Daily Market Lookup

• The dollar rose in early dealings in Europe on Tuesday, pulled higher as concerns over inflation pushed 10-year U.S. government bond yields to their highest in over two years. The yield on the 10-year U.S. benchmark rose as high as 1.86% in the overnight session, a level it last saw when practically no-one outside China had heard of Covid-19. The two-year benchmark yield, which is more sensitive to expectations for short-term interest rates, also broke above 1% for the first time in two year. The dollar returned briefly above the 115 yen level after Bank of Japan Governor Haruhiko Kuroda said the bank hadn't discussed the possibility of raising interest rates, as had been reported by newswires last week. That was despite the fact that the bank raised its outlook for inflation slightly to 1.1% for the next two years. That is still well below the bank's 2% target. The dollar had hit a five-year high against the yen earlier this month, amid expectations that the Federal Reserve will tighten monetary policy much more this year than the BoJ. The Fed's first policy meeting of the year takes place next week, and policymakers have now entered their usual blackout period ahead of it. In Europe, the pound was flat against the dollar at $1.3639 but edged up against the euro despite numbers showing that unemployment fell by less than expected in the three months through November. Analysts zeroed in on a sharp downward revision to the claimant count in November and to a bigger-than-expected drop again in December, suggesting that the U.K. economy rode out the first part of the winter wave of Covid-19 comfortably enough. In emerging markets, the ruble weakened again amid growing fears that President Vladimir Putin will send his tanks across the Ukrainian border again. USD/RUB rose 0.4% to 76.40, although the movement was largely in line with other emerging market currencies as the dollar strengthened again. The ruble typically reacts badly to geopolitical shocks emanating from Russia, but the country's foreign exchange reserves stand at a record high, while its public debt is low and foreign currency borrowing by its corporates has fallen by nearly half since the last time it invaded Ukraine in 2014. With prices for oil and other commodity prices still high, the ruble has various pillars supporting it.
• The dollar was down on Tuesday morning in Asia, while the latest policy decision from the Bank of Japan dictated the yen’s moves. The dollar’s weakness came despite a continual rise in U.S. Treasury yields. Two-year yields rose above 1% for the first time since February 2020 as the Asian session opened and as trade resumed after a holiday in the U.S. Five-year yields rose 3.6 bps to 1.5960%, the highest since January 2020. Yields have been on an upward trend in 2022, with investors expecting the U.S. Federal Reserve to begin interest rates hikes as soon as March. Theories for the anomaly included investors reacting early to the fact the dollar has historically peaked around the time the Fed has raised rates, or they were trading in anticipation of a surge in global economic growth, he added. However, Attrill was not convinced by either argument. Meanwhile, expectations that the Bank of England will hike its own interest rates gave the pound a boost. Any weakness in the currency as Prime Minister Boris Johnson faces calls to resign would be contained, according to ING analysts. Although no major economic data is due from the euro zone throughout the week, investors look to speeches from European Central Bank (ECB) President Christine Lagarde and colleagues, as well as the minutes from the central bank's December policy meeting due on Thursday.
• Oil was up on Tuesday morning in Asia, reacting to a series of drone strikes on the United Arab Emirates (UAE) that were attributed to Yemen’s Houthi group. The latest “geopolitical tension added to ongoing signs of tightness across the market," ANZ Research analysts said in a note. The attacks on the outskirts of the UAE’s capital city of Abu Dhabi caused an explosion and fire as well as killing three people. It triggered worries about possible supply disruptions, as well as escalating hostilities between the Iran-aligned group and a Saudi Arabian-led coalition. The Houthi movement warned of more potential attacks on UAE facilities, with the UAE responding by saying it reserved the right to "respond to these terrorist attacks". The Abu Dhabi National Oil Company activated business continuity plans to ensure uninterrupted supply to both local and international customers after an incident at its Mussafah fuel depot. Meanwhile, oil prices are being supported by colder winter temperatures in the northern hemisphere that are driving up demand for heating fuels, according to CommSec analysts. Other analysts added that the tight supply-demand balance is unlikely to ease, with some Organization of the Petroleum Exporting Countries and allies (OPEC+) producers struggling to pump at their allowed capacities. The cartel agreed to continue its plan to add 400,000 barrels per day each month when it last met on Jan. 4."That should continue to be supportive for oil and increase talk of triple-figure prices," OANDA analyst Craig Erlam told Reuters. Investors now await U.S. crude oil supply from the American Petroleum Institute.

Gold – XAU

Gold on Monday made its intraday high of US$1823.10/oz and low of US$1814.59/oz. Gold 0.055% at US$1818.63/oz.

Technicals in Focus:

In daily charts, prices are above 200DMA (1809) and breakage below will call for 1790. MACD is above zero line and histograms are also increasing trend and it will bring upward stance in the upcoming sessions. RSI is in overbought region and more upside is expected before it gets stretched. Stochastic Oscillator is in neutral territory and giving negative crossover to bearish stance for intraday trade.

