US Dollar Index

The US Dollar Index fell yesterday, reaching a low of 105.20. Despite Federal Reserve Chairman Jerome Powell acknowledging signs of persistent high inflation and the Fed's recent hawkish stance, the dollar appeared to ease its downward pressure on Thursday due to weak initial jobless claims data. In Thursday's early European session, the dollar performed strongly against other currencies as Fed policymakers remained confident about the US economic outlook. It has been a calm week for the dollar. The combination of last week's mild Federal Open Market Committee (FOMC) meeting and weak non-farm payroll data has alleviated the sting of a rising dollar. However, investors are still concerned that next week's US core CPI data, showing a 0.3% month-on-month increase, will only solidify the Fed's view of maintaining higher interest rates for a longer duration. Nonetheless, hawkish Fed speculation that policy rates may not be stringent enough failed to resonate in the market.

The daily chart indicators reflect a fairly unstable situation for the US Dollar Index. The 14-day Relative Strength Index (RSI) remains flat in the positive territory, indicating a lack of clear momentum in either direction. Moreover, the index is currently still above the 34-day (105.25) and 50-day (104.66) moving averages, suggesting that short-term bulls maintain a dominant position in the overall trend. Further upward movement and a breakthrough of the 106.00 psychological barrier are needed before targeting the May 1st high of 106.51. On the downside, 105.00 (a psychological barrier) and 104.92 (the 23.6% Fibonacci retracement from 102.35 to 106.51) should provide ample support. If these levels fail to hold, the next support lies near 104.66 (50-day moving average).

Today, consider shorting the US Dollar Index near 105.40, with a stop loss at 105.60 and targets at 105.10, 105.05.

WTI Crude Oil Spot Price

U.S. WTI crude oil was trading just above $79.00 on Thursday. The black gold recovered lost ground after an unexpected decrease in U.S. crude inventories. During the week, the price of U.S. WTI crude once fell to a near two-month low of $76.67. Iran plans to increase its daily production by 300,000 to 400,000 barrels this year, which has been poorly received by the market. This means that the next OPEC meeting, which will discuss the extension of production cuts, is likely to be chaotic. Meanwhile, the US dollar index continued to rise this week, and the bullish sentiment around the dollar may continue to suppress oil prices. The decline was reversed following the U.S. Energy Information Administration’s (EIA) weekly data showing a decline in U.S. inventories, suggesting a tightening market supply. WTI crude has now risen above $78, a breakthrough that traders view as the first bullish indicator among popular bearish technical indicators. The EIA's more reliable crude inventory data, considering the significant rise in API data, caused some shorts to cover early-week gaps and sold positions in trades.

The risk of disruptions in Middle Eastern oil production did not materialize, further cooling oil prices. Prices softened due to traders being weary of risk premium pricing for events that have not occurred, with only $76.67 appearing to be the only solid support before potentially dropping to $74.77 (the 78.6% Fibonacci retracement level from $71.42 to $87.08). However, once oil prices rebound above $79.78 (200-day moving average) and $80.00 (psychological barrier), the market might see a turnaround, with $81.10 (the 38.2% Fibonacci retracement level) and $81.37 (20-day moving average) becoming the first key resistance areas. The next upward direction is $82.39 (34-day moving average). These are levels to watch for potential profit-taking. In the long term, $83.38 (23.6% Fibonacci retracement level) remains a key upward level.

Today, consider going long on crude oil near $78.80, with a stop loss at $78.60 and targets at $79.90 and $80.10.

AUDUSD

The decline in the US dollar allowed the AUD/USD to break away from two consecutive days of decline, reclaiming the area above the key threshold of 0.6600 on Thursday. Previously, the Reserve Bank of Australia's stance was not as strong, especially after last week's inflation data exceeded expectations. Inflation in Australia rose in March, contrary to market expectations of stability. Additionally, RBA Governor Michele Bullock emphasized the importance of remaining vigilant about inflation risks. Bullock believes that current interest rates are at an appropriate level to guide inflation back to the target range of 2-3% by the second half of 2025 and reach the midpoint by 2026. With market expectations that the Fed will maintain higher interest rates for an extended period, the US Dollar Index, which measures the dollar against six major currencies, moved higher. This drove up US Treasury yields, providing support for the dollar.

From the daily chart, the Australian dollar was trading near just below 0.6600. The AUD/USD is consolidating within a symmetrical triangle pattern, with the 14-day Relative Strength Index (RSI) hovering above 54, indicating a bullish inclination. Potential resistance levels for AUD/USD include the key support level at 0.6647 (the high from May 3rd), and the upper trendline of the symmetrical triangle around 0.6650. Breaking above this level could lead to a retest of the high from March at 0.6667, with further upward potential to reach the psychological level of 0.6700. On the downside, immediate support for AUD/USD is expected near the 50-day moving average at 0.6538. If the pair breaks below this moving average, it could face additional selling pressure, with targets pointing to the psychological barrier area near 0.6500.

Today, consider going long on the AUD at just before 0.6600, with a stop loss at 0.6585 and targets at 0.6650 and 0.6660.

