U.S. Dollar Index

The two-day Federal Reserve meeting is about to commence, and the U.S. Dollar Index has risen to 106.34. The market anticipates a hawkish stance from the central bank, but Jerome Powell's message will be key. On Tuesday, positive mid-tier data provided a boost to the dollar. Yesterday, the Dollar Index rebounded from its low point. Recent interventions by the Bank of Japan caused the dollar to fall early in the week. However, due to favorable monetary policy divergences and hawkish expectations for the upcoming Fed meeting, the dollar's upward trend is expected to continue. The coming week will bring significant event risks centered around the U.S. The week begins with the Treasury's quarterly refunding announcement—detailing how the U.S. government will fund itself. On Wednesday, the Federal Open Market Committee will issue a statement, which is unlikely to alter the federal funds rate but will focus on growth and inflation risks and how the organization perceives these risks. The non-farm payroll report released on Friday concludes the week, expected to further reflect resilience. Bullish signals seem to be forming, with the rise at the end of Friday suggesting that the bullish trend will continue into next week, but the recent risk rebound has sidelined the dollar.

From the daily chart, technical indicators reflect a mixed outlook for the U.S. Dollar Index. The 14-day Relative Strength Index (RSI), although on a negative slope, remains in the positive zone (latest report at 62.65), indicating the resilience of buyers. However, this bullish momentum appears to be challenged, as evidenced by a newly formed red bar in the Moving Average Convergence Divergence (MACD), typically indicating a potential shift to a bearish zone. Moreover, the Dollar Index still remains above the 50-day (104.45) and 200-day (104.13) moving averages, suggesting that buyers still hold the advantage in the medium and long term. Although short-term selling pressure may exist, the bullish narrative continues to be supported by this moving average structure. Upward targets to watch are the April 16 high at 106.51 and 106.52 (23.6% Fibonacci retracement from 102.35 to 106.51). Breaking these could further challenge the 107.00 round figure and 107.11 (November 1 last year).

Today, consider shorting the U.S. Dollar Index near 106.50, with a stop loss at 106.70 and targets at 106.00 and 105.95.

WTI Crude Oil Spot

The lowest price for U.S. WTI crude oil on Tuesday was approximately $80.68. Oil prices slightly declined as ceasefire talks in Cairo between Israel and Hamas eased concerns about a broader conflict in the Middle East. The trading price for U.S. WTI crude oil was around $81.20 on Tuesday. As the ceasefire talks in Cairo between Israel and Hamas alleviated worries of a broader Middle East conflict, oil prices edged lower. According to The Guardian, the recent ceasefire proposal seems to include significant concessions from Israel, which faces pressure due to the fate of captives and global criticism for the humanitarian crisis caused by its war in Gaza. Successful ceasefire negotiations could reduce the geopolitical risk premium in oil prices. Additionally, recent U.S. inflation data and the Federal Reserve's hawkish stance have dimmed prospects for interest rate cuts, limiting the upward potential for oil. Chairman Jerome Powell's press conference will also be a focal event, as it may provide insights into the Fed's stance on rate adjustments. Statements about "sustained higher rates" could boost the dollar and exert selling pressure on oil priced in dollars.

Technically, the 10-day moving average (82.75) just breaking below the 25-day moving average (83.62) has formed a bearish "death cross" pattern, indicating that the downturn could intensify this year. Yesterday, it broke through the support zone formed by the upward trend line from the February 5 low of 71.42; the 45-day moving average (81.52); and $81.20 (the middle line of the downward channel). Below this level, $80.00 (a psychological market level) and $79.74 (the 200-day moving average) will become key support levels. Resistance levels will first revisit $84.00 (61.8% Fibonacci retracement from 93.94 to 67.94); $84.05 (20-day moving average); and $84.14 (last week's high). The next reference points are $85.48 (April 19 high) and $87.67 (April 12 high).

Today, consider going long on crude oil near $80.90, with a stop loss at $80.70 and targets at $82.30 and $82.45.