Trading Strategy: Buy on Dips

Buy in between 1805-1778 with risk below 1778, targeting 1818-1824-1834 and 1840-1848-1854. Sell in between 1818-1854 keeping stop loss closing above 1854, targeting 1800-1790 and 1783-1774-1769.

Silver - XAG

Silver on Monday made its intraday high of US$23.10/oz and low of US$22.81/oz settled down by 0.235% at US$23.00/oz.

Technicals in Focus:

On daily charts, silver is sustaining below 100DMA (26.62), breakage above will lead to 27.60. MACD is below zero line and histograms are decreasing trend and it will bring bearish stance in the upcoming sessions. RSI is approaching neutral region, indicating buy signal for now. The Stochastic Oscillator is in oversold region and giving positive crossover to show upside move for the intraday trade.

Trading Strategy: Buy on Dips

Buy in between 22.50-20.50, targeting 23.20-23.80-24.05 and 24.55-24.90-25.50 with stop loss should be place on the breakage below 20.10. Sell in between 23.15-25.50 with stop loss above 25.50; targeting 22.50-21.40-21.00 and 20.50-19.90-19.50.

Oil - WTI

Crude Oil on Monday made an intra‐day high of US84.06/bbl, intraday low of US$82.91/bbl and settled up by 2.987% to close at US$83.68/bbl.

Technicals in Focus:

On daily charts, oil is sustaining above its 20DMA i.e. 68.50 which is a support level and breakage below will call for 65.40. MACD is above zero line and histograms are in increasing mode will bring bullish stance in the upcoming sessions. The Stochastic Oscillator is in neutral region and giving positive crossover for confirmation of bullish stance; while the RSI is in neutral region and more upside can be expected to reach the overbought region, which is highly probable.

Trading Strategy: Neutral to Sell

Sell in between 85.90-87.90 with stop loss at 87.90; targeting 84.50-83.90 and 83.00-82.30-81.80. Buy above 83.00-80.20 with risk daily closing below 80.20 and targeting 83.90-84.50-84.95 and 85.60-86.30.

EUR/USD

EUR/USD on Monday made an intraday low of US$1.1391/EUR, high of US$1.1433/EUR and settled the day down by 0.0876% to close at US$1.1403/EUR.

Technicals in Focus:

On daily charts, prices are sustaining below 50DMA (1.1700), which become immediate resistance level, break above will target 1.1825. MACD is above zero line and histograms are increasing mode which will bring bullish view. Stochastic is in overbought territory and giving positive crossovers to signal for bullish outlook for intraday. 14D RSI is currently in neutral region and giving no directions to consider right now.

Trading Strategy: Neutral to Buy

Buy above 1.1420-1.1120 with risk below 1.1120, targeting 1.1485-1.1525-1.1590 and 1.1620-1.1650. Sell below 1.1485-1.1650, targeting 1.1420-1.1385-1.1310 and 1.1250-1.1200-1.1170 with stop-loss at daily closing above 1.1650.

GBP/USD

GBP/USD on Monday made an intra‐day low of US$1.3636/GBP, high of US$1.3689/GBP and settled the day down by 0.0981% to close at US$1.3644/GBP.

Technicals in Focus:

On daily charts, prices are sustaining above 100DMA (1.3760) is become immediate support level. 14-D RSI is currently in neutral region and direction is difficult to predict on RSI bases. The Stochastic Oscillator is in overbought territory and giving positive crossover to confirm bullish stance. MACD is above zero line but histograms are increasing lead to upward movement.

Trading Strategy: Neutral to Buy

Based on the charts and explanations above; buy in between 1.3640-1.3490 with target 1.3700-1.3750-1.3800 and 1.3840-1.3890-1.3950 with stop loss closing below 1.3950. Sell in between 1.3700-1.3950 with targets at 1.3550-1.3490-1.3440 and 1.3390-1.3300-1.3265 with stop loss should be 1.3790.

USD/JPY

USD/JPY on Monday made intra‐day low of JPY114.13/USD and made an intraday high of JPY114.64/USD and settled the day up 0.404% at JPY114.59/USD.

Technicals in Focus:

In daily charts, JPY is sustaining above 200DMA (108.30), which is initial support on the daily chart. 14-D RSI is currently in overbought region and chances of downward are expected based on RSI. MACD is above zero line but histograms are in decreasing mode which might lead to downward movement. The Stochastic Oscillator is in neutral territory and signaling to sell as it has given negative crossover to confirm bearish stance.

Trading Strategy: Neutral to Sell

Sell below 114.65-116.50 with risk above 116.50 targeting 14.50-113.90 and 113.20-112.70-112.50. Long positions above 114.20-112.50 with targets of 114.65-115.00-115.50 and 116.00-116.50-116.90 with stop below 112.50.