Market Talk
– The U.S. dollar held gains on Thursday after strong U.S. banking results firmed up expectations that the Federal Reserve will keep monetary policy tight for a while longer while the New Zealand’s dollar slumped after cooler than expected inflation data.
– The Japanese yen weakened for a second day, losing 0.1% to at 134.85, after the yield on two-year Treasury notes rose 7 basis points to 4.269%, after hitting a one-month high of 4.286%. The greenback had briefly poked above 135 for the first time in a month in Wednesday’s trading.
– Sterling was last trading at $1.2440, up 0.13% on the day after hotter-than-expected UK inflation cemented expectations for more rate hikes by the Bank of England.
– New Zealand’s consumer price index for the first quarter came in below expectations on Thursday, but remained near historic highs. The kiwi slid 0.7% to $0.6154 after touching the weakest level since March 16.
– Gold prices traded below key levels on Thursday, coming under pressure from resurgence in the dollar and mounting expectations that major central banks across the globe will keep raising interest rates in the near-term.
Chart Focus USD/CHF
Key Points
1. Buy USD/CHF recommendation.
2. Buy USD/CHF at 0.8925. Stop at 0.8895 and profit target at 0.9050
3. Expectations of another 25bp Fed hike and an increase in US Treasury yields are both likely to aid the U.S. dollar.
4. Price is likely to be supported by the Fibonacci 50% correction point with MACD hinting at a bullish price trend.
Fundamental Comments
1. An increase in US Treasury yields is likely to aid the U.S. dollar.
2. Expectations of another interest rate hike by the Fed is likely to aid the U.S. dollar.
Technical Comments
1. Price is likely to be supported by the Fibonacci 50% correction point.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 0.8935 | 0.8895 | 0.8855 |
| Resistance | 0.8975 | 0.9005 | 0.9045 |
Technical Overview
USD/JPY – Price reached a high of 135.13 on Wednesday but this high was accompanied by a divergence warning from the MACD indicator, hinting at a possible price high. Stochastic is also hinting at a price decline ahead but 20EMA is hinting at a strong bullish price trend. We think price may have reached a high at 135.13 and we see a decline back to 133.80 in the next few days.
| Support | 134.30 | 133.95 | 133.35 |
| Resistance | 134.75 | 135.15 | 135.80 |
EUR/USD – Price has tested the support at 1.0905 on 2 occasions and both times, this support has managed to hold. We are likely to test a test of the top side at 1.1075. Stochastic is hinting at a price rally ahead. MACD and 20EMA are neutral at the moment. We think price is likely to move higher to 1.1020 in the next 48 hours as long as price can hold above 1.0945.
| Support | 1.0940 | 1.0905 | 1.0865 |
| Resistance | 1.0985 | 1.1020 | 1.1075 |
GBP/USD – Price has managed to hold around the 20EMA support level and if this support holds, price is likely to test the topside of 1.25 again in the next 48 hours. Stochastic is rising and is hinting at a bullish price trend. MACD is about to turn bullish while 20EMA is neutral at the moment. We favour the topside test but a move below 1.2390 would negate our bullish price view for the next 48 hours.
| Support | 1.2405 | 1.2355 | 1.2305 |
| Resistance | 1.2455 | 1.2505 | 1.2545 |
XAU/USD – Price only reached a high of $1998.50 overnight, missing our sell entry price at $1999. If price is capped by the 20EMA at $2000, we are likely to see another decline to $1965. If price can move above the $2000 level, we are likely to see a test back to $2022 in the next few days. MACD has a divergence and is hinting at a price rally. Stochastic is also hinting at a price rally but 20EMA is hinting at a price decline. We favour the upside test.
| Support | 1980.95 | 1966.00 | 1949.65 |
| Resistance | 1998.85 | 2011.70 | 2022.65 |
NZD/USD – Price reached a low this morning at 0.6148 but this low was accompanied by a divergence warning from the MACD indicator, hinting at a possible price low. Stochastic is hinting at continuation of this price decline. 20EMA is also hinting at a bearish price trend. We think price may have reached a low and we see a rally back to the previous high at 0.6225 in the next few days.
| Support | 0.6145 | 0.6095 | 0.6060 |
| Resistance | 0.6185 | 0.6225 | 0.6260 |