GBPUSD

Due to further weakening of the dollar, the GBP/USD fluctuated up and down near 1.2500, as market participants continued to digest the events surrounding the Bank of England. During the London session on Thursday, the pound fell to a low of 1.2445 against the dollar. The GBP/USD experienced significant selling as seven out of nine members of the Bank of England's Monetary Policy Committee (MPC) voted to keep interest rates steady. Bank of England policymakers Swati Dhingra and Deputy Governor Dave Ramsden voted in favor of a rate cut. As expected, the Bank of England held the borrowing rate steady at 5.25% for the sixth consecutive time. Dave Ramsden remained quite optimistic about the progress of disinflation in his latest comments from April, hence the financial markets saw mixed movements. Meanwhile, the Bank of England significantly lowered its inflation expectations, forecasting that the inflation rate would fall to 1.9% in the second quarter of 2025 and further decrease to 1.6% in the same quarter of 2026. The Bank of England reiterated that the MPC will maintain a restrictive enough policy framework for a sufficient length of time until inflation consistently returns to the 2% target.

Technically speaking, the pound is likely to continue oscillating within the current familiar range. In this scenario, GBP/USD needs to effectively break above the key 200-day moving average at 1.2542 to continue the current upward momentum, which began near the year's low of 1.2300 recorded on April 22. Further gains might lead GBP/USD to revisit the 1.2600 (psychological level), and the May high of 1.2634 (high from May 3rd) area, which seems to be supported by the temporary 100-day moving average at 1.2636. Moving upwards, the next target is 1.2666 (the 61.8% Fibonacci retracement from 1.2893 to 1.2299). On the other hand, a resurgence of selling pressure could prompt some corrective movements for the pound in the short term. That said, the short-term battleground target is 1.2439 (the 23.6% Fibonacci retracement). A break below this level could further weaken the pound, although the next support level is expected at the low of April 22, at 1.2299.

Today, consider going long on the GBP just before 1.2505, with a stop loss at 1.2490 and targets at 1.2555, 1.2565.

USDJPY

As market forces overcome attempts at intervention, USD/JPY continues to rise. The U.S. dollar has strengthened across the board due to U.S. interest rates diverging from global trends. Weak wage data in Japan undermined the Bank of Japan's plans to support the yen with rate hikes. During the Thursday Asian morning trading session, USD/JPY traded near 155.60 for the fourth consecutive day in the positive territory. However, concerns about further intervention by the Bank of Japan may temporarily limit the yen's downward space. A summary of opinions from the Bank of Japan showed that board members turned hawkish at the April policy meeting, with many policymakers calling for stable rates to avoid the risk of inflation overshooting. The statement highlighted recent comments by BOJ Governor Kazuo Ueda, suggesting possible multiple rate hikes in the coming months and a potential rise in short-term borrowing rates. Earlier in the week, Japan's chief currency diplomat, Masato Kanda, made a verbal intervention, stating that he would take appropriate action to prevent yen appreciation if necessary. On the other hand, the gap in monetary policy between the U.S. and Japan continues to support USD/JPY. Meanwhile, hawkish remarks from Federal Reserve officials have boosted the dollar, giving the currency pair a tailwind.

USD/JPY rose for the fourth consecutive trading day, trading at a high near 155.92 during the European session on Thursday. The pair is consolidating within an upward channel, with the 14-day Relative Strength Index (RSI) above the 58 level, indicating a bullish inclination. Furthermore, the Moving Average Convergence Divergence (MACD) indicator is above the midline, showing convergence below the signal line. A crossover of the MACD line with the signal line, emitting a buy signal, would confirm the bullish trend. USD/JPY may encounter resistance near the psychological level of 156.00, and 156.28 (last Friday's high). Breaking above this level, the pair might test the 157.98 level (high from May 1). On the downside, 154.95 (the 38.2% Fibonacci retracement from 146.47 to 160.20), and 155.00 (round figure) are direct support levels, followed by 153.96 (near the 30-day moving average).

Today, consider going short on the USD just before 155.68, with a stop loss at 155.90 and targets at 154.70, 154.60.

EURUSD

As risk appetite generally improved, the EUR/USD reversed some of its recent weakness and rose to just below the 1.0800 area, responding to new selling pressures that hurt the dollar. On Thursday, EUR/USD extended this week's retracement momentum, testing the three-day low region at 1.0725. That said, EUR/USD further expanded its recent trend from the May 3rd high of 1.0812. As investors continue to digest the Federal Reserve's recent decision to keep interest rates unchanged and the prospect of the Fed possibly starting an easing cycle in September, the dollar appreciated while yields on U.S. Treasury securities also rose. Notably, the Fed reiterated its openness to adjusting rates, while expressing its concerns about potential risks to inflation and economic stability. Looking ahead, due to postponed expectations that the Fed might cut rates later this year, intermittent weakness in the dollar is expected to be temporary. From this perspective, the medium-term outlook for EUR/USD may soften further.

From a technical standpoint, current resistance for EUR/USD is expected at the 200-day moving average of 1.0792, facing a second resistance at the May high of 1.0812 (May 3rd). A break above could target 1.0870 (the 50.0% Fibonacci retracement from 1.1139 to 1.0601), and the April high level of 1.0885 (April 9th). Conversely, if the pair falls further and breaks below the 1.0700 (round figure), and 1.0695 (20-day moving average), it could potentially head towards 1.0650 (the low from the beginning of the month). Ultimately aiming for the 2024 low of 1.0601 (April 16th).

Today, consider going long on the EUR just before 1.0765, with a stop loss at 1.0750, and targets at 1.0820 and 1.0830.

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