U.S. Dollar Index

The U.S. Dollar Index modestly increased on Monday, now trading around 106.10. The strengthening of the dollar is driven by a robust domestic economy and persistent inflationary pressures, prompting a firmer stance by the Federal Reserve. Despite a calm start to the week, the Dollar Index continues to show resilience, with indications it may retest the November high near 107.10. With mounting evidence that the Fed may wait longer before easing policy restrictions, the dollar has climbed to multi-month highs earlier this year. A tight labor market and sustained inflation have dashed hopes for a rapid and significant rate cut later this year. Although the Dollar Index reached a five-month high near 106.51 on April 16, it exhibited little volatility last week after a significant rise the previous week. Overall, the outlook for the dollar appears optimistic. The evolving macroeconomic landscape evidently favors a scenario where the Fed acts cautiously, delaying an easing cycle to address stubborn inflation, while other central banks like the ECB and the Bank of England are closer to shifting to an easing stance. This dynamic supports the potential for a continued rise in the dollar.

From a technical perspective, if the bulls continue to strengthen, the Dollar Index might revisit the 2024 high of 106.51. If it breaks this level, the Index could test the November peak of 107.11 (November 1) and the 2023 high of 107.34 before potentially reaching 107.50. Additionally, if the Dollar Index extends its decline, the 105.00 psychological level may act as a preliminary barrier, with potential support forming at 105.704, and 105.75. If it falls below this level, it will test the 104.76 level.

Today, consider shorting the U.S. Dollar Index around 106.25, with a stop loss at 106.40 and targets at 105.90 and 105.85.

WTI Spot Crude Oil

Iran eased tensions on Monday, stating that it would not further retaliate against Israel. Recent weeks have seen repeated conflicts between the two nations, heightening fears of an expanded Middle Eastern conflict and severely impacting the global energy markets. Iran's current de-escalation has provided a breather for the oil markets, with oil prices retreating as market tensions ease. WTI crude oil, after dropping from a recent peak near $87.00, is now probing the $82.00 level. U.S. oil inventories have declined by 6% but are still expected to grow nearly 15% in 2024. Last week, oil prices fell after Iran downplayed reported Israeli strikes on its territory, a sign that hostile actions in the Middle East might avoid escalation. On Monday, the downtrend continued in early European trading to below $81.00. After Tehran minimized the incident and stated no intention to retaliate, the gains were narrowed. Investors have been closely monitoring Israel's response to Iran’s April 13 drone and missile attacks. As the oil risk premium gradually decreases, oil prices have fallen more than 4% since the start of last week, marking the largest weekly decline since February.

Technically, the 14-day RSI and stochastic indicators have retreated from the overbought zone, and the MACD indicator has crossed below the signal line. The $84.00 support was breached last Wednesday, and the focus is now on the psychological level of $80.00. If this level is also breached, a further decline is expected. The next target is $79.25. A breach here could lead to testing $77.41. Resistance first revisits the Monday high of $81.97, with significant resistance up to $83.38 and the $84.00 level.

Today, consider going long on crude oil around $81.60, with a stop loss at $81.35 and targets at $83.00 and $83.15.

XAUUSD

Gold trading was unfavorable, with the price dropping more than 2% during the day, breaking below $2,340. The easing of geopolitical tensions led to a significant pullback in gold prices, while resilience in U.S. Treasury yields further pressured the precious metal. Gold started the week weakly, apparently ending a two-day uptrend, but remains confined within the familiar trading range of the past week. Hopes for easing tensions between Iran and Israel boosted investor confidence and were key in driving funds away from safe-haven assets like gold. Moreover, with U.S. inflation remaining high, bets on the Federal Reserve maintaining higher interest rates for an extended period added extra pressure on non-yielding commodities. However, speculation about major central banks cutting interest rates this year seems to have cushioned the downside for gold prices. Additionally, the worsening global economic condition should help limit any significant depreciation in gold. Traders also appear hesitant.

