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USD
On Wednesday, the US dollar index fell by about 0.7% to trade around 104.30, showing a significant decline triggered by soft Consumer Price Index (CPI) and flat April retail sales data. In early European trading, the dollar struggled to maintain resilience against its major counterparts. The dollar index is currently trading below 105.00. Annual data for the US Producer Price Index showed no surprises, but the monthly price increase exceeded expectations. Jerome Powell indicated that interest rates may need to remain at higher levels for a longer period, but rate cuts will eventually come, and inflation will return to target levels. The US economy is showing strong growth and persistent inflation, which is making the Federal Reserve cautious about rate cuts. Although the Fed has hinted that it may take longer than initially anticipated to begin easing policy restrictions, Powell has essentially ruled out the possibility of a new round of rate hikes. However, another unexpected upward movement in the data could change the situation for the Federal Open Market Committee and lead to a more aggressive stance.
Looking at the daily chart, the 14-day Relative Strength Index (RSI) of the US dollar index is showing a negative slope in the negative zone (38.20), indicating that selling momentum still exists. Additionally, the Moving Average Convergence Divergence (MACD) shows rising red bars, indicating increased bearish momentum in the short term. However, the position of the US dollar index relative to the simple moving average tells a different story. Currently, the index is below the 14-day moving average (105.40) and 105.52 (23.6% Fibonacci retracement from 102.35 to 106.51), depicting recent bearish control and serving as a short-term resistance area for this week. On the other hand, the fact that the US dollar index is still above the 120-day moving average (103.87) and 103.93 (61.8% Fibonacci retracement) suggests that bullish support has not completely lost dominance.
Today, consider shorting the US dollar index near 104.45, with a stop loss at 104.60 and targets at 104.10 and 104.05.
WTI Spot Crude Oil
After OPEC and the IEA released their monthly reports, oil prices briefly fell below $78. Despite OPEC sticking to previous expectations, the IEA's report projected sluggish demand. The US dollar softened ahead of the release of the Consumer Price Index (CPI). During the European session on Wednesday, WTI crude oil prices recovered from recent declines, trading around $78.00 per barrel. The rise in oil prices may be attributed to the latest crude oil supply update from the American Petroleum Institute (API) released on Tuesday. The API's Weekly Statistical Bulletin (WSB) provides comprehensive data on US and regional refinery operations and major petroleum product production. For the week ending May 10, API reported a sharp decrease in weekly crude oil inventories by 3.104 million barrels, significantly exceeding the expected decrease of 1.35 million barrels. This steep decline completely offset the increase of 509,000 barrels from the previous week. Concerns about the Federal Reserve possibly maintaining high interest rates in the long term were triggered by higher-than-expected US producer prices in April, causing oil prices to fall. Higher interest rates could dampen economic activity in the world's largest oil-consuming country, the United States, thus affecting oil demand.
From a technical perspective, the US WTI crude oil trading price has been fluctuating within the recent range of $79.00 to $77.00. Upside bullish momentum would need to overcome the vicinity of the 200-day moving average at $79.75, $79.76 (38.2% Fibonacci retracement from $67.94 to $87.08), and the last major swing high near $80.00 (psychological level), with a breakthrough challenging the 50-day moving average at $81.40 and $82.56 (23.6% Fibonacci retracement). Conversely, a bearish breakthrough near technical prices of $77.26 (Tuesday's low point) and $77.36 (120-day moving average) would extend the downside to $76.67 (May 8th low point) and $75.25 (61.8% Fibonacci retracement) levels.
Today, consider buying crude oil near $78.00, with a stop loss at $77.80 and targets at $79.20 and $79.50.
XAUUSD
Yesterday, gold prices surged, breaking through $2,380. US data showed a slight drop in the year-on-year inflation rate to 3.4% in April, meeting expectations. The benchmark 10-year US Treasury yield remained below the critical level of 4.4%, allowing gold prices to hold steady. Increased demand for gold due to strong over-the-counter (OTC) investments, continued central bank purchases, and safe-haven flows amid geopolitical risks in the Middle East served as bullish factors for gold. However, hawkish comments from Federal Reserve officials, including Fed Chair Jerome Powell's remark that the decline in the inflation rate is slower than expected and the Producer Price Index (PPI) data provide more reasons to maintain higher interest rates for a longer period, suggested a potential drag on gold in the short term. Powell added that more rate hikes may not be necessary and advised maintaining higher rates for a longer period, which could temporarily weigh on gold.
