U.S. Dollar Index

The U.S. Dollar Index fell on Monday, dropping to 105.46. The recent intervention by the Bank of Japan caused the dollar to slightly decline. However, due to monetary policy divergences that favor the dollar and hawkish expectations for the upcoming Federal Reserve meeting, the dollar's uptrend is expected to continue. On Monday (April 29), during the Asian market session, the USD/JPY pair plunged from the 160.00 level, finding support near 155.00, with a rapid decline of over 500 points. Dragged down by the sharp fall in USD/JPY, the Dollar Index briefly dropped nearly 60 points, with current support at 105.46. The coming week will bring numerous event risks centered around the U.S. The week starts with the Treasury's quarterly refunding announcement, detailing how the U.S. government will fund itself. If the ISM Manufacturing PMI data follows S&P Global into contraction, concerns about U.S. economic growth could intensify on Wednesday. The Federal Open Market Committee is set to release a statement on Wednesday, unlikely to change the federal funds rate but will focus on growth and inflation and how the committee views these risks. The week concludes with the Non-Farm Payrolls report on Friday, expected to further restore resilience. Bullish signals seem to be forming, with the end-of-week surge on Friday suggesting bullish momentum may continue into next week, though recent risk rebounds have sidelined the dollar.

So far this year, the Dollar Index has risen nearly 5.0% against a basket of six major currencies. After the bulls pushed the Dollar Index to a monthly high of 107.34 in October 2023, the outlook for the dollar remains optimistic. The Relative Strength Index on the monthly chart has rebounded from the 50.00 midpoint, and daily charts show the price trend retesting and holding support at 105.20, 105.00, and 104.92, reinforcing this area. Investors will also notice potential bullish signals brewing at $106.51. This scenario suggests that if buyers continue to control the market this week, upward targets are the psychological market level of 107.00 and resistance between that and the high of 107.11 from November 1 last year.

Today, consider shorting the Dollar Index near 105.78, with a stop loss at 105.90 and targets at 105.40, 106.35.

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WTI Spot Crude Oil

WTI U.S. crude oil prices started the week on a weak note, breaking below the $83.00 per barrel mark during the Asian stock market session. This decline was amid fading concerns over a further escalation in the Israel-Iran conflict, coupled with fears that U.S. interest rate hikes could weaken the fuel demand of the world's largest consumer, exerting pressure on oil prices. The U.S. GDP growth data for the first quarter, which was weaker than expected, reaffirmed these concerns. Additionally, the U.S. Personal Consumption Expenditures (PCE) Price Index, released on Friday, reinforced expectations that the Federal Reserve might delay rate cuts. Meanwhile, a hawkish outlook continues to support a potentially bullish undertone for the dollar, which could keep pressing down on oil prices.

Technically, the 10-day moving average (82.75) just crossed below the 25-day average (83.62) in a bearish death cross formation, suggesting that the downturn could intensify this year. The target levels would be directed towards a support zone formed by $81.60, $81.52, and $81.20. Below this level, $80.00 and $79.74 will become key support levels. Resistance levels to watch for include $84.00, $84.05, and $84.14. The next levels of interest are $85.48, and $87.67.

Today, consider going long on crude oil near $82.15, with a stop loss at $81.90 and targets at $83.30 and $83.45.

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XAUUSD

On Monday, gold prices fluctuated within a relatively narrow channel above $2,330. A downward adjustment in the benchmark 10-year U.S. Treasury yield helped limit losses ahead of this week's crucial Federal Reserve policy meeting. Despite minor gains in the past two trading days, gold prices struggled to advance and edged slightly lower at the start of the new week, although the downside remained cushioned. The U.S. Personal Consumption Expenditures (PCE) Price Index released last Friday reaffirmed market expectations that the Federal Reserve might delay rate cuts, indicating that inflation remains sticky. Additionally, a generally positive tone in the stock market proved to be a key factor weakening demand for the safe-haven precious metal. Meanwhile, a significant rebound in the yen, driven by potential government intervention, introduced new supply for the dollar, reversing the gains from a slight recovery from a two-week low on Friday. Moreover, the ongoing Russia-Ukraine conflict maintains geopolitical risks and helps limit the downside for gold prices. Traders might also prefer to wait before the two-day Federal Open Market Committee meeting starting Tuesday and key U.S. macroeconomic data due early in the month, including the Non-Farm Payrolls (NFP) report.

