Market Talk
– The U.S. dollar dipped on Wednesday against major currencies as investors waited on inflation data later in the global day for further signs of whether price pressures are ebbing and what it means for further Federal Reserve interest rate hikes.
– The euro was last 0.12% higher at $1.0926 boosted by a rise in European bond yields on Tuesday. Sterling rose 0.02% to $1.2430, with both currencies some distance away from their one-week lows hit on Monday.
– Against the yen, the dollar rose to a nearly one-month high of 134.04, a reflection of the stark contrast between the Fed’s aggressive monetary policy tightening cycle and the Bank of Japan’s ultra-loose policy.
– The Australian and New Zealand dollars were mostly steady on Wednesday. The Aussie edged 0.2% higher to $0.6664 while the kiwi dollar was up 0.1% at $0.6198, having dropped 0.4% to as far as $0.6185 overnight, a three-week low.
– Gold jumped 0.5% to $2,013.33 an ounce on Wednesday, boosted by safe haven buying after Minneapolis Federal Reserve President Neel Kashkari flagged a potential recession this year, with focus also turning to more U.S. economic cues due later in the day.
Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.6650. Stop at 0.6620 and profit target at 0.6725
3. Dovish Fed comments and an agreement with China to resolve dispute over barley imports have helped to improve sentiment for the Aussie dollar.
4. Price may have reached a temporary bottom with stochastic and MACD warning of a potential price low and a price rally ahead.
Fundamental Comments
1. Overnight dovish Fed officials’ comments are weighing on the US dollar
2. An agreement with China to resolve dispute over barley imports has helped to improve sentiment for the Aussie dollar,
Technical Comments
1. Price may have reached a temporary bottom with a technical bounce likely.
2. Stochastic and MACD are warning of a potential price low and a price rally ahead.
Key Levels
| Support | 0.6650 | 0.6615 | 0.6585 |
| Resistance | 0.6685 | 0.6725 | 0.6760 |
Technical Overview
USD/JPY – Yesterday, we had recommended buying at 133.00, which was filled when price declined to a low of 132.96. Overnight, price has moved up to a high of 134.03. We are expecting the rally to continue higher to 134.60 in the next 24 hours. Stochastic is in the overbought zone, hinting at a limited upside. Both MACD and 20EMA are hinting at a bullish price trend. We would recommend lifting stop to cost while keeping profit target at 134.60.
| Support | 133.70 | 133.15 | 132.70 |
| Resistance | 134.40 | 134.85 | 135.15 |
EUR/USD – Price was capped by a previous high resistance at 10935 this morning and we may see a tight range ahead of CPI data later tonight. The next direction is likely to be set by the CPI data tonight. Stochastic is supporting a price decline while 20EMA is hinting at a price rally. MACD is neural at the moment. If price can move above 1.0935, we could see a test of 1.1035. Failure to move above 1.0935 could send price lower to 1.0830.
| Support | 1.0895 | 1.0830 | 1.0785 |
| Resistance | 1.0935 | 1.0975 | 1.1035 |
GBP/USD – Price reached a low of 1.2343 on Monday and we have seen a recovery to 1.2455. We are likely to see a tight range ahead of CPI data. Both MACD and 20EMA are hinting at a sideways range while stochastic is hinting at price decline. We think the US data tonight is likely to determine the next directional move. If price is capped at 1.2450, we are likely to see a decline back to 1.2345. However, if price can move above 1.2450 we are likely to see a rally to test the previous high at 1.2525.
| Support | 1.2400 | 1.2340 | 1.2275 |
| Resistance | 1.2455 | 1.2525 | 1.2595 |
XAU/USD – We have seen a price rally from Monday’s low of $1981.58 to a high of $2021.15 this morning. This high is also a previous price high. Stochastic is hinting at a continuation of this price rally. 20EMA is supporting stochastic view while MACD is neutral at the moment. We think price may have reached a correction high and a decline back to $1981 is likely. A move above $2021 would hint at a rally towards $2074.
| Support | 2006.90 | 1987.55 | 1976.80 |
| Resistance | 2021.15 | 2031.85 | 2049.60 |
NZD/USD – After reaching a low of 0.6167 this morning, we saw a rally towards the 20EMA line, but this rally failed to move above the 20EMA line. We are likely to see a price decline below this morning low of 0.6167 to 0.6135 in the next 24 hours to establish a low. Stochastic is hinting at a possible price low. However both MACD and 20EMA are hinting at a bearish price trend.
| Support | 0.6170 | 0.6135 | 0.6085 |
| Resistance | 0.6205 | 0.6250 | 0.6305 |