Tag: CAD/JPY

Market Talk

– The U.S. dollar rebounded after digesting slightly softer-than-expected U.S. inflation data after Federal Reserve Governor Lael Brainard said that there were some signs of “welcome” cooling in the latest inflation readout, but emphasized that the central bank is still proceeding with a series of interest rate hikes, as well as an effort to trim its balance sheet.

– Although data released on Tuesday showed CPI rose by 8.5% y-o-y, which is the highest since 1981, there was a small glimmer of hope that price pressures may have peaked, sending US benchmark 10-year Treasury yield into its first decline in 8 sessions.

– The Kiwi whipsawed after the Reserve Bank of New Zealand announced its sharpest rate hike in two decades to curb inflation. While the 50 basis point hike by the Reserve Bank of New Zealand was larger than many economists had expected, it was within traders’ expectations, and policymakers tempered the move by not lifting their projected peak for rates.

– The euro was pinned to a five-week low on Wednesday $1.0820 as prospects for peace in Ukraine seemed to darken. Sterling, which has been pegged near $1.30, held at $1.3001.

– Gold was down on Wednesday morning in Asia, after gaining as much as 1% during the previous session aided by the latest U.S. inflation data. While gold is considered an inflation hedge, rising interest rates is likely to push up bond yields and increase the opportunity cost of holding zero-yield bullion.

Chart Focus EUR/USD

Key Points

1. Buy EUR/USD recommendation.

2. Buy EUR/USD at 1.0825. Stop at 1.0795 and profit target at 1.0930

3. ECB meeting later tonight may boost the Euro if ECB hints at a hike later in the year.

4. Price has managed to hold above a previous low while MACD is also hinting at a bottom.

Fundamental Comments

1. ECB meeting later tonight could boost the Euro.

2. Interest rate differential may have peaked if ECB hints at a hike later in the year.

Technical Comments

1. Price has managed to hold above a previous important low, hinting at a Double Bottom possibility.

2. MACD is hinting at a bottom with a divergence warning.

Key Levels

Technical Overview

USD/JPY – Price broke above the previous high at 125.85 this morning and we are likely to see price heading towards 126.40 in the next 24 hours. While stochastic is in the overbought zone, MACD remains bullish. 20EMA is pointing up with a steep slope, hinting at a strong bullish price trend ahead. A move below 124.70 would negate our bullish view.

USD/CAD – We had a sell recommendation at 1.2650 which was filled when price reached a high of 1.2661. Overnight, price declined to a low of 1.2580 before recovering this morning above 1.2600. We remain bearish as MACD is showing a bearish divergence. However, Stochastic is hinting at a price rally while 20EMA is still bullish. We would recommend lowering stop to 1.2665 and keeping profit order at 1.2560.

GBP/USD – The decline overnight managed to move one pip below last Friday low of 1.2982. The possibility of a break below this support is still strong although price has managed to repel three attempted breaks. Stochastic is still moving lower. 20EMA and MACD are both hinting at a bearish price trend. A break below this low is likely to send price lower to 1.2855 in the next few days.

XAU/USD – Price has broken above the resistance at $1970 overnight and could be heading towards $1990 to $2000 in the next few days. Stochastic is rising and is not yet in the overbought zone. MACD remains bullish and is hinting at a bullish price trend. 20EMA is pointing up with a steep slope, hinting at a strong bullish price trend. However, a price move below $1940 would negate this bullish price trend.

CAD/JPY – We had a buy recommendation on this pair at 99.10 from Monday and yesterday. we had recommended placing stop at 98.90 and profit order at 99.80. Price has moved higher to 99.91, filling our profit order. We are out of this position with a profit of 70 pips. Price is likely to test the previous high at 100.15 in the next 24 hours as Stochastic is moving higher and MACD remains bullish. 20EMA is also hinting at a bullish price trend.

Market Talk
– The U.S. dollar rose to its highest level in more than three years on Tuesday, as Treasury yields spiked to a three year high ahead of U.S. inflation data which could foreshadow even more aggressive interest rate hikes from the Federal Reserve.

– The yield on benchmark 10 year notes rose to 2.836%, its highest since December 2018, supporting the dollar. The Japanese currency bore the brunt of the losses against the greenback, which rose to 125.77 yen overnight, its highest since June 2015.

– The euro was steady at $1.0870, buffeted by politics, but unable to hold onto gains from its mini-relief rally on Monday after French leader Emmanuel Macron beat far-right challenger Marine Le Pen in the first round of presidential voting.

– Investors now await the U.S CPI data due later in the day for clues as to how far and fast the Federal Reserve will tighten its monetary policy. A high reading is likely to reinforce expectations of aggressive Federal Reserve tightening.

– Gold was up on Tuesday morning in Asia as U.S. Treasury yields and the greenback gained ahead of the latest inflation figures. The data could provide clues as to how far the U.S. Federal Reserve will continue tightening monetary policy.

Chart Focus USD/CAD

Key Points

1. Sell USD/CAD recommendation.

2. Sell USD/CAD at 1.2650. Stop at 1.2680 and profit target at 1.2560.

3. A recovery in crude oil price and interest rate differential are both aiding the Canadian dollar.

4. Price may have hit a top and a correction is due with MACD warning of a possible price high.

Fundamental Comments

1. A recovery in crude oil price is aiding the Canadian dollar.

2. Interest rate differential is in the Canadian dollar favour.

Technical Comments

1. Price may have hit a top and a correction could be ahead.

2. MACD has a divergence warning of a possible price high

Key Levels

Technical Overview

USD/JPY – Price broke above the previous high at 125.10 yesterday and reached a high of 125.77, which was just short of our resistance at 125.85. Stochastic is in the overbought zone but both MACD and 20EMA are hinting at a strong bullish price trend. We are likely to see another attempt to test the high of 125.85 in the next 24 hours. A break of this resistance will sent price higher to 126.40 while failure will send price back to 124.00.

EUR/USD – Price was capped again below 1.0945 and we saw a decline to 1.0865 at the point of this writing. We are likely to see a test of last Friday’s low at 1.0835 again. However, with MACD warning with a divergence, we think the low could be either at 1.0835 or 1.0805. Stochastic is in the middle of its range.  20EMA is also starting to flatten, hinting at a trend exhaustion.

GBP/USD – The decline overnight managed to stay above last Friday low of 1.2982 and MACD could be developing a divergence. However, there is still no confirmation of a possible low in place at the moment. The decline could continue as 20EMA is still pointing lower and hinting at a bearish price trend. Stochastic is in the middle of its range. We think a medium term low could be near after a 3-week decline and we are waiting for confirmation.

XAU/USD – Our view remains the same as yesterday. Price moved above the high of $1949.40 to test $1970. However the inability to break above $1970 has sent price lower to $1940.65. We are likely to see another test of $1970 again in the next 24 hours. Watch the breakout at $1970. A break of this resistance is likely to send price higher to $2000 while failure will keep price within the range of the past few day.

CAD/JPY – We had a buy recommendation on this pair yesterday at 99.10 which was filled when price declined to a low of 98.97. The 20EMA is currently supporting the price and as long as price stays above the 20EMA, are likely to see another test of the high at 99.83 again. We remain bullish and would recommend shifting stop higher to 98.90 and profit order lower to 99.80.