Market Talk
– The U.S. dollar held on to modest gains against its peers on Tuesday, supported by strong U.S. economic data. Renewed concerns over more hawkish moves by the Fed, especially after stronger-than-expected inflation readings for January.
– Business activity in the United States in February unexpectedly rebounded to an eight-month high, increasing to 50.2 from a final reading of 46.8 in January, according to a survey. It follows recent robust data on retail sales, the labour market and manufacturing production, suggesting solid momentum in the economy at the start of the year.
– The euro fell to $1.0648 after data showed euro zone manufacturing activity deteriorated. The British pound extended gains against the greenback to $1.2106 after data showed an unexpected bounce in British business activity, suggesting a smaller risk of recession.
– New Zealand’s central bank raised interest rates by 50 basis points to a more than 14-year high of 4.75% on Wednesday. RBNZ said it expects to keep tightening further as inflation remains too high, a hawkish signal but the kiwi was muted.
– Gold prices hovered slightly above a six-week low on Wednesday with markets remaining cautious ahead of the minutes of the Federal Reserve’s February meeting, after some stronger-than-expected U.S. economic data further supported the dollar.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.2120. Stop at 1.2150 and profit target at 1.2050.
3. Strong US data and interest rate differential are both aiding the U.S. dollar.
4. Price may have reached a high and stochastic is hinting at a price decline.
Fundamental Comments
1. Stronger than expected business activity is likely to aid the U.S. dollar.
2. Interest rate differential is in the U.S. dollar favour.
Technical Comments
1. Price may have reached a high and is likely to decline lower.
2. Stochastic is hinting at a price decline.
Key Levels
Support1.20901.20501.1990Resistance1.21201.21601.2210
Technical Overview
USD/JPY – Price only reached a low of 134.30 yesterday and our entry order at 134.10 was not filled. Overnight, price had rallied to a high of 135.22, which was higher than the previous week’s high at 135.10. There was also a divergence warning from the MACD indicator, hinting at a possible price high. 20EMA is still bullish and stochastic is also hinting at a price rally. However, we think price may have reached a peak and a decline to 133.60 is likely within the next few days.
Support134.50133.90133.55Resistance134.90135.25135.95
EUR/USD – We had a buy recommendation on Monday at 1.0665 and had recommended placing stop at 1.0655 and profit order at 1.0785. Our stop was triggered as price moved below 1.0655 to a low of 1.0636. Both MACD and 20EMA are hinting at a bearish price trend. MACD is hinting at a rising price trend. We think price is likely to move sideways with technical indicators mixed at the moment.
Support1.06101.05701.0540Resistance1.06651.07051.0755
USD/CAD – Price reached a high of 1.3548 overnight but this high was accompanied by a divergence warning from the MACD indicator, hinting at a possible price high. However, both 20EMA and stochastic are hinting at a price rally. If price fails to move above the overnight high at 1.3548, we are likely to see a decline back to 1.3435 in the next 48 hours. Above 1.3548, the upside could also be limited with stochastic hinting at a limited upside.
Support1.35151.34851.3435Resistance1.35451.35901.3620
XAU/USD – Price reached a low of $1818.85 last Friday and this could be a temporary low. MACD has also given a divergence warning of a possible price low. Stochastic and 20EMA are currently hinting at a price decline but price has moved sideways in the past 24 hours. We may see a continuation of this movement in the next 24 hours. Watch the price move at $1846 or $1818 and follow in the direction of the break.
Support1836.601818.701803.70Resistance1847.351860.051871.95
NZD/USD – Price has reached a low of 0.0.6193 on Friday. There was a rally to 0.6260 but the rally was been halted by the declining 20EMA line. Price failed to move above this resistance and had declined to an overnight low of 0.6202. This could be a base building and we see price moving higher in the next 48 hours to 0.6310. Stochastic and MACD are both supporting this bullish view but 20EMA is hinting at a price decline.
Support0.62250.61900.6155Resistance0.62600.62950.6325