XAUUSD

Amid the rebound of U.S. Treasury yields and the U.S. dollar's resurgence in a bullish trend, ahead of the Federal Reserve's interest rate decision on Wednesday, gold continues to face selling pressure, dropping below the $2,300 zone on Tuesday. Gold prices have fallen against the backdrop of mixed signals from the U.S. economy and improved risk appetite. Market focus is shifting towards the Fed's monetary policy on May 1st and the upcoming non-farm payroll data. The market has underpriced the possibility of a rate cut under the "no rush to decide" stance, and it's believed unlikely that the Fed's next move would be to raise rates, suggesting a narrowed expected range of Fed Fund impacts on the gold market. Despite a delay in the Fed's rate cut timeline, gold prices have risen over 13% this year, reaching an all-time high this month. The rise in precious metals over the past two months is linked to central bank purchases, strong demand from Asian markets, especially China, and escalating geopolitical tensions from Ukraine to the Middle East.

Technically, the gold price remains biased downward, but to expand gains, buyers need to reclaim the $2,364.10 (23.6% Fibonacci retracement from $2,146.10 to $2,431.50) and the high of April 26 at $2,352 to continue hoping to challenge higher prices. The next resistance level is $2,388.00 (trendline stretching downward from the high of $2,431.50), followed by the psychological market threshold of $2,400.00. On the other hand, if the gold price effectively breaks below $2,300, such a breach would expose the levels of $2,275.00 (35-day moving average), followed by $2,255.10 (61.8% Fibonacci retracement).

Today, consider going long on gold near $2,282.00, with a stop loss at $2,278.00 and targets at $2,298.00 and $2,305.00.

AUDUSD

The AUD/USD turned sharply lower on Tuesday, reversing gains from six consecutive trading days, and fell to a multi-day low near 0.6470, driven by a strong rebound in the USD. At the beginning of the week, amidst strong commodity performance, it successfully tested the brief 100-day moving average near 0.6584. The Australian dollar continued its upward trend since April 22 on Monday, reaching a three-week high near 0.6586. Last week's consumer price index (CPI) inflation data exceeded expectations, enhancing the hawkish sentiment around the Reserve Bank of Australia (RBA), propelling the Aussie's upward momentum. The "Australian Financial Review" reported that Judo Bank's chief economist, Warren Hogan, expects the RBA to implement three cash rate hikes throughout 2024, eventually reaching 5.1%, with the first hike possibly in August. Investors may be awaiting retail sales data for March, set to be released on Tuesday, as it provides deep insights into Australian consumer spending habits, significantly impacting inflation and GDP trends.

From the daily chart, the AUD/USD turned sharply from the low level of 0.6362 on April 19 and gained for six consecutive trading days. In the process, it broke through 0.6480 and reached a three-week high of 0.6586. Yesterday, it turned sharply, reversing the gains from the past six trading days, and fell to a multi-day low near 0.6470 driven by a strong USD rebound. Over the weekend, the 100-day moving average (0.6584) seemed to be the direct resistance level at the beginning of the week. AUD/USD bulls broke through this threshold on Monday, reaching 0.6586, then pulled back during the session. The RSI is still some distance from the overbought zone, indicating that the market may still have more upside potential before a pullback to 0.6600 (psychological market level) and 0.6667 (March 8 high). Currently, after breaking below the 200-day moving average at 0.6521, the bearish trend continues to 0.6442 (February 13 low), and 0.6400 (psychological market level).

Today, consider going long on the AUD near 0.6460, with a stop loss at 0.6440 and targets at 0.6500 and 0.6515.

GBPUSD

The GBP/USD exchange rate reversed after initially breaking through the 200-day moving average, impacted by U.S. Employment Cost Index data indicating potential inflation rises, boosting the USD. Consequently, after reaching a daily high of 1.2563, GBP/USD traded near 1.2490. Early in the Asian session on Tuesday, GBP/USD fluctuated around 1.2500 after touching the critical 200-day moving average (1.2552) and a three-week high in the 1.2569 area. Wednesday, the Federal Open Market Committee's rate decision will be in focus ahead of the release of April's Non-Farm Payroll (NFP) data on Friday. The market broadly expects the Federal Reserve to maintain interest rates at a high not seen in over two decades after Wednesday's meeting. Investors will gain more clues from the tone of the meeting and Chairman Jerome Powell’s press conference. Recent U.S. GDP growth and higher-than-expected inflation data may persuade the Fed to maintain higher interest rates for an extended period. The Fed's hawkish stance could boost the USD in the short term and limit the upward potential of GBP/USD.

