US Dollar Index

The US Dollar Index is trading slightly below 105.00, rising during the US session on Wednesday. Supported by cautious comments from Federal Reserve officials, the dollar continues to show resilience, shaking off the impact of last week's weak inflation report. Last week, the Dollar Index continued its downward trend since May, primarily due to weakening overall US data, reigniting rate cut trades. Recently released retail sales and labor market data have also shown weakness. However, the Fed's officials have reiterated their hawkish stance, stating that despite gradually decreasing inflation, US interest rates may remain at levels seen for most of the past decade. This reflects the Fed's expectation that the timing for rate cuts is still off the table. As financial conditions continue to ease, the Fed remains cautious about implementing easing policies prematurely. Despite recent data showing some underperformance, the US economy demonstrates firm signs of stability. Nonetheless, with financial conditions continuing to ease, the Fed remains vigilant and reluctant to adopt early easing policies. The prospect of rate cuts this year poses pressure on the dollar and US bond yields.

Technical indicators on the daily chart reflect a balanced state for the Dollar Index. The 14-day Relative Strength Index (RSI) remains flat, indicating no clear dominance between buying and selling momentum. However, it is still in the negative region (45.25), which may suggest an overall bearish bias, though not conclusively. The Moving Average Convergence Divergence (MACD) shows flat red bars, suggesting a stable bearish sentiment. Despite increased selling pressure, demand consistently appears whenever the Dollar Index drops to 104.20 (100-day moving average) and 104.00 (psychological market level), highlighting a greater bullish outlook. On the upside, resistance levels to consider are 105.00 (psychological market level) and 105.11 (23.6% Fibonacci retracement level from 100.61 to 106.51).

Today, consider shorting the Dollar Index around 104.98, with a stop loss at 105.10 and targets at 104.70 and 104.60.

WTI Spot Crude Oil

On Wednesday, oil prices experienced another decline amidst volatility. Norway, Ireland, and Spain announced that they would recognize the State of Palestine on May 28. This comes after a turbulent 24 hours during which the US Dollar Index fluctuated narrowly. In response, Israel quickly recalled its embassy personnel from these countries. This move highlights concerns about how Israel is handling the Gaza situation, ignoring calls for a ceasefire and for allowing more humanitarian aid into the Gaza Strip. Yesterday, oil prices briefly dipped due to headlines about Palestine but stabilized thereafter. All eyes are once again on the US, which has been filling the gap left by OPEC's supply cuts, significantly disrupting the oil market. The geopolitical landscape now faces several questions, particularly whether the US will continue to support Israel despite growing global criticism. A retreat from the Middle East could mean the end of diplomacy, ultimately leading to an escalation of the situation and a rise in oil prices, posing a narrow path for the US to navigate.

The daily chart shows that, on the upside, the 200-day simple moving average at $79.62 and the $80.00 psychological barrier remain critical demarcation lines between the market bulls and bears. If the bulls manage to break above this level, the short-term resistance area would be at $81.67 (50.0% Fibonacci retracement level from $86.99 to $76.34). A breakthrough above this area could see prices rising again to $83.07 (April 26 high). On the downside, support areas are at $76.80 (midline of the daily descending channel) and $76.34 (May 15 low). The key level at $75.28 could serve as a solid defensive line against further declines. If this level fails to hold, investors might accelerate their sell-offs, pushing prices towards $72.00 and $70.00, thereby erasing all gains made in 2024.

Today, consider going long on crude oil around $77.00, with a stop loss at $76.80 and targets at $78.20 and $78.30.

Spot Gold

Gold prices turned downward and extended their decline after breaking below the critical $2,400 level. The 10-year US Treasury yield remains steady above 4.4%, benefiting the US dollar amid a negative shift in risk sentiment before the FOMC meeting minutes, thereby preventing a rebound in gold prices. During the early European session on Wednesday, gold prices fluctuated within a narrow range above $2,400, consolidating previous losses. This week, gold started strong but retreated from its historical high of $2,450, entering a downward consolidation phase. Several Fed policymakers expressed concerns about the sustainability of the disinflationary trend, implying that interest rates might remain higher for a longer period. This has significantly reduced bets on aggressive rate cuts by the Fed this year. Investors are evaluating recent remarks from Fed officials, with several advocating for continued policy caution. The Fed's inclination towards maintaining a restrictive stance keeps gold buyers on the sidelines, despite broad pressure on the dollar and stable US Treasury yields.

On the daily chart, gold is forming a potential five-week-long ascending wedge. Meanwhile, the 14-day Relative Strength Index (RSI) has turned downward but remains in the positive territory, currently around 64.50, indicating a likelihood of "buying on dips." However, gold needs to close above the ascending wedge barrier at $2,450 to establish a sustained uptrend. This level is the ultimate high for gold prices. If this level is reclaimed, gold prices could rise to $2,500 and $2,526. However, gold buyers failed to regain lost momentum yesterday, with prices falling back below the $2,400 psychological barrier. The next support level is the May 17 low of $2,374. A break below this level would test $2,361 (14-day moving average).

Today, consider going long on gold around $2,375, with a stop loss at $2,370 and targets at $2,390 and $2,395.

AUDUSD

The AUD/USD faced heavy downward pressure on Wednesday, declining for the third consecutive day due to an additional rise in the US dollar and weak commodity prices. Despite some cautious remarks from Federal Reserve officials about when to start rate cuts, the Australian dollar saw a slight rise against the US dollar. Consequently, US Treasury yields fell while the dollar remained strong. The AUD/USD traded slightly above 0.6600 with little change at the start of the Asian session on Wednesday. Although the Fed's remarks were somewhat hawkish, the stability of the dollar was maintained despite a drop in US Treasury yields. On the Australian front, the Reserve Bank of Australia's (RBA) minutes from the last meeting showed a hawkish bias, as RBA board members considered rate hikes during their discussion. ANZ Bank economists noted in a report that "we still think the economy is weak enough to achieve target inflation, so we still see the next move in the cash rate being down." They anticipate a modest easing cycle with only three rate cuts.

