US Dollar Index
The US dollar is rising on all fronts, except for a few cases. The EU election results have forced Macron to call for early elections, causing the market to tremble with fear. The US Dollar Index broke through 105.00, reaching a four-week high. Last weekend, the index extended its gains due to stronger-than-expected labor market data. At the beginning of the week, the index further climbed, reaching near 105.30, marking a nearly one-month high. Non-farm employment data, along with rising wage inflation, portray a strong and resilient economy, which may justify the Fed's delay in cutting interest rates. Attention now shifts to the upcoming Fed meeting, where the market will be closely watching for any shifts in monetary policy stance following the positive labor data. The likelihood of a rate cut in June and July remains low after the robust employment data, and the chance of a September rate cut has also decreased due to numerous positive economic signals.
Last week, the US Dollar Index recovered all of its losses from the previous week after the better-than-expected non-farm employment data was released. The index has rebounded above the 200-day moving average of 104.44 and 104.58 (23.6% Fibonacci retracement of 106.50 to 103.99), breaking through 105.00 (round number) and 105.09 (50-day moving average). It is currently testing 105.54 (61.8% Fibonacci retracement of 106.50 to 103.99), with a potential breakthrough to 105.74 (May 9 high) and 106.00 (psychological level). On the downside, the index might test 104.58 (23.6% Fibonacci retracement) and the key support level of 104.44 (200-day moving average).
Today, consider shorting the US Dollar Index around 105.25, with a stop loss at 105.35 and targets at 104.90 and 104.85.
WTI Spot Crude Oil
Oil prices broke through the critical level of 77.26 (150-day moving average) and rose to a new five-day high. Most investors remain on the sidelines ahead of the US Consumer Price Index and the Federal Reserve decision on Wednesday. On Monday, WTI crude oil prices recovered from the previous trading day's losses, trading above $78.00. The rise in crude oil prices is mainly due to market speculation that the Federal Reserve might cut interest rates in September. However, last Friday's better-than-expected US employment data led traders to delay their expectations of a Fed rate cut. Stronger US non-farm employment data attracted dollar buyers, causing crude oil prices to remain high for buyers using other currencies, thus putting downward pressure on oil prices. If borrowing costs remain high for a prolonged period, oil prices may face pressure, negatively impacting oil demand. Additionally, concerns about a potential oil supply surplus have increased as OPEC+ decided to gradually lift voluntary production cuts for eight member countries starting in October.
From a technical perspective, WTI crude oil has begun a counter-trend recovery rebound within the downward channel on the daily chart, breaking above the 77.51 (50.0% Fibonacci retracement of 67.94 to 87.08) and 77.26 (150-day moving average) regions. These levels might provide hope for the bulls. If the channel's integrity is maintained, it could trigger an upward move within the channel. Since mid-April, WTI crude oil prices have been moving lower within the channel. This trend is expected to reverse to $78.40 (lower boundary of the downward channel) and $80.00 (psychological level). On the downside, support levels to watch include the 77.26 (150-day moving average) region, followed by $74.90 (5-day moving average) and $72.03 (78.6% Fibonacci retracement level).
Today, consider going long on crude oil around $78.00, with a stop loss at $77.70 and targets at $79.50 and $79.80.
Spot Gold
Following a sharp decline on Friday, gold prices held onto daily recovery gains during the US session on Monday, breaking through $2,300 to $2,314. Ahead of this week's highly anticipated Federal Reserve meeting, a negative shift in risk sentiment helped gold find demand as a safe haven. In early Asian trading on Monday, a stronger dollar narrowed gold's losses, with prices near $2,298. Last Friday, gold prices fell to a one-month low as market bets on a Fed rate cut this year decreased and news emerged that China paused its gold purchases in May after 18 months, fueling bearish sentiment. Better-than-expected US employment data prompted traders to delay expectations of a Fed rate cut. The strong employment data attracted some dollar buyers, which also pressured gold prices as it made gold more expensive for overseas buyers. Additionally, as gold prices hit new highs in April and May, the People's Bank of China, one of the world's largest gold buyers, ended its 18-month purchasing streak in May. Market concerns over reduced gold demand have added some selling pressure to the precious metal.
