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US Dollar Index
The Dollar Index is trading around 105.00. The annual U.S. Producer Price Index data showed no surprises, but the monthly price increase exceeded expectations. Jerome Powell reiterated the script given in the Fed's last decision, which is that interest rates may have to remain higher for a longer period, but rate cuts will eventually come, and inflation will return to target levels. Against the backdrop of generally stronger risk-related assets, the dollar retreated. The Dollar Index fell, dropping to 104.95 at one point. However, robust market data potential and the Fed's tough stance on rate cuts limited the dollar's decline. Any potential rebound in the dollar largely depends on this week's key U.S. data, especially Wednesday's Consumer Price Index (CPI) for April. The U.S. economy continued to show strong growth in the second quarter, supporting a recovery in the dollar following cautious comments from the Fed. Signals that there won't be immediate rate cuts have adjusted market expectations for easing, pushing a more hawkish outlook.
The current technical aspect of the Dollar Index shows mixed signals, leaning towards a more pessimistic outlook. The 14-day Relative Strength Index (RSI) is clearly on a negative slope and is in the negative territory, indicating that selling pressure is increasingly dominating, showing weakened buying momentum and a potential downward trend. Meanwhile, the Moving Average Convergence Divergence (MACD) shows flat red bars, indicating that despite weak bullish momentum, bearish momentum has not risen strongly. At this stage, the Dollar Index remains above 105.00 with fluctuations. If the Dollar Index later falls below 105.00, it is expected to find initial support at the 50-day moving average of 104.73, followed by the May low of 104.52 and 104.43 (50.0% Fibonacci retracement from 102.35 to 106.51). If the Dollar Index falls further, it will drop to the 104.00 (whole number level). On the upside, the first level to watch is 105.53 (23.6% Fibonacci retracement), breaking which it could test the 25-day moving average at 105.67, and then 106.00 (market whole number level).
Today, consider shorting the Dollar Index around 105.15, with a stop loss at 105.30 and targets at 104.80, 104.75.
WTI Crude Oil
On Tuesday (May 14th), the U.S. Producer Price Index for April exceeded expectations, enhancing investors' concerns that the Federal Reserve might continue to keep interest rates high. However, tensions in the Middle East and potential risks to supply due to wildfires in Canada reduced last year's revenues. During the Asian session on Tuesday, WTI crude oil prices traded around $78.00 per barrel. The rise in oil prices could be attributed to uncertainties in crude oil supply during the wildfires in the remote regions of Western Canada. The market is concerned about the country's production capacity of 3.3 million barrels per day. On Monday, firefighters were racing against time to control major fires in British Columbia and Alberta, provinces close to the heart of the country's oil sands industry. Reuters quoted the Iraqi Deputy Prime Minister and Minister of Oil, Hayan Abdul Ghani, reaffirming Iraq's commitment to the voluntary oil production cuts agreed upon by OPEC, which could also affect oil supply, according to the Iraqi National News Agency.
Although WTI oil prices rebounded at the beginning of the week, due to U.S. crude oil trading prices being in the high supply range above $78.00 per barrel, WTI is still trapped at recent technical levels. Bullish momentum is constrained by resistance areas at the 200-day moving average of $79.75; $79.76 (38.2% Fibonacci retracement from 67.94 to 87.08); and $80.00 (psychological market level). The next levels directly point to the 55-day moving average at $81.13, and $82.56 (23.6% Fibonacci retracement). On the downside, the first level to watch is $77.35 (120-day moving average), followed by $76.67 (the low on May 8), and $75.25 (61.8% Fibonacci retracement).
Today, consider going long on crude oil around $77.70, with a stop loss at $77.50 and targets at $79.00; $79.20.