Gold prices rose midweek. The 4-hour chart indicates that the bullish outlook for gold remains unchanged as gold/USD stays above the critical 100-hour moving average ($2,325.00). The 14-hour RSI is in the bullish zone at 73.00, indicating minimal resistance to upward movement in gold prices. Any follow-up buying breaking through the May 10th high of $2,378.50 could clear the path for further gains towards the next significant resistance level near the psychological level of $2,400. A decisive breakthrough above this level could propel gold prices towards the historical high of $2,431.30. On the other hand, key support lies in the $2,325–$2,330 range, which includes the lower trendline of the descending channel, the 100-hour moving average, and the May 13th low of $2,332.00. A breach of this level could push gold prices down to the $2,300 integer level, followed by the May 2nd low of $2,281.
Today, consider buying gold before $2,382, with a stop loss at $2,378.00 and targets at $2,398.00 and $2,405.00.
AUDUSD
The Australian dollar/US dollar rose for the third consecutive trading day on Wednesday, touching a four-month high of 0.6695 before retreating below the 0.6700 mark ahead of the release of key labor market data from Australia on Thursday. Despite the Wage Price Index (Q1) released by the Australian Bureau of Statistics on Wednesday coming in lower than expected, the Aussie dollar remained stable with positive sentiment. The index serves as an indicator of labor cost inflation. The appreciation of the Australian dollar can be attributed to improved risk appetite. After recording a surplus of AUD 9.3 billion for the fiscal year 2023-24, following a deficit, the Australian government has restored its budget. The government aims to reduce energy bills and rents by allocating billions of dollars while also taking measures to lower income taxes to address overall inflation and alleviate the pressure of living costs. The US Dollar Index, which measures the performance of the dollar against six major currencies, continued to decline on the second trading day. Investors have already digested higher-than-expected US Producer Price Index data for April.
The Aussie dollar traded slightly below 0.6700 mid-week. The AUD/USD currency pair broke above the upper resistance line of the ascending triangle pattern at 0.6647. In addition, the 14-day Relative Strength Index (RSI) shows a bullish tendency, holding above the 64.95 level. The AUD/USD currency pair may challenge the psychological level of 0.6700. Upon breaking this level, further upward momentum may target 0.6750 (61.8% Fibonacci retracement level from 0.6871 to 0.6362). On the downside, the psychological level of 0.6600 seems to be a direct support level, followed by the low of the month on the 8th at 0.6557, and then the more relevant 200-day moving average at 0.6521.
Today, considering buying the Australian dollar before 0.6680, stop-loss at 0.6660; targets: 0.6730; 0.6740.
GBPUSD
During the US session on Wednesday, the British pound against the US dollar reached a monthly high of 1.2686. The dollar suffered heavy losses due to expectations of a decrease in the Consumer Price Index (CPI) and stagnant April retail sales data, causing the pound/USD exchange rate to soar. The US Dollar Index (DXY), which tracks the dollar against six major currencies, fell sharply to around 104.30. In early European trading, the pound/USD consolidated gains near 1.2590. Speeches by the Fed's Kashkari and Bowman are also expected. The US Bureau of Labor Statistics reported on Tuesday that wholesale inflation measured by the Producer Price Index (PPI) reached its highest level in a year. US April PPI data rose by 2.2% year-on-year, compared to a 1.8% increase in March (revised to 2.1%), in line with expectations. Meanwhile, the core PPI, excluding food and energy costs, rose by 2.4% year-on-year, compared to a 2.1% increase previously, also meeting expectations. Month-on-month, both April PPI and core PPI rose by 0.5%.