From the daily chart, gold prices last week fell below key support levels of $2,343.20 (50-day moving average) and $2,333.80 (38.2% Fibonacci retracement from $2,146 to $2,450), which have now become major resistance areas for the rebound. Meanwhile, technical indicators on the daily chart, such as the 14-day Relative Strength Index (RSI), fell below 50 to 45.30, reflecting slightly increased bearish momentum. Before reaching $2,262.10 (61.8% Fibonacci retracement), $2,277.30 (May 3 low) may be seen as temporary support levels. On the upside, $2,314 - $2,315 (June 3; 4 low) is a temporary resistance area, followed by $2,333 and $2,343. Breaking these levels could pave the way for a further rebound to $2,349.70 (5-week moving average).
Today, consider going long on gold around $2,306, with a stop loss at $2,302 and targets at $2,320 and $2,325.
AUDUSD
Following a strong pullback on Friday, the AUD/USD managed to regain some composure and recover part of its weakness, moving back above the 0.6600 region. In early Asian trading on Monday, the AUD/USD still faced some selling pressure around 0.6580. Stronger-than-expected US non-farm employment data reignited demand for the US dollar, pushing the AUD/USD lower. The US May Consumer Price Index (CPI) and the Federal Reserve rate decision will be the focal points this week and could trigger market volatility. Strong US employment data might support economic growth, reducing the likelihood of the Fed lowering borrowing costs. This, in turn, could bolster the US dollar in the short term, weighing on the AUD/USD. On the Australian side, the Reserve Bank of Australia's (RBA) hawkish stance might limit the downside for this currency pair. Last week, RBA Governor Bullock stated that the central bank is not expected to cut rates this year and added that if inflation does not return to the 1%-3% target range, the bank is prepared to hike rates further.
After Friday's surprising non-farm employment data, the AUD/USD sharply pulled back to 0.6578. The AUD/USD is consolidating slightly below the recent May high of 0.6714, hovering near the pre-pandemic low of 0.6580. The pair dropped 100 points from high to low on the day and was trading at 0.6580 in early Asian markets, a level that provided a pivot point in March and April last year, and occasionally in 2024. Dynamic support appears at the 200-day simple moving average of 0.6537 and 0.6538 (50.0% Fibonacci retracement of 0.6362 to 0.6714). The next level points to 0.6500 (round number). Resistance is found at 0.6630 (23.6% Fibonacci retracement) and 0.6635 (midline of the daily horizontal channel), with the next challenge at 0.6681 (last Friday's high) and 0.6693 (upper boundary of the horizontal channel).
Today, consider going long on AUD/USD around 0.6600, with a stop loss at 0.6585 and targets at 0.6650 and 0.6660.
GBPUSD
After opening the week with a bearish tone, GBP/USD erased its intraday losses and stabilized above 1.2700. However, cautious market sentiment ahead of key macroeconomic events helped the US dollar maintain resilience, making it difficult for the pair to gather recovery momentum. In early Asian trading on Monday, GBP/USD recovered some ground near 1.2725. Stronger-than-expected US non-farm employment data has lowered expectations of a Fed rate cut this year, potentially limiting GBP/USD's upside. Investors will closely watch the UK's May employment data, set to be released on Tuesday. In the US, the Consumer Price Index and the Federal Reserve's decision this week will be key focuses for investors. Prolonged high US interest rates might temporarily support the dollar. On the other hand, Tuesday's UK employment data, including claimant count change, employment change, and average earnings data, will be crucial. Any signs of increased layoffs might trigger expectations of an early rate cut by the Bank of England, weakening the pound.
