Market Talk
– The U.S. dollar was on the back foot while the euro climbed on Tuesday, as regional bank jitters in the U.S. had traders expecting U.S. interest rate cuts before long. However, in Europe a 50 basis point hike remains a live option at next week’s central bank meeting.
– News overnight of plunging deposits at First Republic Bank in the U.S. served as a reminder that stability risks have not entirely died down and prompted traders to renew expectations that the Fed shifts quickly from hiking to cutting. Interest rate futures market has also factored in roughly 50 bps of rate cuts by the end of the year
– The euro rose above $1.10 overnight and was still going at $1.1062 early in the Asia session. European Central Bank board member Isabel Schnabel told Politico that a 50 bp rate hike was not off the table and would depend on data – notably inflation figures due two days before May’s meeting.
– The Japanese currency struggled amid remarks from new Bank of Japan governor Kazuo Ueda, that he was not in a hurry to shift policy. The greenback rose versus the Japanese currency, and was last 134.27 yen. This week’s BOJ meeting, which concludes on Friday, is his first in charge.
– Gold prices rose 0.3% to $1,995.57 an ounce, on Tuesday, extending a recovery into a third straight session as the greenback fell amid bets that the Federal Reserve could pause its rate hike cycle by as soon as June. Worsening economic conditions, which increase the safe haven appeal of the yellow metal, also aided the yellow metal.
Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation.
2. Buy EUR/USD at 1.0995. Stop at 1.0960 and profit target at 1.1075
3. A potential 50 basis point hike and divergent monetary policy is aiding the Euro dollar.
4. Price is likely to be supported by the 20EMA with MACD hinting at a bullish price trend.
Fundamental Comments
1. A potential 50 basis point hike in Euro interest rate is aiding the Euro dollar.
2. Divergent monetary policy between the Euro and US is aiding the Euro dollar.
Technical Comments
1. Price is likely to be supported by the 20EMA which is also hinting at a bullish price trend.
2. MACD remains bullish and is hinting at a bullish price trend.
Key Levels
| Support | 1.1040 | 1.1000 | 1.0965 |
| Resistance | 1.1075 | 1.1100 | 1.1135 |
Technical Overview
USD/JPY – Price has been moving in a 100 pips range for the past 48 hours and looks like it would stay range bound for the next 24 hours. Stochastic is in the middle of its range and both MACD and 20EMA are hinting at a sideways range trading scenario. We think price may have reached a top at 135.13 last week. We see price going down to 133.10 in a correction over the next few days.
| Support | 134.10 | 133.55 | 133.15 |
| Resistance | 134.70 | 135.15 | 135.55 |
USD/CAD – Price has reached a high of 1.3566 which was also a previous high from 2 weeks ago. Price will need to move above this high to test another important high at 1.3700. Stochastic remains near to the overbought zone and is hinting at a limited upside. However, 20EMA is hinting at a strong bullish price trend. MACD is also hinting at a bullish price trend. We see price moving higher unless price moves below 1.3445.
| Support | 1.3510 | 1.3470 | 1.3445 |
| Resistance | 1.3565 | 1.3620 | 1.3650 |
GBP/USD – Price reached a high of 1.2506 this morning and we may see a correction lower to 1.2450 in the next 24 hours. Stochastic has reached the overbought zone and is hinting at a possible price decline. MACD is hinting at a mild bullish trend. Only 20EMA is hinting at a strong bullish price trend. We see price going lower to 1.2350 in the next couple of days.
| Support | 1.2460 | 1.2410 | 1.2375 |
| Resistance | 1.2505 | 1.2555 | 1.2600 |
XAU/USD – We think price has reached a low of $1969.13 last week and we are likely to see a bounce back up to $2012.35 in the next couple of days. If price failed to move above $2018, there could be another decline to $1969 but a move above will hint at $2048.45. Stochastic is rising and is hinting at a price rally. MACD has turned bullish and is hinting at a price rally as well. 20EMA is neutral at the moment.
| Support | 1988.65 | 1969.15 | 1959.95 |
| Resistance | 2000.80 | 2018.15 | 2031.70 |
NZD/USD – Price has reached a low of 0.6125 on Monday but this low was accompanied by a divergence warning from the MACD indicator, hinting at a possible price low in place. Stochastic is moving higher and is hinting at a price rally. 20EMA has turned bullish and is hinting at a bullish price trend. We see price testing its previous high of 0.6225 in the next 48 hours. A price move below 0.6125 would negate our bullish view.
| Support | 0.6125 | 0.6080 | 0.6050 |
| Resistance | 0.6185 | 0.6225 | 0.6265 |