From the 4-hour chart, the Relative Strength Index (RSI) is around 60, and GBP/USD continues to trade below the 100-hour moving average, currently at 1.2500. On the upside, 1.2580 (200-hour moving average) acts as a temporary resistance before 1.2600 (psychological market level). A daily close above the latter could attract buyers and open the door for further rises to 1.2661 (61.8% Fibonacci retracement from 1.2893 to 1.2299). On the other hand, the first support for the currency pair is at 1.2464 (14-day moving average), with the next level at 1.2439 (23.6% Fibonacci retracement from 1.2893 to 1.2299), and breaking below this points to the 1.2400 (psychological market level).

Today, consider going long on GBP near 1.2470, with a stop loss at 1.2455, and targets at 1.2540 and 1.2550.

USDJPY

USD/JPY rebounded after a sharp sell-off on Monday. Following a drop in USD/JPY due to potential intervention by authorities, USD traders bought the dip. The interest rate differential between Japan and the U.S. may sustain bullish pressure on this currency pair. After an instinctual reaction to possible government intervention the previous day, the yen faced renewed selling pressure and maintained its quoted tone before the European session on Tuesday. A significant expected interest rate gap between Japan and the U.S., along with easing geopolitical tensions in the Middle East, eventually became key factors in weakening the safe-haven yen. This, coupled with some dollar-buying on dips, became a tailwind for the USD/JPY pair. However, traders seem hesitant, preferring to wait for more clues about the Fed's rate-cut path before placing new directional bets. Thus, market focus will remain on the results of the two-day Federal Open Market Committee policy meeting scheduled for Wednesday, and the highly anticipated U.S. Non-Farm Payroll (NFP) report due on Friday.

Technically, the day's sharp corrective decline might be attributed to the Relative Strength Index (RSI) on the daily chart being extremely overbought, leading to long positions being closed. Nonetheless, USD/JPY has shown some resilience below 155.39 (200.0% Fibonacci retracement from 150.88 to 146.37). On the other hand, momentum exceeding the 156.45 (223.6% Fibonacci retracement level) could extend further into the 158.43 (last week's high) area, above which USD/JPY may reclaim the 160.00 whole number level. Conversely, weakness breaking below the 156.45-156.50 area seems to have found some support near the 155.39 level. If the latter convincingly breaks, it could expose the 14-day moving average support currently near the 155.08 area, then USD/JPY could further weaken below the 155.00 psychological level, challenging the overnight low around 154.50.

Today, consider shorting USD near 158.00, with a stop loss at 158.30, and targets at 157.00 and 156.90.

EURUSD

EUR/USD plummeted to a multi-day low near 1.0664, following the broadly negative sentiment in the wider risk complex and a data-driven USD rebound ahead of the Federal Reserve's rate decision. EUR/USD fluctuated at the beginning of the week as the market awaited the Fed's speech on Wednesday. Investors widely anticipate U.S. interest rates to remain stable this week, but traders will seek guidance on when the Fed might adjust its rate-cut timeline. The CME FedWatch tool shows a 58% probability of a rate cut in September as priced by the rate market. Meanwhile, Germany's consumer price index (CPI) inflation rate rose to 0.5% month-over-month in April, higher than last month's 0.4%, but below the expected 0.6%. The German Harmonised Index of Consumer Prices (HICP) annual inflation rate slightly increased to 2.4%, while it was anticipated at 2.3%. The main headlines this week will be the Fed's latest rate decision on Wednesday, followed by the Non-Farm Payroll data on Friday.

Technically, EUR/USD fluctuated below the 1.0700 level, with the currency pair once rising from the 200-hour exponential moving average to the 1.0700 area in a technical rebound. The 1.0750 level proved to be the upper limit of a downward channel. Successfully breaking this level could provide upward momentum for the pair, targeting close to the psychological barrier at 1.0800. The recent price floor is at 1.0601 (April 16 low) and 1.0600 (psychological market level). Before these key support areas, investors should watch the 1.0655 level (mid-line of the downward channel on the daily chart).

Today, consider going long on EUR near 1.0650, with a stop loss at 1.0630, and targets at 1.0700 and 1.0705.

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