From the daily chart, GBP/USD faces key resistance near the midline of the ascending channel around 1.2800, which also serves as a psychological barrier. If the pair rises above this level and establishes it as support, technical buying interest may emerge. In this scenario, immediate resistance lies at 1.2800 (psychological barrier), followed by 1.2850 (static level). The next relevant resistance is at the March 8 high of 1.2894. On the downside, initial support is at 1.2700 (psychological level) and the confluence of 1.0694 (23.6% Fibonacci retracement of 1.2299 to 1.2817). Further down, the 120-day moving average at 1.2649 will challenge bullish commitments.
Today, consider going long on GBP/USD around 1.2710, with a stop loss at 1.2700 and targets at 1.2760 and 1.2770.
USDJPY
USD/JPY remains around 157.00 as the dollar strengthens ahead of the Federal Reserve policy announcement. Following a strong US non-farm employment report, traders quickly reduced their bets on a Fed rate cut. The Bank of Japan is expected to reduce asset purchases to further ease policy. The yen fell slightly for the second consecutive day on Monday. After the better-than-expected US employment data on Friday, the dollar regained strength, supporting the USD/JPY exchange rate. Mixed data from Japan on Monday might limit the yen's downside. The annualized GDP showed a smaller-than-expected contraction in Japan's first-quarter economy. Meanwhile, the first-quarter GDP (quarter-on-quarter) shrank, consistent with the flash data. The US dollar index, which measures the value of the dollar against six major currencies, continued to rise as US Treasury yields increased.
At the beginning of the week, USD/JPY traded around 157.00. Daily chart analysis indicates a bullish tendency as the pair consolidates within a symmetrical triangle pattern. Additionally, the technical indicator, the 14-day Relative Strength Index (RSI), is at 56.84, suggesting an upward movement trend. On the upside, the psychological level of 158.00 is a significant key obstacle. Breaking this level could support the USD/JPY exchange rate near the upper limit of 158.44, the high from April 26. Further resistance appears at the 160.20 level, the highest in over three decades. On the downside, 154.98 (50-day moving average) and the lower boundary of the ascending channel near 154.90 seem to be critical support levels. Breaking below this level could increase pressure on the USD/JPY exchange rate, possibly leading it to the retracement support area near 153.60 (May 16 low).
Today, consider shorting USD/JPY around 157.20, with a stop loss at 157.50 and targets at 156.40 and 156.30.
EURUSD
The ongoing upward momentum of the US dollar, coupled with increasing political tensions, has suppressed the price action of EUR/USD, opening the door for further declines in the short term. In early Asian trading on Monday, following the closely watched US Labor Department's monthly employment report, EUR/USD faced selling pressure for the second consecutive day, dropping to over a three-week low. Currently trading around 1.0765, EUR/USD seems poised to extend its post-nonfarm payroll breakdown, potentially falling below the 100-day simple moving average of 1.0806. Despite this, the data has forced investors to lower their expectations of a Fed rate cut in September, leading to a continued rise in US Treasury yields. This, along with cautious sentiment in the stock market, supports the safe-haven US dollar and applies downward pressure on EUR/USD. On the other hand, the European Parliament election results on Sunday showed Eurosceptic nationalists gaining the most advantage, and French President Emmanuel Macron's decision to hold elections later this month adds to the political uncertainty in the Eurozone's second-largest economy, favoring EUR/USD bears.
From a technical perspective, the path of least resistance for EUR/USD is downward. Traders face the risk of key central bank events and the release of the latest US consumer inflation data, which could boost the dollar and provide significant momentum. Currently, EUR/USD remains capped by the 20-day simple moving average at 1.0847 and the 100-day moving average at 1.0806, losing its bullish bias. The downward pressure on EUR/USD is increasing. Additionally, the pair is approaching support around 1.0758 (50.0% Fibonacci retracement from 1.0601 to 1.0916). A break below this level would target the next support at 1.0721 (61.8% Fibonacci retracement), followed by 1.0700 (psychological round number). On the upside, if EUR/USD climbs back above the 20-day and 100-day moving averages, it could challenge 1.0860 (midline of the horizontal channel) and the psychological resistance at 1.0900.
Today, consider going long on EUR/USD around 1.0750, with a stop loss at 1.0735 and targets at 1.0800 and 1.0810.
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