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Technical Analysis | Chart of the Week

USD/JPY

  • Resistance Zone: 111.45 to 111.65
  • Support Cluster: 109.93.8 to 109.78
  • Key Support: 110.20
  • Pivot: 110.63
  • Trade Insights – Viable Short positions below 110.63 with the target of 110.20 and then towards 109.93 with an extension of 109.60. Alternatively, can go long above Pivot point of 110.63 with the target of 110.97 then towards 111.45 to 111.65 and then re-enter for the short position with the target of 110.63, maintaining the uptrend channel.

USD/JPY CHART

Chart Analysis:

Directional bias: 2 Weeks USD/JPY

The Dollar-Yen is one of the most traded forex pair second only to EUR/USD and it is the benchmark of Asian economic health and even the global economy.  USD/JPY is still maintaining its upward parallel channel since we did our last USD/JPY analysis in June beginning. The channel was created in May and has been in strong upward movement until recently. The hawkish views of Fed’s moved USD/JPY towards the higher limit of our channel at 111.00 where the buying momentum weakened as lower US treasury yields reduced the demand for long dollar exposure. The chart shows that as of now the pair is going to retest the Pivot at 110.63 first then an attempt at the key resistance at 110.97. After the need to climb decisively towards the resistance zone of 111.45 to 111.65. Once this resistance zone is broken, we can see outlook for the USD/JPY will be tilted higher with 112 being the immediate focus followed by 114 regions in the next quarter. Alternatively, If USD/JPY fails to breakthrough the resistance zone the sellers will gain the control and drop the prices towards our key support level of 110.20. Should the prices fall below this level the next relevant support is at 109.78 and then from there towards 109 ending the continuation of the uptrend channel. As of now we caution patience before entering a long or short positions to observe the move towards the Pivot point. The price is above its 200-day moving average and presence of higher lows confirms the uptrend.  A move above 112 could spark a macro rally to push USD/JPY towards 115.

Fundamental summary: The greenback has been recovering from past 3 months after Federal reserve has indicated the rate lift off can began as early as end of 2021 and they can scale down the asset purchases. Currently the pair is in uptrend amid all the noise. There could be a weakness in the third quarter and traders need to be mindful of the dollar weakness.

XAU/USD

  • Resistance Zone: $1825 to $1835
  • Key Resistance Level: $1808
  • Support Zone: $1780 to $1775
  • Key Support: $1785
  • Pivot: $1785
  • Trade Insights – Viable Long positions above $1785 with the target of $1808 and then to $1825. If $1785 is broken, then go short to the first support of $1775 then towards $1760. As $1825 is touched in next week or so then gold can retrace back to first $1808 and with further weakness to $1785. So, $1785 is a crucial point at this time for gold.

GOLD/USD CHART

Chart Analysis:

Directional bias: 2 Weeks GOLD/USD

Gold has been in an uptrend for past 6 days and touched as high as $1815 on 6th July, after the heavy retracement in May and June where it tumbled to $1750.  The sentiment around gold seems downbeat due to soaring risk appetite and growing equity markets. As of now it is struggling to breakthrough the key resistance between $1805 to $1808. Gold touched the 200-day EMA at $1808 and retraced back as bears are moving to retake the control. The bulls are looking tired as of today and there is a risk of gold touching back the crucial mark of $1885. Once prices are pushed back to this level, we can see another go at $1750 mark as Bears take full control. However, it seems support zone at $1780 to $1775 will hold the prices and it will not be as bad as it was earlier. The chart looks quite interesting because if the long-term downtrend must continue gold will have to form a lower high apparently between $1825 to $1835.  Bulls will eventually take back the control and push the prices as high as $1835 in next week or so. From there we can see a retracement back to $1808 and then to $1785. We see a viable long trade opportunity at this stage.  

Fundamental summary: Gold’s near-term direction is based on the risk catalysts like inflation rate, jobless claims, S&P 500 growth, bond yield rates, dollar strength, oil prices and Corona virus news. There are signs that Covid-19 and its new variants will keep important economic regions like Asia Pacific, Europe and America’s jostling between lockdowns and partial openings. The US dollar edged higher on the back of FOMC minutes that shows that tapering of asset purchase can be met earlier than anticipated in the previous meetings but still Fed Reserve has ruled out an interest rate hike any time soon. June’s NFP data showed the strongest job growth in 10 months, but the jobless rate fell short of expectations.  Oil is again in the grip of uncertainty after the OPEC and oil cartel’s members failed to agree on a plan to boost crude output. There is a 5% drop in the 10-year treasury yields and this will make it difficult for the U.S dollar to extend its gains. To put it all together there are signals that are all mixed up and investors are trying to find the right direction for the Gold. 

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Disclaimer

The information provided is of a general nature and is not intended to be personalised financial advice. The information provided is not intended to be a substitute for professional advice. You may seek appropriate personalised financial advice from a qualified professional to suit your individual circumstances.

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