FX Commentary – Euro Up On Eurozone Business Activity Upturn.

Market Talk
– The U.S. dollar slid on Tuesday after data showed U.S. business activity contracted for a troubling seventh straight month in January while the Euro hit a nine-month peak against the dollar after euro zone business activity made a surprise return to modest growth in January.

– While U.S. business activity shrank in January, the downturn moderated across both the manufacturing and services sectors for the first time since September and business confidence strengthened since the turn of the year, limiting the greenback’s decline.

– The euro steadied at $1.0888, near Monday’s nine-month high of $1.0927. Data on Tuesday showed that euro zone business activity made a modest growth in January, indicating the downturn in the bloc may not be as deep as feared. Expectations of further rate increases from the ECB also aided sentiment.

– The Aussie rose to $0.7092, its highest since August, after a shock surge in inflation to a 33-year high last quarter added to the case for the Reserve Bank of Australia to continue raising interest rates. The kiwi slid to $0.6469, after New Zealand’s annual inflation of 7.2% in the fourth quarter came in below its central bank’s 7.5% forecast.

– Gold prices steadied near a nine-month high on Wednesday near $1930.55 as fears of a looming U.S. recession kept safe haven demand elevated amid increased expectations that the Federal Reserve will slow its pace of interest rate hikes in the coming months.


Chart Focus XAU/USD – Gold

Key Points

1. Sell Gold recommendation.

2. Sell Gold at $1935. Stop at $1944 and profit target at $1901.

3. Expectation of another interest rate hike by the Fed next week, although at a slower pace, is likely to weigh on the yellow metal.

4. Price may be forming a Double Top chart pattern with MACD confirming a possible price high in the making.

Fundamental Comments

1. Expectation of another interest rate hike by the Fed next week, although at a slower pace is likely to weigh on the yellow metal.

2. A US$40 rally in the past 1 week may have run its course ahead of an expected rate hike by the Fed.

Technical Comments

1. Price may be forming a Double Top chart pattern, which is a sign of a potential price high in the making.

2. A bearish divergence warning from the MACD indicator is hinting at a possible price high.



Key Levels

Support1925.401911.301900.80
Resistance1935.151942.301958.95










Technical Overview

USD/JPY – Price could be forming a consolidation pattern, in the form of a Triangle chart pattern at the moment. For the past 1 week, price has a smaller daily range movement. Stochastic has been declining, hinting at a price decline. However, both MACD and the 20EMA are bullish and are hinting at a price rally. We see the topside at 131.10 capping the rally while price is likely to be support by the support at 129.60 for the next 48 hours.

Support130.10129.70129.35
Resistance130.60131.10131.55

EUR/USD – Price has moved up to a nine-month high of $1.0927 on Monday. The rally was followed by a sharp price decline. However, the decline was halted by the 20EMA line and price is likely to test the high of 1.0927 again within the next 24 hours. Stochastic is supporting this view by hinting at a price rally. MACD remains bullish. The 20EMA is also hinting at a bullish price trend. A move below 1.0830 would negate our bullish view.

Support1.08751.08301.0790
Resistance1.09251.09801.1035

GBP/USD – Price reached a high of 1.2447 on Monday but this high was accompanied by a divergence warning from both the MACD and the stochastic indicator. This is a strong sign that price may have reached a temporary high. However, stochastic is hinting at a short-term price rally while both the 20EMA and MACD are hinting at a bearish price trend in the next 48 hours.

Support1.22951.22601.2210
Resistance1.23451.23901.2445

AUD/USD – The Aussie rose to $0.7092, its highest since August, after inflation data pointed to further rate hikes by the RBA in the coming month. Stochastic is in the overbought zone and is hinting at a price decline. However, 20EMA is pointing up with a steep slope, hinting at a strong bullish price trend. MACD is also hinting at a bullish price trend. We think price is likely to move higher to the next resistance level at 0.7280 in the next few days.

Support0.70900.70500.6995
Resistance0.71250.71900.7245

USD/CAD – Price is near to Monday’s low and looks like this low will be tested and broken in the next 24 hours. While stochastic is near to the oversold zone and is hinting at a limited downside, 20EMA is pointing down with a steep slope hinting at a strong bearish price trend. MACD is also bearish and hinting at a bearish price trend. A break of 1.3320 is likely to send price lower to 1.3225 in the next 24 hours.

Support1.33201.32751.3220
Resistance1.33651.34101.3445

CFD Indices – Wall Street Indices Ended Mixed Due To A Raft of Mixed Earnings

Market News

  • S&P 500 ended nominally lower on Tuesday at the close of a rocky session marked by a raft of mixed earnings and a technical malfunction at the opening bell. Dow Jones gained 104 points while the Nasdaq Composite fell 30 points.
  • More than 80 stocks of NYSE-listed stocks were halted at the top of the session due to an apparent technical malfunction, which caused initial price confusion and prompted an investigation by the U.S. Securities and Exchange Commission
  • Inflation in Australia rose to a new 32-year high of 7.8% in the final quarter of the fiscal year of 2022, marking the fastest pace since March 1990. The annualized figure of a rise in consumer prices was backed by higher prices in food, automotive fuel, and new residential construction.

