USD

The U.S. dollar closed last week below the 106.00 level, aligning with the decline in U.S. yields across various time frames, despite investors tentatively leaning towards a potential Federal Reserve rate cut in September. However, the dollar had a rough week, with the Dollar Index touching a more than three-week low of 104.52 before the weekend's close, well below the 105.00 support level. This was primarily due to the dovish tone of the FOMC meeting and weaker-than-expected non-farm payroll data for April. The disappointing U.S. non-farm payroll (NFP) data released last Friday triggered a sell-off of the dollar. The U.S. economy shows mixed signs of development, with robust demand, a tight labor market, slow yet significant wage growth, thereby driving inflation. Federal Reserve Chairman Jerome Powell remains cautious about the uncertain trajectory of inflation, emphasizing that restrictive monetary policy has contained economic overheating. The weak labor market data last Friday increased the likelihood of a rate cut in September.

From the weekly chart, the Dollar Index, after reaching a peak of 106.50 last week and forming a "double top" with the April high of 106.51, began to decline. The index closed last weekend forming a "head and shoulders" bearish pattern, indicating the Dollar Index may have entered a downward phase, suggesting a likely continuation to fall towards a key support area formed by 104.52, 104.49 , and 104.43. With the 14-week Relative Strength Index (RSI) possibly emitting an oversold signal, the likelihood of the index finding a bottom increases. If this is the case, it would suggest a higher chance for the price to find a base and consolidate. When RSI enters an oversold state, it signals traders not to increase short positions. If a decisive break below the key support area occurs, it implies that prices will continue to fall towards the psychological level of 104.00, and further test down to 103.33. On the other hand, the long-term moving average remains a strong support defending the overall bullish outlook, currently at 104.20. Upward resistance can be watched at 105.53, and 105.80.

Today, consider going short on the Dollar Index near 105.25, with a stop loss at 105.40, and targets at 104.80 and 104.75.

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WTI Spot Crude Oil

Last week, the U.S. dollar experienced a significant decline, marking the largest single-week drop in three months, as investors weighed weak U.S. employment data against the timing of potential Federal Reserve rate cuts. Following the Fed's decision to keep rates steady for the sixth time and noting that high inflation data might delay rate cuts, investors expressed concerns that persistently high rates could suppress economic growth in the U.S., a major global oil consumer. According to CME's "FedWatch" tool, the probability of the Fed keeping rates unchanged in June stands at 91.1%, with a 25 basis-point rate cut probability at 8.9%. For August, the probability of maintaining rates is at 70.4%, with a cumulative probability of a 25 basis-point cut at 27.6%, and a 50 basis-point cut at 2.0%. These interest rates typically exert pressure on the economy and could reduce oil demand. Moreover, easing geopolitical tensions in the Middle East and prospects of a ceasefire between Israel and Hamas in Gaza led to narrow trading ranges for crude oil prices. The geopolitical risk premium has faded. However, market participants will closely monitor developments in geopolitical risks, as any escalation could raise concerns about disruptions in the region's oil supply and drive up crude oil prices.

Technically speaking, WTI crude oil continued its decline for five consecutive trading days last week, recording the largest single-week drop (6.79%) since January this year. However, the overall long-term upward trend is still in effect, with the uptrend line from December last year still valid. For traders who previously missed opportunities and are hesitant to break above $80, the recent decline may present a welcomed entry point. Oil prices may face additional pressure before soaring to $84, due to ceasefire agreements and further inventory buildup. After attempting a minor rise, the recent decline has made $79.81 and $79.25 re-emerge as the first key levels for an upward move. The crucial barrier is at the psychological level of $80.00. If tensions escalate further, oil prices might rebound to $82.30 and $83.39 could also be in play. On the downside, as last weekend's close formed a "death cross" bearish pattern, the 120-day moving average near $77.88, and $77.10 serve as the first line of defense before testing the actual upward trend. Breaking this support area could lead to a drop to $75.12 and potentially down to $73.60.

Today, consider going long on crude oil near $77.40, with a stop loss at $77.10, and targets at $78.60 and $79.00.

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XAUUSD

Gold prices gave back all the gains made following the release of the non-farm payroll report last Friday. After the U.S. non-farm payroll (NFP) data came in below analysts' expectations, the precious metal initially rose to around $2,310, gaining over half a percent. However, bears took over and pushed gold prices down to around $2,280 before managing to recover and close above $2,300. The overall positive market sentiment before the weekend could have been a catalyst for the drop in gold prices, as gold tends to perform better during crises due to its safe-haven appeal. Currently, gold prices are still in a downtrend. Following weak U.S. data, the benchmark 10-year U.S. Treasury yield is expected to be below 4.6%, but improved risk sentiment has not provided upward traction for gold. The expectation that the Federal Reserve will maintain higher interest rates over a longer term and optimistic market sentiment are key factors for the demand for safe-haven gold. As the likelihood of a rate cut this summer diminishes, gold investors are looking for clearer signals from the Fed. Most Wall Street analysts believe that after a downward consolidation, gold prices will likely slide further in the near term.

