Market Talk
– The U.S. dollar stumbled on Monday, surrendering earlier gains following unexpected oil output cuts from OPEC+, as data showed the U.S. economy continued to slow with declines in manufacturing and construction spending.
– Data on Monday added to the narrative that the Federal Reserve is near the end of its rate-hike cycle. The Institute for Supply Management data on Monday showed that manufacturing activity fell to the lowest in nearly three years in March as new orders continued to contract, with all sub-components of its manufacturing PMI below the 50 threshold for the first time since 2009.
– The euro fell to $1.0890, having gained more than 0.5% on Monday. Against the Japanese yen, the dollar rose 0.28% to 132.83. Sterling firmed 0.8% at $1.2422, while the dollar dipped 0.% against the Swiss franc to 0.912 francs.
– The Australian dollar slipped to 0.6770 on Tuesday after the Reserve Bank of Australia left its cash rate unchanged at 3.60%, as expected, with policymakers saying additional time was needed to “assess the impact of the increase in interest rates to date and the economic outlook”.
– Gold prices fell slightly $1978 on Tuesday after rallying back to key levels in the prior session as markets considered the potential for more economic turmoil this year amid a manufacturing slowdown and rising fuel costs.
Chart Focus EUR/JPY
Key Points
1. Buy EUR/JPY recommendation.
2. Buy EUR/JPY at 144.40. Stop at 144.10 and profit target at 145.60.
3. Divergent monetary policy and interest rate differential are both in the Euro interest.
4. Price is supported by the 20EMA with MACD hinting at a bullish price trend.
Fundamental Comments
1. Divergent monetary policy is in the Euro’s favour.
2. Interest rate differential is in the Euro’s favour
Technical Comments
1. Price is supported by the 20EMA which is also hinting at a bullish price trend.
2. MACD remains bullish and is hinting at a bullish price trend.
Technical Overview
USD/JPY – Price had reached a high of 133.75 on Monday and that high was accompanied by a divergence warning from the MACD indicator, hinting at a possible price high. We are likely to see a price decline back to the Fibonacci 50% correction point of the rally at 132.15 over the next few days. Stochastic is also hinting at a price decline, 20EMA remains neutral. A price move above 133.75 would negate our bearish price view.
| Support | 132.55 | 132.10 | 131.70 |
| Resistance | 133.10 | 133.70 | 134.35 |
EUR/USD – Price remains nears a 5-week high at 1.0929 and looks likely to test the high again the next couple of days. 20EMA is hinting at a bullish price trend. MACD remains bullish and is hinting at a price rally. Stochastic is moving higher and is hinting at a price rally. A move above 1.0930 is likely to send price higher to 1.1032. A move below 1.0785 would negate our bullish price view.
| Support | 1.0880 | 1.0845 | 1.0790 |
| Resistance | 1.0925 | 1.0985 | 1.1035 |
GBP/USD – Price has moved above the previous week’s high at 1.2422 and looks like it will continue higher to 1.2595 in the next few days. 20EMA is pointing to a bullish price trend. Stochastic is also hinting at a continuation of this current rally. MACD is bullish and is hinting at a bullish price trend. Only a move below the 20EMA at 1.2365 would negate our bullish price view for the next few days.
| Support | 1.2395 | 1.2335 | 1.2270 |
| Resistance | 1.2450 | 1.2515 | 1.2575 |
XAU/USD – Price is consolidation in a big triangle chart pattern at the moment after reaching a high at $2009.75. Both MACD and Stochastic confirm the consolidation triangle chart outlook. 20EMA is neutral at the moment. We would prefer to see a break on the topside for a test to $2078 in the next few weeks. For the short term, watch out for the boundaries at $1991 and the downside at $1943. A break above would confirm our bullish view while a move below the lower boundary would negate our bullish view.
| Support | 1973.10 | 1959.50 | 1943.85 |
| Resistance | 1987.55 | 1999.55 | 2009.75 |
AUD/USD – A pause by the RBA in rate hike has brought the Aussie dollar down to 0.6755 from a high of 0.6793 earlier in the day before the RBA announcement. Stochastic is in the overbought zone and is hinting at a limited upside. MACD remains bullish and is hinting at a bullish price trend. 20EMA is also bullish. We think the correction should be supported at the 20EMA line at 0.6730 and from there we see another rally to 0.6850.
| Support | 0.6745 | 0.6715 | 0.6665 |
| Resistance | 0.6795 | 0.6850 | 0.6895 |