US Dollar Index
The US dollar made a slight recovery, with the DXY index rising to 105.20. This was buoyed by recent comments from Federal Reserve Chairman Jerome Powell in Congress, where he avoided recent rate cuts and instead advocated for patience. The dollar index fell last week due to weak US data and Fed speeches. Although recent US non-farm payroll data unexpectedly rose to +206,000 (from the previous value of 190,000), it has since fallen below the six-month moving average of +222,000. The job vacancy rate is also declining. Overall, the labor market appears to be easing in terms of tightness. This week, markets will closely watch the US CPI report (Thursday) and Chairman Powell's semi-annual testimony before the Senate Banking Committee and House Financial Services Committee (Wednesday). If Powell's recent remarks remain unchanged and the CPI continues to soften, there could be further downside for the dollar. With signs of deflation emerging in the US economy, the dollar continues to struggle, which reinforces market participants' confidence in a possible Fed rate cut in September.
At the beginning of the week, the US dollar index was last reported at 105.00. Daily momentum has turned bearish, and the 14-day Relative Strength Index (RSI) indicator has declined, indicating a weak short-term trend. A "bearish evening star" pattern has appeared on the weekly chart, suggesting there could be room for bearish setups to run. Support levels are seen at 104.50 (200-day moving average) and 104.43 (the 50% Fibonacci retracement level of 102.35 to 106.51). The next level to watch is last month's low at 103.99. Resistance levels are at 105.25 (65-day moving average) and 105.52 (the 23.6% Fibonacci retracement of 102.35 to 106.51).
Today, consider shorting the US dollar index around 105.20, with a stop loss at 105.30 and targets at 104.85 and 104.80.
WTI Crude Oil Spot
As Hurricane Beryl's minimal impact alleviated concerns about supply disruptions, oil prices fell further. Federal Reserve Chairman Powell might provide clues about when the central bank will cut rates. This week, investors will focus on the June CPI reports from China and the US. On Monday, WTI crude oil prices fluctuated downward as market concerns about supply interruptions caused by Tropical Storm Beryl eased, leading to a drop in WTI prices. However, Monday's news predicting the storm's dissipation shifted technical support downwards for crude oil prices, extending the decline from last Friday and pushing WTI crude prices down to $81.60. Following significant week-over-week reductions in U.S. crude supply reported by both the American Petroleum Institute (API) and the U.S. Energy Information Administration (EIA), the oil market will anticipate that this substantial reduction in supply will continue. The global energy market has maintained oil prices due to long-standing expectations of widespread growth in oil demand. However, after six months of flickering sparks in demand growth, the market has begun to question the accuracy of OPEC's demand growth forecasts.
From a technical perspective, WTI prices have fallen below the 200-hour moving average to $82.14, testing familiar key technical levels at $81.50 and $81.81 (the 23.6% Fibonacci retracement level from $72.62 to $82.65). A breach would further point to the psychological market threshold of $80.00. Last week, WTI crude was bullish but failed to break through the recent new high, barely missing the $84.65 (last week's high) threshold, falling back to recent technical levels. The daily chart shows that if WTI prices maintain the recent bullish trend and can hold above the congested area of $82.00 - $81.81 (the 23.6% Fibonacci retracement from $72.62 to $84.65), a rebound could resume. The next levels to watch are the April 26 high of $84.50 and near last Friday's high of $84.65, which formed a "double top."
Today, consider going long on crude oil around $81.70, with a stop loss at $81.40 and targets at $83.00 and $83.20.
Spot Gold
Amid some buying pressure recovery in the dollar, gold prices maintain a slightly constructive stance near $2360 per ounce. During the Tuesday Asian session, gold prices attempted a modest rebound while defending the psychological support level of $2350. The potential rise in gold prices could be due to a consolidation phase where the dollar and U.S. Treasury yields are trending downward. Traders are eagerly awaiting testimony from Federal Reserve Chairman Jerome Powell in Congress for new hints on the timing of rate cuts. Powell's remarks could reinforce the Fed's dovish expectations, and a drop in the dollar and bond yields could push gold prices above the historical high of $2400. Powell is set to testify before the House Financial Services Committee on Wednesday. This could drive gold price movements in light of subdued U.S. data. Gold prices dropped on Monday due to profit-taking and concerns over Chinese gold demand. After gold breached the $2400 level, traders began taking profits, with some adjusting positions before Powell’s testimony and this week’s U.S. inflation data release.