The daily chart shows a rectangular price pattern forming since mid-last month on the short-term chart, pointing to a consolidation phase. As the gold market shows a downward trend and tests the $2,258 ; $2,256.70; and $2,255.10 areas, the near-term outlook appears bearish. If the downtrend continues, and $2,288.80, and $2,277.30 fail to hold as support areas, it is likely to fall further to $2,256.70 - $2,255.10. Conversely, the $2,300 - $2,318 area currently seems to be the immediate barrier before $2,366, and $2,376. If strength continues beyond the latter, it will confirm a breakout of the short-term trading range for gold prices, paving the way to challenge the resistance at the $2,400 level, and then the historic peak near $2,431 reached on April 12.

Today, consider going long on gold just before $2,298.00, with a stop loss at $2,294.00, and targets at $2,315.00 and $2,320.00.

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AUDUSD

The AUD/USD pair continued its upward trend for the third consecutive trading day last week, buoyed by hawkish sentiments surrounding the Reserve Bank of Australia (RBA), which supported the AUD/USD exchange rate. The RBA is expected to hold its key policy rate at 4.35% for the fourth consecutive meeting this Tuesday, potentially maintaining this rate until the end of September. Economists anticipate only one rate cut this year. Last week's domestic inflation data exceeded expectations, sparking expectations that the RBA might delay rate cuts. Meanwhile, the U.S. dollar index, which measures the dollar against six major currencies, faced pressure after Fed Chairman Jerome Powell's dovish remarks following the decision to keep rates unchanged at 5.25%-5.50%. Powell's denial of the possibility of further rate hikes led to a softer dollar. Additionally, last Friday, U.S. April non-farm payroll data fell well short of expectations. The dollar index touched a more than three-week low of 104.52 before the weekend's close, significantly below the 105.00 support level, primarily due to the dovish tone of the FOMC meeting and weaker-than-expected April non-farm payroll data. AUD/USD reached a near two-month high level of 0.6647.

From the daily chart, last week AUD/USD finally broke through the upper resistance line of the "symmetrical triangle" at 0.6567, and the 50.0% Fibonacci retracement level from 0.6871 to 0.6362 at 0.6616, to reach a near two-month high of 0.6647. The 14-day Relative Strength Index (RSI) is at 59.72, indicating bullish tendencies. Coupled with the formation of a "golden cross" from the 10-day (0.6521) and 200-day (0.6520) moving averages before the weekend, AUD/USD is expected to test the 61.8% Fibonacci retracement level at 0.6676, followed by the psychological barrier around the 0.6700 level. Breaking this level could lead the pair to explore the area near last December's high of 0.6871. On the downside, AUD/USD could move towards the 38.2% Fibonacci retracement level at 0.6556, followed by the psychological level of 0.6500 and the lower support line of the symmetrical triangle at 0.6505.

Today, consider going long on the Australian Dollar just before 0.6590, with a stop loss at 0.6575, and targets at 0.6645 and 0.6655.

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GBPUSD

Due to adjusted market expectations about when the Federal Reserve might cut interest rates, the U.S. dollar generally received a boost. Meanwhile, the increase in non-farm payroll jobs in April was significantly below expectations, and the unemployment rate rose. It's too early to determine whether this is a minor hiccup in an otherwise strong series of data or if it points to a more serious issue. However, the market's reaction leaned towards the latter, which partly explains the buoyancy of GBP/USD. Turning to the pound, the Bank of England is set to announce its monetary policy decision for May on Friday. No changes are expected. In fact, predictions about when rates might decrease have been pushed back to the extent that even a modest rate cut this year (possibly in the third quarter) might bring some relief to the market. Given this, it may be challenging to understand why GBP/USD should maintain such a high level. Of course, it remains closer to the peaks of the past eighteen months rather than the lows, partly due to a general recovery in risk appetite. However, a significant reason must be attributed to the fact that the market is still far from certain that UK rates will fall much faster than U.S. rates. As nothing significant is expected to disrupt this view in the coming week, the uptrend in the pound could continue for some time.

The daily chart shows GBP/USD trading just below the 200-day moving average at 1.2548, after having rebounded to a near three-week high of 1.2634 earlier. Although the 14-day Relative Strength Index (RSI) indicates that buyers have been in control, it currently hovers just above 50.00, suggesting a balance between buyers and sellers. Before last weekend, the currency pair formed a "shooting star" bearish pattern, potentially paving the way for further pullbacks. The first support level is at the psychological mark of 1.2500. Breaking this level could expose the May 2 low of 1.2474 and the 14-day moving average at 1.2471, followed by the most recent pivot low at 1.2466. A breach of these levels could target 1.2439, with further attention on the psychological level of 1.2400. Conversely, if buyers step in, the first resistance level would be at 1.2596, and 1.2600. Further upward potential is seen at 1.2644 , followed by 1.2666.