Technically, the price range of the past week or so has formed a horizontal channel pattern on the short-term 4-hour charts, which may still be a bearish consolidation phase against the backdrop of a recent sharp rebound. Furthermore, oscillators on the daily chart have retreated from the overbought zone, indicating that the path of least resistance for gold prices is upwards. That said, bulls might wait for a sustained strength and acceptance above the $2,400 mark (representing the upper limit of the trading range) before preparing for further advances. Short-term upside targets could consider $2,376 (5-day moving average) and $2,392 (Monday's high). On the other hand, yesterday's breach below the $2,352 (14-day moving average) to $2,350 area may continue the downward trend, becoming a critical juncture. A convincing break below could trigger some technical selling to the $2,325-$2,322 area, down to the psychological level of $2,300.

Today, consider going long on gold around $2,323.00, with a stop loss at $2,320.00 and targets at $2,340.00 and $2,345.00.

AUDUSD

Improved risk appetite and a loss of momentum in the US dollar allowed the AUD/USD to quickly shake off a two-day losing streak, reclaiming levels well above the 0.6400 mark at the start of the week, reaching multi-day highs. Signs of easing geopolitical tensions supported the Australian dollar, as it broke the two-day downtrend on Monday. Statements from Iranian officials, declaring no immediate plans for retaliation against Israeli airstrikes, helped improve market sentiment. The Australian dollar may face challenges ahead, especially as domestic inflation continues to moderate, in line with the latest forecasts from the Reserve Bank of Australia (RBA). Additionally, the persistently tight labor market could lead to calls for a rate cut by the RBA before the end of the year. Despite rising US Treasury yields, the US Dollar Index, which measures the dollar against six major currencies, remains under pressure. However, comments from Federal Reserve officials hinting at a tougher stance may limit the potential downside for the US dollar.

The daily chart shows the AUD/USD trading above the 0.6400 level at the start of the week. The AUD/USD exchange rate remains below the key support area near 0.6468, with the 14-day Relative Strength Index (RSI) still below 40, indicating bearish sentiment. A key support level is the psychological price of 0.6400. Breaking below this could put pressure on the AUD/USD, potentially revisiting last week's low of 0.6362, followed by the major level of 0.6300. On the upside, immediate resistance for the AUD/USD pair is anticipated at 0.6468, followed by the psychological level of 0.6500. Breaking above this level could lead the pair to reach the 0.6531 level.

Consider going long on the AUD at 0.6430 today, with a stop loss at 0.6416 and targets at 0.6480 and 0.6490.

GBPUSD

The GBP/USD exchange rate has fallen to its lowest level since November of last year, as investors start to anticipate a more dovish stance from the Bank of England. The lack of economic data from the UK has left GBP/USD traders puzzled over market sentiment and dynamics related to the US dollar, causing the pair to trade around 1.2350. GBP/USD rebounded slightly from the 1.2365-1.2360 area, the lowest level since November 14 reached during Monday's Asian session, and it appears to have ended a two-day decline. Iran's statement that it has no plans to retaliate against Israel's limited-scale missile strike on Friday has alleviated concerns over further escalation of tensions in the Middle East. This, in turn, boosted investor confidence, weakening the safe-haven US dollar and acting as a driving force for the GBP/USD pair. A hawkish outlook continues to support rising US Treasury yields, driving the US dollar. Additionally, speculations about the Bank of England adopting more aggressive policy easing may help curb further appreciation of the GBP/USD exchange rate.

The daily chart shows that GBP/USD was sold off last week, breaking below the technical bottom of 1.2430 and reaching the lowest point since November at 1.2301. Given the continuing bearish momentum, there is a potential for an accelerated decline, possibly prompting a retest of the 1.2300 psychological level, and the 1.2263 area. Prices may find a floor in this area and then rebound; however, if it breaks lower, it could move toward the 1.2200 whole number level. Alternatively, if sentiment shifts favorably for buyers and the pound rebounds from its current position, subsequent resistance levels can be identified at 1.2400. Breaking this critical barrier could shift focus to 1.2470, and 1.2481. Following that, the next level would be at 1.2568.