The daily chart indicates that gold's short-term technical outlook remains constructive as the 14-day Relative Strength Index (RSI) has risen again, now above the 50 level. Gold buyers must breach the six-week high of $2393 to resume the uptrend towards the historic high of $2450. Until then, the $2400 level may present a significant challenge. On the flip side, gold prices may face short-term support at the psychological threshold of $2350. If this level breaks, the demand zone around $2340 will be challenged. The 50-day ($2342.10) and 21-day ($2335.00) simple moving averages are near this level. If a sustained break below the latter occurs, it could trigger a new downward trend towards the $2300 round figure.
Today, consider going long on gold near $2360.00, with a stop loss at $2356.00 and targets at $2376.00 and $2380.00.
AUDUSD
The AUD/USD pair opened bearish this week, with the continuing strong upward momentum being somewhat restrained. After reaching a six-week high near 0.6761 on Monday, it quickly returned to negative territory. The market continues to assess the mixed recent US non-farm payroll data and its potential impact on the Fed's prospects for starting rate cuts earlier, leading to a slight rebound in the US dollar and a consolidation trend in the AUD/USD. Signs of weakness in copper and iron ore prices after several days of gains have exacerbated the pullback in the Aussie. In terms of monetary policy, the Reserve Bank of Australia (RBA), similar to the Fed, is expected to be among the last of the G10 central banks to start cutting rates. The latest meeting maintained a hawkish stance, indicating that future decisions will be flexible. The minutes from the RBA’s latest meeting highlighted that the main reason for maintaining the policy rate was "uncertainty in consumer data and clear evidence of significant financial pressures on many households." Overall, the RBA is not in a rush to ease policies, which might provide support for the AUD/USD in the coming months. However, concerns about the ongoing economic downturn in China post-pandemic may hinder the continuous recovery of the Aussie.
From a technical trend perspective, once the short-term bulls increase their efforts, breaking the July high of 0.6761 (July 8) could challenge the high of December 2023 at 0.6871, followed by the July 2023 high of 0.6894 (July 14), and eventually test the key level at 0.7000. On the flip side, if the AUD/USD maintains a bearish intent, it might drive a lower fluctuation in the pair, first falling to the June low of 0.6574 (June 10), then to the critical 200-day moving average at 0.6565. Further declines could test the May 2 low at 0.6512 and the psychological threshold of 0.6500. Overall, as long as the AUD/USD remains above the 200-day moving average, it will maintain an upward trend.
Today, consider going long on the AUD at 0.6725, with a stop loss at 0.6710 and targets at 0.6770 and 0.6775.
GBPUSD
The mild rebound of the US dollar has put pressure on risk-associated assets, forcing GBP/USD to shift its focus below the 1.2800 region in a lukewarm dollar environment. Early in the week, GBP/USD briefly tested a four-week new high, breaking through 1.2845, only to see significant market capital flows push it back to around its opening level of 1.2800. This week's data from the UK remains sparse, leaving traders caught between hopes for a peak in rate cuts and the Fed's cautious stance. The Fed insists on waiting for further signs that US inflation is moving towards the Fed's 2% annual inflation target before cutting rates. Key US inflation data will be released later this week, with the Consumer Price Index (CPI) inflation set for Thursday and the Producer Price Index (PPI) wholesale inflation on Friday. This week's UK data is also limited, with various speeches by Bank of England (BOE) policymakers on Wednesday and industrial and manufacturing activity surveys due on Thursday. Following a slight decline last month, UK industrial and manufacturing production is expected to rebound in May.
