD is bearish and is hinting at a price decline.
Key Levels
| Support | 1.3650 | 1.3600 | 1.3555 |
| Resistance | 1.3690 | 1.3740 | 1.3790 |
Technical Overview
USD/JPY – Price had reached a low of 130.41 overnight, which was lower than Monday’s low of 130.53. This low was accompanied by a divergence warning from the MACD indicator hinting at a possible price low. However, 20EMA and stochastic indicator are both hinting at a continuation of this price decline. We think the downside is limited. We are looking at a bounce to 131.90 in the next 48 hours.
| Support | 130.40 | 129.80 | 129.20 |
| Resistance | 130.95 | 131.45 | 131.95 |
EUR/USD – Price continued its rally and had reached a high of 1.0929 at the point of this writing. Stochastic is deep in the overbought zone but expectation of a narrowing of an interest rate differential is likely to keep the bid strong and the market overbought. MACD and 20EMA are both hinting at a bullish price trend. We think the rally is likely to continue towards 1.1030 in the next few days.
| Support | 1.0885 | 1.0850 | 1.0795 |
| Resistance | 1.0930 | 1.0985 | 1.1030 |
GBP/USD – Price broke above last Monday’s high at 1.2284 to reach a high of 1.2334. Stochastic is rising and is hinting at a continuation of this rally. MACD is also hinting at a continuation of this price rally. 20EMA is hinting at a bullish price trend. We think the topside may be limited to 1.2405 in the 24 hours. Bank of England is likely to hike rates by 25 basis points which could have a big impact on the next directional move.
| Support | 1.2320 | 1.2280 | 1.2230 |
| Resistance | 1.2370 | 1.2405 | 1.2450 |
XAU/USD – The decline was halted at $1934 overnight and we have seen a rally up to 1983.58 at the point of this writing. We remain bearish and think this rally could be a corrective rally, especially if price cannot move above $1989. MACD had previously hinting at a possible price high with a divergence but both stochastic and 20EMA are currently hinting at a price rally. Above $1989 would negate our bearish view and calls for a test of the recent high at $2009.75.
| Support | 1969.40 | 1951.90 | 1942.55 |
| Resistance | 1988.30 | 2009.75 | 2030.25 |
EUR/AUD – We had a buy call yesterday at 1.6045 but price only fell to a low of 1.6053 and our entry order was not filled. Overnight, we saw price moved above our target to a high of 1.6353. We think this could be a temporary high and we see a decline back to 1.6000 in the next few days. MACD has a divergence warning of a potential price high and stochastic is also hinting at a price decline. 20EMA is hinting at a bullish price trend.
| Support | 1.6150 | 1.6105 | 1.6055 |
| Resistance | 1.6205 | 1.6255 | 1.6295 |