Market Views

  • Asia-Pacific shares rose on Wednesday morning, taking the lead from Wall Street’s struggle for direction as China and Hong Kong markets remain closed for the Lunar New Year holidays. Nikkei 225 index was up 30 points.
  • National Australia Bank’s monthly business survey showed worsened business conditions for December with a reading of 12 points, a decline from November’s print of 20 points, reflecting deteriorated trading conditions, profitability, and employment.


Dow Jones Index
(CFD Symbol: US30)

Trend:

Recommendation:

Last: 33,629

Target price:

Protective stop:

Outlook
Price rebounded from the rising trendline support but this rebound could be short-lived as it is capped by the Fibonacci 62% correction point. Stochastic is still weak and MACD remains bearish. Price is likely to break down this trendline support to move lower.

Trading Idea
Wait for better trading idea.


Nikkei 225 Index
(CFD Symbol: JP225)

Trend:

Recommendation:

Last: 27,352

Target price:

Protective stop:

Outlook
This index has turned its chart outlook to bullish as it broke out a double bottom chart pattern. It will be a good entry if price retraces to the 20EMA support at 26,630, which is also the resistance-turned-support level. Stochastic is rising and MACD is bullish.


Trading Idea.
Wait for better trading idea.


Nasdaq 100 Index
(CFD Symbol: USTec)

Trend:

Recommendation:

Last: 11,755

Target price:

Protective stop:

Outlook
Price is on a decline after forming a hanging man candlestick pattern last night. We are likely to see price testing the 20EMA at 11,445 in the next few days. Stochastic is at the overbought region. MACD is bullish but the histogram is giving potential divergence warning.

Trading Idea
Wait for better trading idea.



FTSE 100 Index
(CFD Symbol: UK100)

Trend:

Recommendation:

Last: 7761

Target price:

Protective stop:

Outlook
Price was capped by the Fibonacci 62% correction point. We are likely to see price violating the 20EMA support to move lower to the next support zone at 7585-7616. However, if this index can stay above the 20EMA, it can rebound back to the previous high again. Stochastic is falling but MACD remains bullish.

Trading Idea
Buy 7720 for 7860 with a stop below 7650.

FX Commentary – US Dollar Remained Strong On Safe Haven Buying.

Market Talk
– The U.S. dollar struggled for direction on Friday as fears of an economic slowdown dented risk sentiment, while the yen slipped as speculation continue to swirl that the Bank of Japan will eventually move away from its ultra-easy policy.

– US data on Thursday showed new claims for unemployment benefits unexpectedly fell last week, pointing to another month of solid job growth and continued labour market tightness. However, other U.S. data on Thursday indicated the world’s biggest economy was slowing down after multiple hefty interest rate hikes from the Federal Reserve. 

– The euro was up 0.11% to $1.0839, after European Central Bank president Christine Lagarde pushed up euro zone bond yields slightly by telling the World Economic Forum’s Davos gathering the bank would stay the course with rate hikes.

 – The greenback gained against the yen to 128.85, a day after the Bank of Japan’s decision to stand pat on its ultra-loose monetary policy. Sterling was last trading at $1.239 while the Australian dollar rose 0.14% versus the U.S. currency to $0.692.

– Gold prices rose over 1% to $1924.09, close to its 9-month peak of $1929 on Thursday, supported by a weaker dollar and some safe-haven demand as weak U.S. economic readings and hawkish comments from Federal Reserve officials fuelled recession worries.


Chart Focus AUD/USD

Key Points

1. Sell AUD/USD recommendation.

2. Sell AUD/USD at 0.6935. Stop at 0.6965 and profit target at 0.6870

3. Renewed concerns about a US recession and a decline in Aussie labour data are both likely to aid the safe haven U.S. dollar

4. Price is likely to be capped by the 20EMA line with MACD also hinting at a bearish price trend.

Fundamental Comments

1. A dip in December Aussie Labour data is hinting the economy is slowing down and weighing on the Aussie dollar.

2. Renewed concerns about a US recession is aiding the safe haven U.S. dollar.

Technical Comments

1. Price is likely to be capped by the 20EMA line which is also hinting at a bearish price trend.

2. MACD remains bearish and is hinting at a bearish price trend.



Key Levels

Support0.69000.68700.6825
Resistance0.69350.69650.7005









Technical Overview
USD/JPY
– Yesterday, we were looking for a decline to 127.21 but we were wrong. Price has been supported above 127.80 and has since moved higher to 129. Stochastic is moving up from the oversold zone and is hinting at a price rally. Both MACD and 20EMA are bullish and hinting at a price rally as well. We think price could be moving higher to 130.80 in the next 48 hours.

Support128.70128.25127.75
Resistance129.35129.90130.30

EUR/USD – Price has moved up slightly overnight but we think price is likely to be capped around the previous highs of 1.0875 and from there; we are likely to see a decline back to 1.0765. Stochastic is moving higher and hinting at a bullish price trend. Both MACD and 20EMA are hinting at a mildly bullish price trend. Above 1.0875 would hint at a rally to 1.0930. Below 1.0765 would hint at a decline to 1.0665.

