Market Talk
– The U.S. dollar paused for breath after an overnight rally on Tuesday, following its best rally this month against major peers as a resilient U.S. labour market bolstered the case for a Federal Reserve rate hike next month.
– The Japanese yen managed to claw back some of Monday’s more than 1% slide, as the 10-year Treasury yield also slowed down in Tokyo trading after a sharp two-day climb. The yen came under additional pressure overnight as the new Bank of Japan governor, Kazuo Ueda, vowed to stick with ultra-easy stimulus setting for the time being.
– The euro fell 0.36% to $1.0859 after dropping to $1.0831, the lowest since April 3. Sterling ticked up 0.11% to $1.2397 after a 0.23% overnight decline. The Swiss francs were little changed at 0.9060.
– The Australian dollar fell 0.51% to $0.6674, after earlier hitting $0.6619, the lowest since March 16, and the kiwi dropped 1.01% to $0.6211, after earlier reaching $0.6195, the lowest since March 27.
– Gold prices hovered just below recent highs on Tuesday, remaining relatively underpinned as markets awaited more cues on the U.S. economy from inflation data and the minutes of the Federal Reserve’s March meeting due later this week.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 133.00. Stop at 132.70 and profit target at 134.60.
3. An increase in US Treasury yields and interest rate differential are both against the yen
4. Price is likely to be supported by the 20EMA line with MACD hinting at a bullish price trend.
Fundamental Comments
1. An increase in US Treasury yields is likely to weigh on the Japanese yen.
2. Interest rate differential is in the US dollar favour
Technical Comments
1. Price is likely to be supported by the bullish 20EMA line.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 133.15 | 132.70 | 132.10 |
| Resistance | 133.70 | 134.40 | 134.85 |
Technical Overview
USD/CHF – Price has reached a high of 0.9119 on Monday and we think price has reached a high and we are likely to see a continuation of the decline to 0.9000 again in the next couple of days. Stochastic is hinting at a price decline. MACD is also hinting at a price decline. The 20EMA line is bearish and hinting at a bearish price trend. Only a move above 0.9120 would negate our bearish view and calls for a test of 0.9190.
| Support | 0.9040 | 0.9000 | 0.8965 |
| Resistance | 0.9080 | 0.9120 | 0.9185 |
EUR/USD – Price reached a low of 1.0830 overnight and we have seen a recovery to a high of 1.0897 this morning. If price is capped by the 20EMA at 1.0897, we are likely to see a decline back to 1.0830. However, if price can move above 1.0897, we are likely to see a rally to test the previous high at 1.0965. Stochastic is suggesting a price rally. MACD is supporting stochastic but 20EMA is hinting at a price decline.
| Support | 1.0855 | 1.0820 | 1.0785 |
| Resistance | 1.0900 | 1.0935 | 1.0975 |
GBP/USD – Price reached a low of 1.2343 on Monday and we have seen a recovery to 1.2419 at the point of this writing. If price is capped at 1.2420, we are likely to see a decline back to 1.2345. However, if price can move above 1.2420 we are likely to see a rally to test the previous high at 1.2525. Stochastic is suggesting a price rally. MACD is supporting stochastic but 20EMA is hinting at a price decline.
| Support | 1.2380 | 1.2340 | 1.2375 |
| Resistance | 1.2425 | 1.2470 | 1.2525 |
XAU/USD – Price had reached a high of 2032.16 last Wednesday and we have seen a price decline to 1981.58 yesterday. Stochastic is hinting that price can move above the 20EMA line at $1999.20 to a high of $2020 in the next couple of days. MACD is also supporting this view. However, 20EMA is hinting that price is likely to decline lower. We think price could move higher to $2020 in the next few days.
| Support | 1981.60 | 1966.00 | 1949.65 |
| Resistance | 2002.90 | 2020.40 | 2032.15 |
AUD/USD – Price is currently capped by the 20EMA line at 0.6655. Stochastic is hinting at a price rally but both MACD and 20EMA are hinting at a price decline in the next 48 hours. We think price is likely to decline back to test the overnight low at 0.6618 in the next 48 hours. However, a price move above 0.6690 would negate our bearish view and call for a rally to 0.6705.
| Support | 0.6645 | 0.6615 | 0.6565 |
| Resistance | 0.6685 | 0.6725 | 0.6775 |