On the daily chart, the 14-day Relative Strength Index (RSI) climbed to 58 after dropping to 50 earlier last week, indicating that the latest pullback is a correction rather than the start of a reversal. Moreover, gold prices continued to oscillate around the 20-day moving average level of $2,240 last week, reflecting a current indecision among traders. On the upside, resistance is at $2,364.10, with further levels to watch at $2,386.50, and $2,388.00, potentially reaching the psychological market level of $2,400.00. The first target for any decline in gold prices is $2,322.40. A break below could target the psychological market level of $2,300.00.

Today, consider going long on gold near $2,332.00, with a stop loss at $2,328.00 and targets at $2,340.00 and $2,345.00.

AUDUSD

The Australian Dollar (AUD/USD) continued its upward trajectory for the sixth consecutive trading day at the start of the week, successfully retesting the vicinity of the 100-day moving average around 0.6584, amidst strong performance in commodities. The AUD extended its gains since April 22, reaching a three-week high near 0.6586 on Monday. Last week's Consumer Price Index (CPI) inflation data exceeded expectations, boosting hawkish sentiments around the Reserve Bank of Australia (RBA). According to a report by the Australian Financial Review, Warren Hogan, the chief economist at Judo Bank, expects the RBA might implement three rate hikes throughout 2024, potentially reaching 5.1%, with the first hike likely in August. Investors might be waiting for the retail sales data for March, due for release on Tuesday, as it provides deep insights into Australian consumer spending habits, significantly impacting inflation and GDP trends.

On Monday, the AUD/USD was trading around 0.6560. This currency pair has been extending its gains within a symmetrical triangle pattern, with the 14-day Relative Strength Index (RSI) above the 50 level, affirming a bullish stance. As for potential upside targets, AUD/USD might aim for the psychological level of 0.6600, followed by the upper boundary of the triangle near 0.6639. The next level to watch is 0.6667 (the high on March 8). On the downside, immediate support is expected near the psychological level of 0.6500. A break below this level could pave the way for further downward momentum, with significant support next found near 0.6470 (10-day moving average), followed by additional support at 0.6400.

Today, consider going long on the Australian Dollar near 0.6548, with a stop loss at 0.6530 and targets at 0.6580 and 0.6595.

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GBPUSD

On Monday, the GBP/USD exchange rate surged to 1.2570 after touching a daily low of 1.2474. Rumors of intervention by Japanese authorities to strengthen the yen (JPY) put pressure on the dollar, causing it to drop significantly against most G8 foreign currencies. Consequently, GBP/USD is currently trading at 1.2555. During Monday's early Asian session, the GBP/USD pair maintained a positive stance around 1.2525. The U.S. economy remains strong, and inflation has begun to rise. Federal Reserve policymakers have indicated that they will not cut interest rates in the coming months due to inflation being higher than expected and still above the Fed's 2% target. The Fed's long-standing hawkish stance may provide some support to the dollar and limit the downside for GBP/USD. On the other hand, investors are betting that the Bank of England will begin lowering borrowing costs at its June meeting. Bank of England Governor Andrew Bailey mentioned at a press conference following the last monetary policy meeting that two to three rate cuts this year would not be “unreasonable.” The dovish shift in the Bank of England's rhetoric could lead to a weakening of the pound and present resistance to the currency pair.

GBP/USD has rebounded from a key five-month low at the 1.2300 integer level, breaking through several key support levels, with a peak seen at 1.2570. These key price levels have now reversed into resistance levels, challenging the critical 200-day moving average at 1.2557. Although GBP/USD rebounded slightly before last weekend's close, it remains below the 200-day moving average, making it difficult to consolidate a recovery in the short term. However, buyers' main concern is that the 14-day Relative Strength Index on the daily chart is still lurking below the 50 level. If GBP/USD faces resistance at the aforementioned 200-day moving average at 1.2557, it will retest 1.2460 (the 14-day moving average), with the next level to watch at 1.2439, and a break could point to the 1.2400 psychological level. On the other hand, a clear break above the 200-day moving average (1.2557) could lead to a significant rise, approaching the 1.2596 and 1.2600 area. The next upward resistance is near the critical level of 1.2666.