It is recommended today to go long on GBP at 1.2330, with a stop loss at 1.2310, and targets at 1.2400 and 1.2405.

USDJPY

Due to easing tensions in the Middle East, the Japanese yen has lost its safe-haven appeal, and USD/JPY is inching closer to its April high. Geopolitical risks have not completely vanished, with the new Omicron variant posing an external threat. Friday could be a pivotal day for USD/JPY, with the Bank of Japan's meeting and the US personal consumption expenditures inflation data due. The yen remains subdued, hovering near decade lows in Monday's Asian session. The Bank of Japan's cautious stance on further policy tightening, coupled with expectations that the Fed will delay rate cuts, suggest that the US-Japan interest rate differential will remain substantial. This fact, along with hopes that the conflict between Iran and Israel will not escalate further, is considered a key factor in weakening the safe-haven yen. Nevertheless, hawkish comments last week by BOJ Governor Kazuo Ueda and a new warning from Japan's Finance Minister Shunichi Suzuki about excessive volatility in the currency markets help limit further declines in the yen. Traders seem reluctant to make significant moves ahead of the BOJ's key policy decision on Friday, preferring to wait on the sidelines.

From a technical perspective, given the recent rebound from the March lows, the price action over the past week or so might still be categorized as a bullish consolidation phase. That said, oscillators on the daily chart are showing overbought conditions and are limiting the upside potential for the USD/JPY pair. Nevertheless, this setup suggests that the path of least resistance for the spot price is upward, and any meaningful corrective pullback might still be viewed as a buying opportunity. This should help limit downside near the 154.00 psychological level, and if a downward reversal gains traction in the coming trading days, subsequent support would be near last week's low at 153.60 and at 153.70. If these areas are breached, focus might shift to the 152.69. On the other hand, last week's 34-year high area around 154.75-154.80 may act as a resistance, potentially leading up to 155.45 and 155.70, with the next level at 157.74.

Today, it is recommended to go short on USD at 155.00, with a stop loss at 155.30, and targets at 154.20 and 153.90.

Top of Form

EURUSD

On Monday, the euro bears remained dominant as the currency pair fluctuated without clear direction, with upward attempts limited below the 1.0700 mark. This level, previously a support, has now turned into a resistance point, keeping the five-month low of 1.0601 dangerously close. During the early Asian session on Monday, the EUR/USD strengthened around 1.0665. However, the upside might be capped due to comments from Federal Reserve officials hinting at an increasingly hawkish stance. Investors will focus on the Eurozone's April PMI preliminary readings on Tuesday and the US Personal Consumption Expenditures (PCE) price index for March final on Friday. The European Central Bank is expected to keep rates unchanged at its June meeting. Additionally, ECB policymaker Robert Holzmann, one of the most hawkish members, views geopolitical tensions as the biggest threat to rate cuts this year, which lowers rate cut expectations for the euro. On the other hand, hawkish remarks from Fed officials and ongoing geopolitical tensions in the Middle East could bolster the US dollar against other currencies.

The daily chart shows that after significant declines last week, EUR/USD has stabilized and slightly rebounded in recent days, bouncing from the psychological level of 1.0600 and breaking through the 1.0650 mark. If the pair continues to rebound in the coming days, resistance is expected around the 1.0700 whole number, and near 1.0712. If it strengthens further, all eyes will be on the Bollinger Band's midline at 1.0756, followed by the next upward target at 1.0810. Conversely, if sellers reassert their position and take control of the market, technical support will become evident at 1.0600. Bulls must actively defend this technical baseline; failing to do so could intensify the bearish momentum in the short term, paving the way for a further drop towards the November 2023 low of 1.0516, with the next level at the 2023 low around 1.0450.

Today, it is recommended to go long on EUR at 1.0638, with a stop loss at 1.0620, and targets at 1.0690 and 1.0700.

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