XAUUSD
After declining on Monday, gold prices rebounded on Tuesday to $2,360. Following the release of the April Producer Inflation data, the benchmark 10-year U.S. Treasury yield remained below 4.5% in the negative territory, helping gold prices maintain their stance. Despite the dollar consolidating on Tuesday, gold prices rebounded. Traders may adopt a wait-and-see approach ahead of this week’s critical U.S. inflation data release. Over the recent trading days, the "higher for longer" U.S. interest rate stance has exerted some selling pressure on gold/dollar. However, escalating tensions in the Middle East causing a flight to safety could temporarily boost gold prices. Investors will closely monitor key economic data from the U.S. this week, with attention turning to the U.S. Consumer Price Index (CPI) released on Wednesday. These reports could hint at the timing of the Fed's first rate adjustment. Inflation data exceeding expectations could dampen prospects for a Fed rate cut, thereby weighing on precious metals. Higher interest rates might reduce overall investment demand for gold as they increase the opportunity cost of holding gold.
Gold prices edged higher yesterday. The precious metal maintains a bullish outlook as gold/dollar remains above the 100-hour moving average (2325) on the 4-hour chart. Upward momentum is strengthened by the 14-day Relative Strength Index (RSI), which is in the bullish zone (55.18), suggesting that gold prices might hold support levels rather than break through. The May 10th high of $2,378 serves as a short-term resistance level. Further rises could push gold prices to the psychological level of $2,400. Breaking this level could propel it towards the historical high of $2,431.30. On the other hand, key support levels are between $2,325 and $2,340, which are resistance-turned-support levels and where the 100-hour moving average lies. A break below this could push gold prices towards the May 2nd low of $2,300.00 (psychological market level).
Today, consider going long on gold around $2,355, with a stop loss at $2,352.00 and targets at $2,370.00; $2,375.00.
AUDUSD
The AUD/USD continued its positive tone from Monday, rising above 0.6600 amid a weaker dollar and robust developments in the commodities complex. Dollar selling pressure reemerged, supporting a rebound in risk assets, prompting the AUD/USD to climb back above the 0.6600 mark at the start of the week. Meanwhile, market caution intensified ahead of Wednesday's Consumer Price Index (CPI) release, leading to a pullback in AUD/USD. Additionally, falling U.S. Treasury yields also contributed to a downward adjustment in the Dollar Index, aligned with expectations that the Federal Reserve might start easing measures around September. Domestically, further rises in copper prices and moderate increases in iron ore prices also fueled the continued upward movement of the AUD on Monday. The Reserve Bank of Australia (RBA) decided to keep the interest rate unchanged at 4.35% during its May 7 meeting. Moreover, the RBA reiterated a neutral policy stance, indicating flexibility in RBA policy. In the subsequent press conference, RBA Governor Blok maintained a balanced view.
Technically, future gains could push AUD/USD back to the May 3rd high of 0.6647, followed by the March high of 0.6667 (March 8) and the psychological level of 0.6700. Meanwhile, if bears dominate, before falling to the May low of 0.6465 and the 2024 low of 0.6362 (April 19), AUD/USD will sequentially test the low of 0.6557 from this month (May 8), followed by the more relevant 200-day moving average of 0.6520. In the longer term, as long as the AUD/USD remains above the 200-day moving average, further rises are anticipated.
Today, consider going long on AUD at 0.6610, with a stop loss at 0.6595 and targets at 0.6650; 0.6660.
GBPUSD
After falling towards 1.2500 during the U.S. morning session, GBP/USD regained traction and turned positive above 1.2550 on the same day. Following the release of producer inflation data, the dollar struggled to find demand, driving the currency pair higher to just below 1.2600. During the London session on Tuesday, GBP/USD continued to fluctuate within a narrow range around 1.2560. However, the Dollar Index consolidated around 105.00 as investors awaited the release of U.S. Consumer Price Index (CPI) data for April, and also needed time to analyze the U.K. employment data for the three months ending in March. According to the report from the U.K. National Statistics Office, the labor market contracted for the third consecutive time, while wage growth remained stable at a relatively high level, as expected. The labor market data clearly indicates that the economy is struggling to absorb the consequences of rate hikes by the Bank of England. In the current scenario, it seems beneficial for the Bank of England to start cutting rates as price pressures also continue to weaken.
