U.S. Dollar Index

The U.S. Dollar Index experienced a slight increase, now standing at 105.50. This rise is partly attributed to cautious remarks from Federal Reserve officials, who emphasized that interest rates would remain elevated as long as necessary to curb inflation. Additionally, significant insights into the U.S. economy are not expected until next week when the Consumer Price Index (CPI) data for April is released. The dollar has risen modestly for the third consecutive trading day this week. As Israel appears poised to commence a ground invasion of Rafah and Egypt strengthens its border control with northern Gaza, the market has once again absorbed some risk premium. This week, major economic indicators to be released include the U.S. Red Book index and the economic optimism measured by the TechnoMetrica Institute of Policy and Politics. Among a crowded agenda of Federal Reserve speakers this week, only Neel Kashkari, President of the Minneapolis Federal Reserve, is scheduled to speak.

After a period of adjustment last week, dollar bulls have continued to rebound this week, with the index now maintaining a position above 105.00. This could be crucial for the remainder of the week, potentially leading to further increases in the index, although no significant known catalysts are expected this week. On the upside, the first key resistance levels to watch are 105.51 (a critical level since April 11) and 105.53 (the 23.6% Fibonacci retracement from 102.35 to 106.51). A further surge beyond 106.00 (a psychological market threshold) would then target the April 16 high of 106.52. On the downside, support should be ample at the 50.0% Fibonacci retracement level at 104.43, with the 89-day and 200-day moving averages located at 104.15 and 104.25 respectively. If these levels fail to hold, the next best support lies near 103.94 (the 61.8% Fibonacci retracement level).

Today, consider shorting the U.S. Dollar Index around 105.65, with a stop loss at 105.80 and targets at 105.15 and 105.10.

WTI Crude Oil

Following the release of data by the Energy Information Administration (EIA), oil prices almost erased all intraday losses. WTI crude oil rebounded to a high of $78.90 per barrel after initially falling to $76.60 earlier in the day. On Wednesday, the price of WTI crude in the U.S. traded just below $78.00. The Israeli war cabinet voted to continue military attacks on Hamas, with Israeli forces striking Gaza's southernmost city. The EIA indicated that signs of escalation in Middle Eastern geopolitical risks could lead to a significant rise in oil prices. Meanwhile, easing concerns over oil supply disruptions might weigh on WTI prices. An increase in U.S. crude inventories exerted some selling pressure on oil prices as it typically signals weak demand. With the outlook on Middle Eastern conflicts growing grimmer, this price increase aligns with Saudi Arabia's willingness and actions to keep oil prices elevated.

From the daily chart perspective, WTI crude oil prices were undermined by consecutive declines throughout the week, breaking below the 100-day moving average (78.01) and reaching a two-month low of $76.60. The mid-term trend is transitioning. The 14-day Relative Strength Index (RSI) is in the negative zone at 38.50, indicating a predominant downtrend with bearish momentum. The medium-term trend shows contradictions, and there is a risk of transitioning to a downtrend. Potential downside targets include $76.47 (the low of March 11) and $75.12 (the 76.4% Fibonacci retracement level from 71.42 to 87.08). For potential upside, resistance levels to watch are $79.25 (the 50.0% Fibonacci retracement level), the 200-day moving average at $79.81, and the psychological barrier of $80.00.

Consider going long on WTI crude oil near $78.50 today, with a stop loss at $78.30 and targets at $79.60 and $79.80.

XAUUSD

Gold prices are currently exhibiting indecisiveness, consolidating in a narrow range above the $2,300 mark. The slight uptick in the benchmark 10-year U.S. Treasury yield, nearing 4.5%, is constraining potential gains for gold against the dollar. Midweek, the price of gold declined due to a strengthening dollar and falling U.S. Treasury yields. In a week with scarce economic data from the U.S., investors will continue to monitor Federal Reserve officials following last Friday's employment report. Gold was trading at $2,310 after reaching a daily high of $2,329. The financial market's narrative is focused on when the Fed might begin easing policies following the release of weak economic data. This week's economic calendar will further scrutinize comments from Fed officials, as well as the initial jobless claims for the week ending May 4 and the preliminary release of the University of Michigan's consumer confidence index.

After a strong start to the week, gold prices have started to retreat, barely holding above the $2,300.00 level. Despite recent fluctuations, gold prices haven't shown significant movement in either direction over the past two weeks. Market consolidation is unlikely to end unless there is a breakthrough above the resistance levels of $2,350-$2,355 (the high from April 26) or below the support level of $2,288.80 (the 50.0% Fibonacci retracement from $2,146.10 to $2,431.50). If the $2,350-$2,355 resistance is breached, the focus would shift to $2,361.10 (the 23.6% Fibonacci retracement level). The next level would be the psychological market threshold of $2,400.00. Additional gains from this point could rekindle interest in historical highs. Meanwhile, a breach below the support levels at $2,300 and $2,288.80 could trigger a fall towards the $2,251.50 level (the 50-day moving average).

Today, consider going long on gold near $2,305, with a stop loss at $2,302.00 and targets at $2,320.00 and $2,325.00.