The AUD/USD is consolidating within the 0.6600 (psychological barrier) - 0.6714 (May 16 high) range, favoring a continuation of the upward trend. The 14-day Relative Strength Index (RSI) indicates that buyers are in control, but the RSI's flatness suggests that bulls are taking a breather. If buyers manage to reclaim 0.6714, the next resistance would be the January 12 high at 0.6728. Once breached, the next targets would be the psychological level at 0.6800 and then the December 28 high at 0.6871. Conversely, if sellers drag the AUD/USD rate below 0.6650, a retest of 0.6600 would be anticipated. Further losses would target the 100-day moving average at 0.6563.

Today, consider going long on the Australian dollar around 0.6600, with a stop loss at 0.6585 and targets at 0.6650 and 0.6660.

GBPUSD

Despite a strong rebound in the US dollar, particularly following a hawkish tone in the Federal Open Market Committee meeting minutes, GBP/USD has maintained its daily gains. The pair rebounded to 1.2760 during the European session on Wednesday after the UK Office for National Statistics (ONS) reported a slower-than-expected decline in the Consumer Price Index (CPI) for April. Inflationary pressures in the UK remain higher than expected but have significantly weakened compared to March, suggesting that the Bank of England's (BoE) rate hikes are sustaining downward pressure on inflation. The slower decline in UK inflation is expected to negatively impact expectations for BoE rate cuts, with financial markets anticipating a reduction in rates starting from the August meeting. Comments from BoE Deputy Governor Ben Broadbent this week have fueled speculation about a possible rate cut in August.

The pound is approaching the nine-month high of 1.2893 set in early March. The appeal of the GBP/USD pair has increased as it has easily stabilized above the 61.8% Fibonacci retracement level (from the March 8 high of 1.2893 to the April 22 low of 1.2299) at 1.2666. With all short-to-long-term moving average indices trending higher, indicating a strong uptrend, the pound is expected to maintain its bullish trajectory. The 14-day Relative Strength Index (RSI) has entered the bullish range of 65.00-70.00, indicating upward momentum. On the upside, attention can be paid to the psychological level of 1.2800 and the March 14 high of 1.2823. On the downside, look at the 1.2700 level. In this case, the first support would be the 61.8% Fibonacci retracement level at 1.2666, followed by the 100-day moving average at 1.2633.

Today, consider going long on the pound around 1.2700, with a stop loss at 1.2685 and targets at 1.2740 and 1.2750.

USDJPY

USD/JPY is approaching resistance at previous highs. The pair might temporarily pull back from technical resistance; however, the upward trend remains intact, indicating a potential for further gains eventually. Following the release of Japan's commodity trade balance data on Wednesday, the yen weakened. The report showed that the trade deficit widened to 462.5 billion yen in April, compared to a previous surplus of 387.0 billion yen. The market expected a deficit of 339.5 billion yen. The yen's depreciation led to increased import costs, outpacing the gains from export growth. Japan's exports grew by 8.3% year-on-year to 89,807.5 billion yen, marking the fifth consecutive month of growth but falling short of the expected 11.1%. Imports also grew by 8.3%, the strongest increase in 14 months, reaching a four-month peak of 94,432.6 billion yen, reversing the revised 5.1% decline in March. Japanese Finance Minister Shunichi Suzuki expressed concern about the negative impacts of a weak yen, stating close monitoring of forex movements. The US dollar strengthened as rising US Treasury yields provided support.

USD/JPY is trading above 156.00 mid-week. The daily chart shows a symmetrical triangle pattern. Currently, USD/JPY is back above the upper resistance line of the ascending triangle at 155.80. Holding above this level could drive the pair to 158.45 (April 26 high) and approach the 160.20 level, the highest since April 1990. On the downside, if USD/JPY breaks below 156.00, it will face downward pressure, potentially dropping to the 20-day exponential moving average at 155.58, followed by short-term support near the key level at 154.60 at the lower boundary of the ascending triangle.

Today, consider going long on USD around 156.50, with a stop loss at 156.30 and targets at 157.50 and 157.60.

EURUSD

Sustained buying pressure on the US dollar kept EUR/USD subdued on Wednesday, pushing the pair down to multi-day lows within the 1.0820-1.0855 range. A week ago, EUR/USD peaked near the 1.09 level, but the bullish momentum has since been challenged without a clear trend reversal. The early week movement has been unremarkable, with the pair trading in a narrow range due to a lack of significant data and unremarkable comments from Federal Reserve officials. Market expectations for rate cuts by both the European Central Bank and the Federal Reserve have remained unchanged in recent days. It appears challenging for EUR/USD to maintain its upward momentum. On the other hand, the favorable interest rate differential for the US dollar remains and could potentially widen in June, offering further support for a dollar rebound.

Technically, EUR/USD has been trading in a very narrow range, with daily fluctuations of less than 50 pips. EUR/USD is near its recent highs but faces a bearish correction threat to the 200-day moving average at 1.0788 after failing to break the 1.0900 resistance level. The pair is currently holding above 1.0806 (38.2% Fibonacci retracement level from 1.1139 to 1.0601) and 1.0800 (psychological level). If EUR/USD seeks to break higher, initial resistance is at 1.0900 (psychological level), with the next target at 1.0933 (61.8% Fibonacci retracement level from 1.1139 to 1.0601).

Today, consider going long on EUR around 1.0805, with a stop loss at 1.0790 and targets at 1.0850 and 1.0860.

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