Today, it is suggested to go long on GBP at just before 1.2540, with a stop loss at 1.2525, and targets at 1.2580 and 1.2590.

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USDJPY

The USD/JPY pair remains defensive around 156.00, although it has rebounded from the day's low as market participants continue to digest the unconfirmed foreign exchange intervention measures by Japan's Ministry of Finance earlier in the Asian session. The yen saw a dramatic reversal against the dollar during intraday trading, rising over 500 points from the lows reached earlier on Monday, which were the lowest since October 1986. Although no official announcement has been made yet, Japanese authorities are likely considering an intervention to support the local currency, considered a key factor for significant economic recovery. Additionally, new bouts of dollar selling have applied substantial downward pressure on the USD/JPY rate. However, the dollar's downside remains cushioned as the market increasingly accepts that the Federal Reserve will delay rate cuts amid persistently high U.S. inflation. This marks a significant divergence compared to the uncertain interest rate outlook of the Bank of Japan, indicating that the significant interest rate differential between the U.S. and Japan may persist for some time. Furthermore, a positive risk tone is limiting the yen's safe-haven appeal and helping attract some buyers near the psychological levels of 153.50 - 153.00.

From a technical perspective, Friday's breakout of the upward-sloping trend channel extending from the year's lows is seen as a new trigger for bullish traders. However, the 14-day Relative Strength Index (RSI) on the daily chart is showing extremely overbought conditions, prompting investors to undertake aggressive long unwinding trades on the first day of the new week. The pair saw its lowest at 154.50 during the early European session. Any subsequent declines could find decent support near the 153.34 and 153.00 area, which represents the breakout point of the ascending channel resistance. The latter should serve as a pivotal point, and a decisive break could change the recent bias in favor of bears, paving the way for some meaningful corrective declines. On the upside, the first level to consider would be 156.45, with a break potentially revisiting the 158.43 level.

Today, it is suggested to go short on the dollar just before 156.60, with a stop loss at 157.00, and targets at 155.80 and 155.60.

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EURUSD

The EUR/USD quickly rebounded from its decline on Friday and regained strong upward momentum in response to a significant pullback in the dollar following unconfirmed foreign exchange intervention measures by Japan's Ministry of Finance. During Monday's early Asian trading session, the EUR/USD recovered the losses from the previous trading day, currently trading strong near 1.0720. The dollar's weakening below the 106.00 level provided some support for major currency pairs. All eyes are on Wednesday's Federal Reserve monetary policy meeting, where no change in interest rates is expected. Recent U.S. inflation data has scaled back expectations on when the Fed might begin cutting rates. According to the CME FedWatch Tool, the likelihood of a rate cut at the July meeting has decreased from 50% last week to 25%, while traders have absorbed nearly a 60% chance of a Fed rate cut at the September meeting. In turn, this might boost the dollar and limit the upside for the EUR/USD pair in the short term.

From a technical perspective, the bearish sentiment for EUR/USD is diminishing as the pair continues to progress within a descending channel, breaking the key psychological level of 1.0700. Additionally, the lagging indicator, Moving Average Convergence Divergence (MACD), suggests that the EUR/USD pair is turning towards upward momentum. Although it is below the centerline, it is showing divergence above the signal line. The EUR/USD pair faces a direct barrier at the major level of 1.0750, corresponding to the upper limit of the downward channel. A successful breach of this level could provide upward momentum for the pair, targeting near the psychological milestone of 1.0800. On the downside, the key support levels for the EUR/USD pair are expected near the psychological mark of 1.0700 and 1.0690. A break below this level could bring downward pressure on the pair, potentially driving it toward the major support level near 1.0650. Further support may occur near the April low of 1.0601.

Today, it is suggested to go long on the euro just before 1.0700, with a stop loss at 1.0680, and targets at 1.0750 and 1.0765.

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