Market Talk
– The U.S. dollar tumbled to a one-year low against a basket of currencies on Friday while the euro hit a one-year peak, as traders ramped up expectations of an imminent end to the U.S. Federal Reserve’s rate-hike cycle on signs of cooling inflation.
– Data from the U.S. Labour Department on Thursday showed the producer price index (PPI) fell by the most in nearly three years last month, coming a day after inflation data pointed to moderation in consumer prices, reinforcing the view of end to interest rate hikes.
– The euro rose to a fresh one-year top of $1.1075, pushing past its previous high from Thursday. The British pound was similarly perched near a 10-month high and last at 1.2526. The Japanese yen rose marginally to 132.44 per dollar
– An unexpected surge in Chinese exports, kept the Australian dollar supported at around $0.6788 on Friday, after having surged 1.3% in the previous session. The New Zealand dollar similarly gained 0.13% to $0.6305 in Asia trade, after jumping 1.3% on Thursday.
– Gold was up at $2,044 an ounce after striking a one-year peak of $2,048.71 overnight, not far from its all-time top of $2,072. Signs of cooling inflation and worries about a possible recession are aiding the yellow metal.
Chart Focus XAU/USD – Gold
Key Points
1. Trading Sell Gold recommendation
2. Sell Gold at $2045. Stop at $2048.45 and profit target at $2020.50
3. Expectations of an imminent end to the U.S. Federal Reserve’s rate-hike cycle on signs of cooling inflation is aiding Gold
4. A price pattern and a divergence in MACD are both hinting at a possible price high.
Fundamental Comments
1. Expectations of an imminent end to the U.S. Federal Reserve’s rate-hike cycle is aiding Gold
2. A sharp drop in US PPI is reinforcing the view of end to interest rate hikes.
Technical Comments
1. A Hanging Man candlestick price pattern is hinting at a possible high in price.
2. A divergence warning from the MACD indicator is hinting at a possible price high.
Technical Overview
USD/JPY – Price had reached a high on Tuesday but has tumbled down to 132.01 overnight. Stochastic is near to the low and is hinting at a possible price rally. MACD and 20EMA remain bearish and are both hinting at a bearish price trend ahead. MACD had earlier warning of a possible price high with divergence, hinting at a possible price high. We think price is likely to move lower to 131.00 in the next few days.
| Support | 132.00 | 131.50 | 131.00 |
| Resistance | 132.65 | 133.15 | 133.75 |
EUR/USD – Price reached a fresh 12-month high at 1.1075 overnight but there was no divergence warning. This is a hint that price can continue to move higher. Both MACD and 20EMA are also hinting at a continuation of this rally. Stochastic is deep in the overbought zone. We think price can continue to move higher to 1.1185 in the next few days. A price move below 1.0975 would negate our bullish view.
| Support | 1.1040 | 1.0995 | 1.0935 |
| Resistance | 1.1075 | 1.1105 | 1.1155 |
GBP/USD – Price reached a fresh 10-month high at 1.2546 this morning and looks like it can continue to move higher. However, a possible divergence could be forming on the MACD indicator, warning of a possible price high in the marking. Stochastic is in the overbought zone and is hinting at a limited upside. 20EMA remains bullish. We think the upside could be limited and a correction to 1.2485 is likely before the uptrend resumes again.
| Support | 1.2480 | 1.2410 | 1.2345 |
| Resistance | 1.2555 | 1.2595 | 1.2660 |
XAG/USD – Price reached a high of $25.65 overnight but this high was accompanied by a bearish divergence warning from the MACD indicator, warning of a possible price high in the making. Stochastic is also hinting at a price decline but 20EMA is hinting at a strong bullish price trend. As long as price can stays above $25.10, we are likely to see a rally to $26.15 but a move below $25.10, it is a hint of a price high and a decline to $24.20.
| Support | 25.05 | 24.70 | 24.20 |
| Resistance | 25.65 | 25.90 | 26.20 |
NZD/USD – Price reached a high of 0.6314 this morning and the rally looks like it will continue higher to 0.6375 in the next few days. Stochastic is in the overbought zone and is hinting at a limited upside. However, both MACD and 20EMA are both hinting at a strong bullish price trend. We think there could be a small price correction to 0.6260 in the next 24 hours before the rally resumes for 0.6314 in a few days’ time.
| Support | 0.6280 | 0.6135 | 0.6085 |
| Resistance | 0.6315 | 0.6350 | 0.6375 |