Today, consider going long on the British Pound just before 1.2530, with a stop loss at 1.2510, and targets at 1.2585 and 1.2590.

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USDJPY

After suspected intervention by the Bank of Japan earlier last week, the USD/JPY pair continued its decline for the third consecutive day in the latter half of the week, cumulating a drop of over 3.40% for the week. Subsequently, the pair formed a double candlestick chart pattern, specifically a "bearish engulfing" formation within the internal daily lines, which was confirmed by Wednesday's price movements. Nonetheless, it closed before the weekend at 152.93. This marks one of the best weeks historically for the JPY against the USD. Since the previous Friday, a series of (unconfirmed) interventions have pushed the USD/JPY from around 160.00 down to a near one-month low of 151.85. As the dust settles, questions remain about how long the impact of these interventions will last and whether they can keep USD/JPY at or below current levels. Meanwhile, the U.S. Dollar Index, which measures the dollar against a basket of six major currencies, is currently losing control around 105.00 as the market moves away from Japanese intervention measures to avoid being overwhelmed. Meanwhile, weak U.S. non-farm payroll data has pushed USD/JPY below 152.00, leading to substantial buying at that level.

Technically, despite last week's significant pullback, USD/JPY remains biased upwards as indicated by the daily chart. The pair set a near one-month new low at the convergence of the October 21, 2022 high (151.92) and the 50-day moving average (151.90) around 151.88/92, but buyers pushed the pair to the current exchange rate. Currently, USD/JPY is just below 153.00; if buyers can push the price above 153.00 and achieve a daily close above it, it may pave the way for further gains. The first resistance is at 153.75, followed by 154.95. A break above these levels could lead to further rises, with the next resistance at 156.96. On the downside, the first support level is at 151.90, followed by 151.75, with the next significant level at the March 21 low of 150.26. Breaking this level could lead the pair towards the psychological level of 150.00.

Today, consider going short on USD/JPY just before 153.25, with a stop loss at 153.40, and targets at 152.10 and 151.80.

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EURUSD

Last week, the EUR/USD reached new weekly highs of 1.0812, breaking out of recent congestion, as the significantly lower-than-expected U.S. non-farm payroll and wage data rekindled hopes for accelerated rate cuts by the Federal Reserve. The weak performance of the U.S. labor market boosted bets on rate cuts. Additionally, the ISM U.S. Services PMI also dropped unexpectedly, surprising markets that had anticipated an uptick in forward-looking business sentiment. The April ISM Services PMI fell to a 16-month low of 49.4, below the contraction threshold of 50.0 and under the anticipated 52.0, previously at 51.4. A key element in hopes for rate cuts was the ISM Services Prices Paid, which showed business operating costs accelerating from 53.4 to 59.2 month-over-month in April. This week, European retail sales data for March is scheduled for release on Tuesday, with the market median expecting a 0.6% month-over-month increase, after a decline of -0.5% the previous month. In the U.S., the Michigan Consumer Sentiment Index due this Friday will be key to gauging the extent of consumer pessimism about the U.S. economy. The May Michigan Consumer Sentiment Index is expected to slightly decline from 77.2 last month to 77.0.

From the daily chart, EUR/USD continued its upward trend for the third consecutive trading day last week, touching near three-week highs of 1.0812 before pulling back to around 1.0760 before the close. The pair's recent appeal has improved as it has broken through the 25-day moving average at 1.0725 and the 23.6% Fibonacci retracement level from 1.1139 to 1.0601 at 1.0728. In the daily chart, due to the price action forming a symmetrical triangle, the volatility of EUR/USD has significantly narrowed within the 1.0801 to 1.0670 range. Meanwhile, the 14-day Relative Strength Index (RSI) has moved into the 40.00-60.00 range, indicating indecision among market participants. Currently, EUR/USD comfortably remains above the short-term moving averages of 10 days (1.0705) and 20 days (1.0704), suggesting that the short-term bullish bias remains unchanged. Immediate resistance is found at 1.0797 - 1.0806. If EUR/USD stabilizes above this area, 1.0870 and 1.0900 could be seen as the next bullish targets. On the downside, 1.0704 and 1.0700 serve as the first support area, with further levels pointing to 1.0670 and 1.0601, and 1.0600.

Today, consider going long on EUR/USD just before 1.0740, with a stop loss at 1.0720, and targets at 1.0790 and 1.0795.

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