Given its strong recent outlook, the pound performed robustly near just below 1.2600. The GBP/USD pair remained stable above the 20-day moving average, which is trading near 1.2493. If the pair breaks below 1.2500 (psychological market level) and 1.2503 (20-day moving average) this week, it could further test down to 1.2466 (50.0% Fibonacci retracement from 1.2299 to 1.2634), and near 1.2445 (the low of this month on May 9). Meanwhile, the 14-day Relative Strength Index (RSI) fluctuates in the 45.00 - 55.00 range, indicating indecision among short-term market participants. Therefore, for buyers to regain control, they must effectively push the price above the 70-day moving average at 1.2605 and the 1.2600 (market psychological level). Clearing this barrier could instill confidence in the market and push the pound to the 1.2666 (61.8% Fibonacci retracement level).
Today, it is advisable to go long on GBP before 1.2585, with a stop loss at 1.2570 and targets at 1.2640, 1.2650.
USDJPY
USD/JPY rose to 156.80. Investors expect the Federal Reserve to begin cutting rates starting from September. Japan's Q1 GDP will reflect its economic strength. During the Asian session on Tuesday, USD/JPY continued its ascent to near the high of 156.80. Despite the Bank of Japan issuing hawkish signals on Monday by reducing purchases of Japanese government bonds, and despite poor performance in April's non-farm payroll data last week, the yen still fell against the dollar. Investors will seek more clues from major U.S. economic data this week, including the Consumer Price Index and retail sales. These reports will provide hints on whether inflation remains stubborn, has fallen, or could even be intensifying. Traders might use the Consumer Price Index and retail sales reports to gauge potential outcomes, and higher-than-expected data could continue to boost the USD/JPY exchange rate.
Observing recent trends, the recovery of USD/JPY has been slow, but as the pair has risen, its progress has been decidedly one-sided, climbing above the 200-day moving average near 155.27. The pair has broken through the 156.00 level to a near two-week high of 156.80 and has risen more than 3% from the price below 151.85 after the last intervention. Five out of the past six trading days have ended higher. The long-term bullish uptrend remains solid, thus upward targets could respectively focus on 156.96 (23.6% Fibonacci retracement from 146.48 to 160.20), and 157.98 (high of May 1). On the downside, the initial support will be near the 200-day moving average around 155.27, followed by 154.95 (38.2% Fibonacci retracement), and then paving the way at 154.40 (30-day moving average).
Today, it is advisable to go short on USD before 156.65, with a stop loss at 156.85 and targets at 156.00, 155.80.
EURUSD
EUR/USD maintained its bullish inclination for the second consecutive trading day, breaking through the 1.0800 level and the key 200-day moving average (1.0790) ahead of crucial data releases from the European Monetary Union and the United States on Wednesday. EUR/USD benefited from mild selling pressure around the dollar, closing in the upward zone on Monday. Before the key events, the pair remained relatively calm below 1.0800 during the European morning session on Tuesday. A slight improvement in risk sentiment made it difficult for the dollar to find demand early in the week, allowing EUR/USD to rise. A survey from the New York Federal Reserve shows that U.S. consumer inflation expectations for April increased. According to the New York Fed's consumer confidence survey, U.S. consumers generally expect inflation to accelerate to 3.3% next year. Meanwhile, Federal Reserve Vice Chair Philip Jefferson stated that he favors maintaining the current interest rates until there is evidence that price pressures are easing, which helped limit the dollar's decline.
EUR/USD has continued to reach higher levels after rebounding from the early month low near 1.0649. Bullish potential broke through the recent high of 1.0806 above the 1.0800 level. Technically, EUR/USD breached the firm resistance at the 200-day moving average of 1.0789 and the psychological level of 1.0800 yesterday. If it fails to further break above these resistance areas, the pair may retreat to the low volatility near 1.0720 (20-day moving average) and 1.0700 (whole number level). A break below this would drop to the April 16th low of 1.0649 (May 1st low). Conversely, the pair would retest the levels of 1.0885 (April 9th high) and 1.0900 (psychological market level).
Today, it is advisable to go long on EUR before 1.0805, with a stop loss at 1.0790 and targets at 1.0850, 1.0860.
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