Market Talk
– The U.S. dollar eased on Tuesday after rallying overnight as strong U.S. economic data reinforced expectations that the Federal Reserve will hike interest rates again in May, while China’s economic recovery gathered pace in the first quarter.
– Confidence among single-family homebuilders improved for a fourth consecutive month in April, while manufacturing activity in New York State increased for the first time in five months. Recent hawkish comments from Fed officials saw markets pricing in a greater chance of a rate hike in May, and brewed uncertainty over whether the central bank will pause in June.
– The euro was at $1.09320, easing away from the one-year high of $1.1075 it touched last week. Sterling was last trading at $1.2381, on the day ahead of employment data that could potentially cause some volatility in the pound if the report shows that the labour market is not cooling.
– The Japanese yen weakened to 134.52 per dollar, hovering around the one-month peak of 134.57 it touched on Monday. The Australian dollar rose to $0.6720 after the minutes of the last Reserve Bank of Australia meeting showed that the central bank considered an 11th-consecutive rate hike in April before deciding to pause.
– Gold prices hovered below key levels in early Asian trade on Tuesday, coming under pressure from a firmer dollar and Treasury yields as markets reconsidered expectations for an imminent pause in the Federal Reserve’s interest rate hikes following recent strong US data and hawkish Fed officials’ comments.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.2435. Stop at 1.2475 and profit target at 1.2285.
3. Strong US data and interest rate differential are both in the US dollar favour.
4. Price is likely to be capped by the 20EMA with MACD hinting at a bearish price trend.
Fundamental Comments
1. Strong US data overnight is aiding the US dollar.
2. Interest rate differential is in the US dollar favour.
Technical Comments
1. Price is likely to be capped by the 20EMA which is also hinting at a bearish price trend.
2. MACD is hinting at a bearish price trend.
Key Levels
| Support | 1.2350 | 1.2305 | 1.2375 |
| Resistance | 1.2410 | 1.2460 | 1.2505 |
Technical Overview
USD/JPY – Price reached a high of 134.70 this morning but this high was accompanied by a divergence warning from the MACD indicator, hinting at a possible price high. A Spinning top candlestick price pattern is also hinting at a possible price high and a reversal ahead. Stochastic is in the overbought zone and is hinting at a price decline ahead. However 20EMA and MACD are both hinting at a bullish price trend. We see price moving lower to 133.25 in the next 48 hours.
| Support | 134.05 | 133.35 | 132.85 |
| Resistance | 134.70 | 135.10 | 135.80 |
EUR/USD – Price reached a low of 1.0908 overnight and we have seen a rally to 1.0950 this morning. However, the rally is likely to be capped by the 20EMA at 1.0970 and we could see another decline to 1.0865 in the next 48 hours. Stochastic is in the oversold zone and is hinting at a limited downside. Both stochastic and 20EMA are hinting at a bearish price trend. We are in favour of the bearish price move.
| Support | 1.0905 | 1.0875 | 1.0830 |
| Resistance | 1.0965 | 1.1000 | 1.1060 |
XAG/USD – Price had reached a high of $26.07 last week and we have seen a corrective decline lower to $24.79 on Monday. We are likely to see a rally to the Fibonacci 62% correction point at $25.58 in the next 24 hours. We think this is the second part of a 3-part correction. There should be another decline in the next few days to $24.45. Stochastic is hinting at a price rally while both MACD and 20EMA are hinting at a price decline.
| Support | 24.95 | 24.55 | 24.15 |
| Resistance | 25.30 | 25.60 | 25.95 |
XAU/USD – Price reached a high last week at $2048.45 last night following a divergence with MACD. Price reached a low at $1980.95 overnight. A Hammer candlestick price pattern is also hinting at a possible temporary low. We are likely to see a rally to $2015 in the next 24 hours but this rally is likely the second part of a 3 part corrective decline process following the high at $2048.45.
| Support | 1991.85 | 1980.95 | 1966.00 |
| Resistance | 2002.95 | 2014.95 | 2031.70 |
USD/CAD – Price had reached a low at 1.3299 last week and we have seen a rally to 1.3419 yesterday. The rally was capped by the previous low turned resistance. Stochastic is reaching the overbought level and is hinting at a limited upside. MACD remains bearish and is hinting at a bearish price trend. 20EMA is also hinting at a bearish price trend. We see price moving lower to 1.3299 in the next few days.
| Support | 1.3340 | 1.3290 | 1.3260 |
| Resistance | 1.3385 | 1.3420 | 1.3470 |