Support1.08151.07651.0725
Resistance1.08451.08901.0930

GBP/USD – Price moved to a high of 1.2435 on Wednesday and a decline was supported by the 20EMA at 1.2310. As long as price is supported by the 20EMA, we are likely to see another test of the week’s high at 1.2435. A move below 1.2310 would hint at a decline to 1.2165. Stochastic is neutral. MACD is bullish and hinting at a bullish price trend. 20EMA is also hinting at a bullish price trend.

Support1.23551.23101.2245
Resistance1.23951.24351.2490

XAU/USD – Price reached another new high this week at $1934.90 but this high was accompanied by a divergence warning from the MACD indicator, hinting at a possible price high. Stochastic is also near to the overbought zone hinting at a limited price upside. 20EMA remains bullish and is hinting at a bullish price trend. A price move below $1905 would confirm the high and hint at a decline to $1882.45 in the next few days.

Support1922.901913.851900.80
Resistance1934.901946.201958.95

USD/CAD – We had a buy recommendation at 1.3445 yesterday. Price declined to a low of 1.3444 and our entry order was filled. Our view remains the same as yesterday. We are looking for a price rally to 1.3550 in the next couple of days. Stochastic is moving lower, hinting at a price decline. MACD and 20EMA are hinting at a bullish price trend. We recommend keeping stop at 1.3415 and profit order at 1.3545.

Support1.34451.33901.3350
Resistance1.34751.35151.3550

CFD Indices – Wall Streets Declined On U.S. Labour Data

Market News

  • U.S. stock indexes closed lower on Thursday after data pointing to a tight labor market renewed concerns the Fed will continue its aggressive path of rate hikes that could lead the economy into a recession.
  • A report from the Labour Department showed weekly jobless claims were lower than expected, indicating the labour market remains solid despite the Fed’s efforts to stifle demand for workers. Expectations the central bank would further dial down the size of its interest rate increases at its policy announcement next month were unchanged by the report.
  • The People’s Bank of China left the loan prime rates for 1-year and 5-year unchanged, widely in line with expectations. The 1-year LPR stayed at 3.65% while the 5-year LPR remained at 4.3%, both unchanged since August, 2022.

Market Views

  • Markets in the Asia-Pacific were higher on Friday morning as investors digested Japan’s inflation data. The nationwide core consumer price index rose 4% in December on an annualized basis, the fastest pace since 1981. Hang Seng index rose 199 points and Nikkei 225 index gained 28 points.
  • The e-commerce giant Amazon said on Thursday it will increase the prices of some of its music subscription plans from February to offset higher costs for shipping and wages.


    Dow Jones Index
    (CFD Symbol: US30)

    Trend:

    Recommendation: Short @ 33,650

    Last: 33,029

    Target price: 34,250

    Protective stop: 33,250 Triggered

    Outlook
    Price is currently testing the uptrend line support for a fifth time. This uptrend line support is crucial at 32,860. A violation of this support will bring price lower to 30,845. Stochastic is falling and MACD has turned bearish.

    Trading Idea
    Buy 33,650 for 34,250 with a stop below 33,250. Entry and stop were triggered on 18 Jan.


    Nikkei 225 Index
    (CFD Symbol: JP225)

    Trend:

    Recommendation:

    Last: 26,647

    Target price:

    Protective stop:

    Outlook
    This index is in an attempt to penetrating its recent price high resistance level of 26,633. As long as price closes above this level, we are likely to see price testing 27,670. Stochastic is rising and MACD is moving higher towards its zero line.


    Trading Idea.
    Wait for better trading idea.


    Nasdaq 100 Index
    (CFD Symbol: USTec)

    Trend:

    Recommendation:

    Last: 11,318

    Target price:

    Protective stop:

    Outlook
    The price correction has brought price lower to the 20EMA support at 11,279. Price has to rebound from this support to move higher, else, a violation of the 20EMA will bring price lower to 11,050. Stochastic is at the overbought zone and MACD is bullish

    Trading Idea
    Wait for better trading idea.



    FTSE 100 Index
    (CFD Symbol: UK100)

    Trend:

    Recommendation:

    Last: 7778

    Target price:

    Protective stop:

    Outlook
    Price created a recent price high of 7874. It is in a price correction and we are likely to see price retracing to the 20EMA at 7685. Stochastic is strong and bullish and is at the overbought zone. MACD remains bullish at the moment.

    Trading Idea
    Wait for better trading idea.

    Maintain Sufficient Funds for CFD and LFX Accounts over Lunar New Year Period

    In anticipation of the upcoming Singapore holiday (Lunar New Year), clients are encouraged to put in funds in their accounts on top of the margin requirements to maintain a healthy account balance.

    This is to protect against any sudden adverse market movements and reduce the possibility of positions being liquidated.

    We wish you a happy holiday and thank you for trading with UOB Kay Hian.