US Dollar Index
On Tuesday, the US Dollar Index showed an upward trend, approaching the 105.36 area. As the focus is on Wednesday's meeting, no highlights are expected from the event. At the start of the week, the Dollar Index further rebounded to around 105.38, a nearly one-month high, following last week's rise. Despite initial fluctuations, the broader outlook for the strong US economy remains robust, suggesting that the dollar will maintain its upward trend. Market participants are primarily focused on the Consumer Price Index (CPI) for May and Wednesday's Federal Reserve meeting. The dollar has continued its previous gains and maintained its rally. The US economy remains strong, and the Federal Reserve's economic forecast on Wednesday will be closely watched, though it is expected to remain unchanged. As Monday's meeting did not provide any major highlights, investors' attention is focused on these upcoming events. Expected data and decisions will offer a clearer picture of potential changes in inflation rates and monetary policy trajectory.
From the daily chart, the Dollar Index not only managed to stay above the key level of 105.00 but also returned to a strong position on the chart. The index is above the 20-day (104.63), 100-day (104.47), and 200-day (104.45) simple moving averages, reinforcing a bullish outlook. Additionally, the 14-day Relative Strength Index (RSI) managed to stay above 50 (last reported at 54.95), further supporting bullish sentiment. The Moving Average Convergence Divergence (MACD) indicates increased demand at current levels. On the upside, attention can be given to 105.54 (61.8% Fibonacci retracement of the 106.50 to 103.99 range), a breakout directly points to 105.74 (May 9 high), and 106.00 (psychological level). For downside support, consider levels at 104.58 (23.6% Fibonacci retracement), and 104.47 (100-day moving average).
Today, consider shorting the Dollar Index around 105.35, with a stop loss at 105.50 and targets at 105.00 and 104.95.
WTI Spot Crude Oil
Due to investors stabilizing crude oil ahead of the important Wednesday, WTI briefly corrected to $77.00 before rebounding above $78.00. On Tuesday, Asian stock markets rose, and WTI crude oil prices hovered around $77.75 per barrel. Expectations of increased summer fuel demand supported crude oil prices. Although the broader macroeconomic outlook remains less optimistic than the previous week, the anticipated summer demand provided support to the dollar, leading to higher crude oil futures prices. Strong US employment data from last week reinforced the Federal Reserve's hawkish stance on monetary policy, with expectations that the Fed will maintain higher borrowing costs in the short term, potentially dampening economic growth and reducing oil demand. Additionally, a stronger dollar makes dollar-denominated commodities like oil more expensive for holders of other currencies, negatively impacting oil demand. Concerns about oil oversupply may increase as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) plan to gradually phase out voluntary production cuts on eight products starting in October.
From the daily chart, US WTI crude oil prices rose more than 3.7% at the start of the week to $78.35, marking the best single-day performance since early January. WTI prices have rebounded to $77.51 per barrel (50.0% Fibonacci retracement of the $67.94 to $87.08 range) and above the $77.26 level (150-day moving average). Price movement remains below the 200-day moving average of $79.37, but WTI has risen 8.6% in 2024. If sellers return before the price reaches the psychological level of $80.00 per barrel, there could be a decline to $76.79 (14-day moving average) and $75.25 (61.8% Fibonacci retracement of the $67.94 to $87.08 range).
Today, consider going long on crude oil around $78.00, with a stop loss at $77.70 and targets at $79.60 and $79.80.
Spot Gold
After testing $2,300 earlier in the day, gold prices traded above $2,315. The benchmark 10-year US Treasury yield fell over 0.5% ahead of the 10-year bond auction, aiding in the rise of gold prices. Following a sharp drop on Friday, gold prices in the US session at the start of the week managed to hold onto daily recovery gains, breaking above $2,300 to $2,314. Before the highly anticipated Federal Reserve meeting this week, a negative shift in risk sentiment helped gold find demand as a safe haven. Better-than-expected US employment data led traders to delay their expectations for a Fed rate cut. The strong employment data attracted some buyers to the dollar while also pressuring gold prices, making gold more expensive for overseas buyers. Additionally, the People's Bank of China, one of the largest gold buyers globally, ended its 18-month streak of gold purchases in May, following gold prices hitting new highs in April and May. Market concerns about reduced gold demand have exerted some selling pressure on the precious metal.