After rebounding from the June 24 low of 1.2612 to the early week high of 1.2845 (an increase of about 2%), GBP/USD has risen steadily, but the momentum has yet to break through the key peak in June of 1.2860, and near the March 8 high of 1.2893. Currently, GBP/USD is still trading near the psychological market threshold of 1.28. If it fails to find a foothold above the 1.2800-1.2815 supply zone, selling interest may intensify, with GBP sellers targeting the 1.2715 level again, which is the 10-day moving average. In case of continued declines, the 50-day moving average at 1.2684 might be the next support level. The 14-day Relative Strength Index has reclaimed 50 and is currently near 62, indicating a shift towards upward risk. The path of least resistance for the GBP/USD currency pair appears to be upwards. Key resistance lies near 1.2860 and 1.2893.
Today, it is advisable to go long on the GBP at 1.2770, with a stop loss at 1.2750, and targets at 1.2820 and 1.2830.
USDJPY
The yen fell back above the 161.00 mark ahead of the US trading day. The Bank of Japan concluded its consultations with bond market participants on Tuesday, and the yen depreciated for the second consecutive trading day. A modest rise in the dollar supported the USD/JPY. However, concerns about potential intervention by Japanese authorities in the forex market could limit the yen's decline. The yen also faces challenges as Japanese individuals purchase overseas assets through the newly revised tax-free investment scheme—Japan's personal savings account plan. According to Nikkei Asia, the scale of these purchases in the first half of the year is expected to exceed the country's trade deficit. US Treasury yields are under pressure as more people speculate that the Fed might cut rates in September, which could limit the dollar's upside. Federal Reserve Chairman Powell is set to deliver the "Semiannual Monetary Policy Report" to the US Congress on Tuesday. Powell is likely to provide a comprehensive overview of the economy and monetary policy, having prepared his remarks before appearing on Capitol Hill.
The USD/JPY traded just above 161.00 on Tuesday. According to the daily chart, the currency pair remains in an upward channel mode, indicating a bullish tendency. Furthermore, the 14-day Relative Strength Index (RSI), maintaining above 65, confirms the bullish trend. USD/JPY may test key resistance near the upper line of the ascending channel around 162.55. Breaking this level could enhance bullish sentiments, possibly driving the pair to form a psychological resistance at 163.00. On the downside, the first support for USD/JPY might be at the psychological market threshold of 160.00, and 159.80, the median line of the upward channel, which is already a critical level. A break below this level could exert pressure on the pair to test the lower line of the ascending channel around 159.40.
Today, it is advisable to go long on the USD at 161.00, with a stop loss at 160.80, and targets at 161.60 and 161.70.
EURUSD
EUR/USD climbed higher in Monday's pullback, continuously descending to challenge the critical 1.0800 area, in response to gradually improving sentiment around the dollar, especially after Powell's initial testimony. The outcome of Monday's French election was complex and ambiguous regarding the euro's policy direction, causing the EUR/USD to drop. In previous parliamentary elections, far-right parties financially flopped, and the victory of a minority coalition government in France has kept them out of the leadership race. However, this victory was not decisive, as ideologically conflicting coalition parties are expected to face policy gridlocks in the coming months. This week, Federal Reserve Chairman Jerome Powell will submit the semiannual monetary policy report to the U.S. Senate Banking Committee. Later this week, the U.S. will release key inflation data. The U.S. Consumer Price Index (CPI) inflation rate will be published on Thursday, and the Producer Price Index (PPI) wholesale inflation rate will be released on Friday. Final German inflation data will be disclosed during the European session on Thursday.
From the recent trend perspective, further upward movement of EUR/USD will test the July high of 1.0845 (July 8), and 1.0862 (the 78.6% Fibonacci retracement of 1.0916 to 1.0666). This is followed by the psychological market threshold of 1.0900, and the weekly high of the June peak at 1.0916 (June 4). If EUR/USD breaks this level, it might refocus on 1.0800 (psychological barrier) and the 200-day moving average at 1.0798. The next level to watch would be 1.0748 (20-day moving average), with a short-term direct target at the 1.0700 round figure.
Today, it is advisable to go long on the EUR at 1.0800, with a stop loss at 1.0780, and targets at 1.0840 and 1.0850.
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