In terms of recent technical trends, the key psychological level of 1.2500 for the pound/USD remains crucial in distinguishing between bullish and bearish sentiments. Continued bullish setups may seek to break through 1.2600 (a psychological barrier in the market) and 1.2605 (70-day moving average) for confirmation, while breaking below 1.2500 and the recent peak at this month's low of 1.2446 may seek to strengthen bearish bias. Due to the recent strong outlook for the pound, its performance remains favorable below 1.2600. If it can effectively stay above 1.2600 - 1.2605, it could push the pound higher to levels of 1.2700 (a round number level) and 1.2753 (76.4% Fibonacci retracement level). Conversely, if the pound/USD falls below 1.2600 (a psychological market barrier), it may test the region around 1.2546 (40-day moving average) and the recent peak at this month's low of 1.2446.
Today's suggestion is to buy the pound before 1.2670, with a stop-loss at 1.2650, and targets at 1.2720 and 1.2750.
USDJPY
On Wednesday, the USD/JPY fell, dropping below the 155.00 level after a broad decline in the US dollar against other major currencies. The yen also found relief from selling pressure in the broader market, recovering ground as the US dollar depreciated. The US Consumer Price Index (CPI) inflation rate saw a slight decrease on Wednesday, with the overall CPI inflation rate for April falling to 0.3%, compared to market expectations of 0.4%. The easing of inflation pressure has raised hopes for interest rate cuts as investors call for action from the Federal Reserve. Concerns about potential intervention by Japanese authorities in the forex market may limit the upside for the USD/JPY pair. Hawkish comments from Federal Reserve officials could boost the US dollar and bring positive sentiment to the USD/JPY pair. On the yen side, Finance Minister Toshimitsu Motegi stated earlier in the week that the Japanese government will closely cooperate with the Bank of Japan in the forex market and will take all necessary measures when needed.
At the beginning of the week, the USD/JPY continued its uptrend, consolidating above the 156.00 level. If this momentum continues later in the week, resistance levels will be seen at 156.96 (23.6% Fibonacci retracement from 146.48 to 160.20), followed by 157.98 (May 1st high). Given the possibility of forex intervention by Japanese authorities to boost the yen, caution is advised when rising to these levels. Alternatively, if selling pressure re-emerges and prompts a reversal in the pair's trend, initial support levels are at 154.26 (34-day moving average) and 153.34 (50.0% Fibonacci retracement from 146.48 to 160.20), followed by a path to 153.00.
Today, it is suggested to short the USD before 155.15, with a stop loss at 155.50 and targets at 154.00 and 153.90.
EURUSD
During the New York session on Wednesday, the EUR/USD refreshed near-month highs around 1.0886. The major currency pair strengthened as the US Consumer Price Index (CPI) decline met expectations and April's monthly retail sales remained stagnant. Expectations of reduced economic price pressures in the US, coupled with weak retail sales data, were unfavorable for the US dollar and bond yields. The US Dollar Index, which tracks the US dollar against six major currencies, fell to a more than one-month low around 104.30. The EUR/USD maintained its bullish trend for the second consecutive trading day, breaking through the 1.0800 level and the key 200-day moving average (1.0790). The EUR/USD benefited from mild selling pressure surrounding the US dollar. Federal Reserve Chair Jerome Powell stated that the central bank is unlikely to need to raise rates further, even as the opportunity for rate cuts has diminished. Additionally, Kansas City Fed President Jeffrey L. Smidth noted that inflation remains too high, and the Fed still has more work to do. These hawkish remarks may boost the US dollar and suppress major currency pairs in the short term.
From a technical perspective, the 14-day Relative Strength Index (RSI) has risen to around 66.20. Thus, on the upside, the EUR/USD is expected to encounter its first resistance at the April high of 1.0885 (April 9th). Beyond this level, targets include 1.0900 (psychological level) and the March high of 1.0981 (March 8th). On the downside, if the EUR/USD falls below the swing lows near 1.0730 (20-day moving average) and 1.0700 (psychological level), the next target could be the April 16th low of 1.0649 (May 1st low).
Today, it is suggested to buy the EUR before 1.0870, with a stop loss at 1.0850 and targets at 1.0920 and 1.0930.
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