From the daily chart, gold prices have rebounded after falling below the key support levels of $2,343.20 (50-day moving average) and $2,333.80 (38.2% Fibonacci retracement of the $2,146 to $2,450 range) last week. These levels now serve as major resistance areas. Meanwhile, the 14-day Relative Strength Index (RSI) on the daily chart fell below 50 to 45.30, indicating a slight increase in bearish momentum. Before reaching $2,262.10 (61.8% Fibonacci retracement), $2,277.30 (May 3 low) may act as temporary support. On the upside, $2,320 - $2,325 serves as temporary resistance, followed by the $2,333 and $2,343 levels, paving the way for further rebound to $2,349.70 (5-week moving average).
Today, consider going long on gold around $2,313, with a stop loss at $2,310.00 and targets at $2,328.00 and $2,330.00.
AUDUSD
The AUD/USD pair managed to maintain its positive start to the week and stay above the 0.6600 region, as investors are cautious before the key data release on Wednesday. Despite the significant rise in the USD, the AUD/USD pair recovered and stabilized around the 0.6600 area after last Friday's sharp decline. The primary reason for the USD's recovery was the heightened cautious sentiment in European political situations following Sunday's parliamentary elections and French President Macron's call for snap elections on June 30. The rebound in copper prices has notably supported the rise in AUD/USD, whereas iron ore prices showed uncertain intraday movements. Regarding monetary policy, the Reserve Bank of Australia (RBA), like the Federal Reserve, is one of the last major central banks to adjust its stance. According to the latest Fed meeting minutes, officials even consider the possibility of a rate hike if inflation rises. Given the Fed's commitment to a tight policy and the RBA's potential to maintain its restrictive policy stance for a longer period, the AUD/USD pair is expected to consolidate further in the coming months.
From this week's performance, if the AUD/USD pair rises further, it may push towards the December 2023 high of 0.6871 and the July 2023 high of 0.6894 (July 14), with the key level of 0.7000 as the final target. Conversely, the 14-day Relative Strength Index (RSI) has fallen to around 42.40, indicating short-term bearishness. If the AUD/USD attempts to move downwards, it may push towards the critical 200-day moving average at 0.6538, followed by testing the psychological level of 0.6500, and then the May low of 0.6465.
Today, consider going long on the AUD/USD around 0.6590, with a stop loss at 0.6575 and targets at 0.6630 and 0.6640.
GBPUSD
On Tuesday, GBP/USD struggled to hold near 1.2700 to 1.2740. The USD benefited from deteriorating market sentiment ahead of Wednesday's US inflation data and Fed policy decision, preventing the currency pair from regaining momentum. In the early Asian session on Tuesday, GBP/USD fell moderately to around 1.2730. Meanwhile, reduced bets on a Fed rate cut this year might support the USD and limit GBP/USD's upside potential. Over the past few months, UK employment growth has been shrinking, and it may continue to shrink in May, making it easier for the Bank of England to start lowering borrowing costs. Last week's US employment data sparked speculation that the Fed would maintain higher interest rates for a longer period. This stronger data provided some support for the pound in previous trading sessions. Wednesday's US Consumer Price Index (CPI) inflation data will be crucial, as Fed officials have emphasized in recent weeks that they will wait for more evidence of inflation before cutting rates. If the Fed adopts a hawkish tone, it could boost the USD and negatively impact GBP/USD.