AUDUSD

The further rise of the U.S. dollar and bearish performance in commodities have sustained selling pressures on AUD/USD, which has revisited the three-day low near 0.6558. Early in the week, AUD/USD declined following the Reserve Bank of Australia's (RBA) decision to keep interest rates unchanged, a move perceived by the market as dovish. Consequently, AUD/USD closed near its daily low, continuing its decline into the second trading session on Wednesday. The RBA’s decision to maintain the cash rate at 4.35% remains a significant driver for AUD/USD traders. Adjustments in the RBA's monetary policy statement since March acknowledge that inflation is cooling slower than expected; this shift in tone was quickly interpreted by the market as a slight dovish tilt from a neutral stance. In the absence of significant economic data, the focus shifts to speeches from Federal Reserve officials. Neel Kashkari, President of the Minneapolis Federal Reserve, indicated that if inflation does not resume its downward trajectory, the Fed might hold steady on interest rates, leaving the door open for potential hikes, thus strengthening the U.S. dollar.

From a technical perspective on the daily chart, AUD/USD exhibits a neutral to slightly upward trend. However, bulls need to decisively break through and stabilize above the recent cycle high of 0.6667 from March 8 to potentially push AUD/USD toward 0.6700. If AUD/USD breaks this level, the next resistance point will be the December 28 high of 0.6871. Before reaching 0.6667, AUD/USD must first challenge the resistance at 0.6647 (the high from March 3). On the downside, if bears drive AUD/USD below the 50-day moving average at 0.6536, further declines could follow. The next target would be the 200-day moving average at 0.6519, and then the psychological level of 0.6500.

Today, consider going long on AUD/USD near 0.6565, with a stop loss at 0.6550 and targets at 0.6600 and 0.6610.

USDJPY

The USD/JPY pair has extended its rally, driven by hawkish sentiment surrounding the Federal Reserve's monetary policy stance. Federal Reserve's Neel Kashkari has indicated that interest rate hikes could persist for a longer period, and he has not entirely ruled out the possibility of further rate increases. Despite potential intervention by Japanese authorities, the yen continues to depreciate. On Wednesday morning in the Asian session, USD/JPY strengthened for the third consecutive day, moving slightly above 155.00. The rhetoric of "higher rates for a longer period" in the U.S. continues to support the dollar and boost USD/JPY. However, further measures by Japanese authorities to curb the current weakness of the yen may limit the upside for USD/JPY in the short term. The Bank of Japan (BoJ) implemented its first rate hike in 17 years in March, yet it remains behind other global central banks, especially the Fed. The interest rate differential between Japan and the U.S. has added some selling pressure, reducing the yen's attractiveness. BoJ Governor Kazuo Ueda indicated on Tuesday that the central bank would closely monitor the weakness of the yen and consider policy measures if the yen were to slide further against the dollar. Further potential forex interventions by Japanese authorities could temporarily limit the downside for the yen.

After two suspected interventions by the BoJ, USD/JPY maintains a neutral to upward bias. This has allowed the pair to rise from around 160.20 to 151.85 within five days and then rebound from the 50-day moving average (last reported at 152.14) during a trading session that formed a "hammer" candlestick. Nevertheless, the pair has broken through the May 3 high of 153.80, intensifying the upward trend, and yesterday it surpassed several resistance levels: 154.95 (the 38.2% Fibonacci retracement from 146.47 to 160.20), the whole number threshold of 155.00, and the 14-day moving average at 155.17, opening the door for further gains. If buyers can maintain control above these resistance zones, the next key resistance appears at 156.28 (last Friday's high). If these levels are cleared, the next resistance point would be the May 1 high of 157.98. On the other hand, if USD/JPY falls below 154.00 and the Tuesday low of 153.83, it could trigger a reversal and push the pair towards the 50.0% Fibonacci retracement at 153.33, and the whole number level of 153.00. The 50-day moving average at 152.15 follows.

Today, consider shorting USD at around 155.75, with a stop loss at 155.90 and targets at 154.90 and 154.80.

EURUSD

As the dollar continues to recover, EUR/USD saw a pullback on Wednesday, retesting the 1.0735 region as the divergence in monetary policy between the Federal Reserve and the European Central Bank becomes more pronounced. The dollar strengthened due to market expectations that the Fed will extend the period of maintaining high interest rates. However, weak U.S. labor market data from last week reignited expectations that the Fed might cut interest rates in 2024. Eurozone retail sales for March surged by 0.8% month-on-month, rebounding from a revised -0.3% in February, indicating strong performance in the European consumer sector. Additionally, the year-on-year retail sales growth of 0.7% marked the first increase since September 2022, suggesting a positive shift in consumer spending trends. The European Central Bank is expected to start lowering borrowing costs in June. ECB Chief Economist Philip Lane stated that recent economic data have reinforced his belief that inflation levels are gradually approaching the 2% target. Although many ECB officials appear to support easing measures next month, ECB President Christine Lagarde has not yet proposed any rate cuts.

EUR/USD experienced a slight decline on Tuesday, after failing to break through the strong resistance levels of the 50-day (1.0789) and 200-day (1.0793) moving averages on its third attempt. Prices then edged closer to the support levels at 1.0728 (the 23.6% Fibonacci retracement from 1.1139 to 1.0601) and the 1.0722 (May 3 low) area. Maintaining this technical baseline is crucial to prevent a deeper pullback; failing to do so could lead to a move towards the whole number level of 1.0700 and the 20-day moving average at 1.0694, and possibly even down to 1.0650 (the low of May 1). If a bullish reversal occurs, the first upside resistance to watch would be around the 200-day moving average at 1.0793, followed by 1.0820, which corresponds to a medium-term downtrend line extending from the high of December 2023. If further strength is observed, bulls may target the 1.0870 level, the 50.0% Fibonacci retracement from 1.1139 to 1.0601.

Today, consider going long on EUR/USD near 1.0735, with a stop loss at 1.0715 and targets at 1.0775 and 1.0780.

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