From a technical perspective, GBP/USD has struggled with key resistance levels around 1.2800 (psychological barrier) and 1.2817 (June 4 high), subsequently falling below 1.2751 (5-day moving average) and 1.2700 (psychological level), creating a new 7-day low at 1.2687 before recovering some ground. Although the momentum still favors buyers, the 14-day Relative Strength Index (RSI) has dropped sharply to near 55, indicating that buyers are losing momentum. Nevertheless, Monday's price action seemed to form a bullish "dragonfly doji," suggesting that the upside resistance is at 1.2800 (psychological barrier) and then at 1.2850 (static level). On the downside, initial support is at 1.2700 (psychological level) and 1.2694 (23.6% Fibonacci retracement of the 1.2299 to 1.2817 range).
Today, consider going long on GBP/USD around 1.2725, with a stop loss at 1.2710 and targets at 1.2780 and 1.2790.
USDJPY
The Japanese yen edged lower as the Bank of Japan is expected to maintain current interest rates on Friday. A stable Japanese stock market also weakened the yen's momentum. The US dollar remained firm as the possibility of two Fed rate cuts in 2024 decreased. During the Asian session on Tuesday, USD/JPY rose for the third consecutive day and the fourth day out of the last five, reaching over a one-week high around 157.25. However, the price faced resistance near the supply zone of 157.65-157.70, as traders appeared reluctant to engage in aggressive trading ahead of this week's key US macro data and central bank event risks. US consumer inflation data will be released on Wednesday, followed by the highly anticipated Fed monetary policy decision. Investors will look for clues on when the Fed might start cutting rates, which will significantly impact recent dollar volatility and provide some clear impetus for the USD/JPY pair ahead of Friday's Bank of Japan decision. On the other hand, stronger-than-expected US employment data released last Friday has fueled expectations, supporting a bullish outlook for the dollar.
USD/JPY is currently trading just above 157.00. Daily chart analysis shows a bullish tendency as the pair broke above the symmetrical triangle's upper resistance line at the beginning of the week. Additionally, the 14-day Relative Strength Index (RSI) is above the 50 level at 57.38, indicating upward momentum. The psychological level of 158.00 is a significant obstacle. Breaking this level would provide support, potentially guiding USD/JPY towards the April 26 high near 158.44. Further resistance is at 160.20, the highest level in over thirty years. On the downside, 156.53 (5-day moving average) aligns with 156.00 (round number), serving as primary support. Breaking this level could intensify downward pressure on USD/JPY, potentially leading it towards the support region around 155.20 and 154.95 (38.2% Fibonacci retracement of the 146.47 to 160.20 range).
Today, consider shorting USD/JPY around 157.35, with a stop loss at 157.50 and targets at 156.70 and 156.60.
EURUSD
Due to the strengthening USD, ongoing political concerns in Europe, and caution ahead of US inflation data and the Federal Reserve's June 12 interest rate decision, EUR/USD weakened further, falling to a new multi-week low in the 1.0720-1.0715 range. During the Asian session on Tuesday, EUR/USD rose and is currently trading around the 1.0765-1.0770 area but lacks strong follow-through buying. Additionally, from both a fundamental and technical perspective, caution is warranted before extending the previous day's modest rebound from the 1.0735-1.0730 area (or a one-month low). Stronger-than-expected US employment data released last Friday supported the USD, as more people believe the Fed may maintain higher rates for a longer period. Furthermore, French President Emmanuel Macron's decision to hold snap elections later this month has increased political uncertainty in the Eurozone's second-largest economy, potentially weakening the common currency further. This supports bearish traders and validates the recent negative outlook for EUR/USD.
From a technical perspective, if EUR/USD maintains a bearish bias, it may initially target the June low at 1.0732 (June 10), then 1.0700 (psychological level). A break below these key support levels would lead to further downside testing at 1.0668 (78.6% Fibonacci retracement of the 1.0601 to 1.0916 range) and further towards 1.0601 (April 16 low) and 1.0600 (psychological level). Conversely, if the bulls gain strength, EUR/USD could first test 1.0800 (psychological barrier), then 1.0841 (23.6% Fibonacci retracement), and 1.0864 (midline of the horizontal channel on the daily chart).
Today, consider going long on EUR/USD around 1.0725, with a stop loss at 1.0710 and targets at 1.0775 and 1.0780.
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