GOLD - The commodity closed higher the past week leaving risk higher. On the downside, support comes in at the 1,250.00 level where a break will turn attention to the 1,240.00 level. Further down, a cut through here will open the door for a move lower towards the 1,230.00 level. Below here if seen could trigger further downside pressure targeting the 1,220.00 level. Conversely, resistance resides at the 1,260.00 level where a break will aim at the 1,270.00 level. A turn above there will expose the 1,280.00 level. Further out, resistance stands at the 1,290.00 level. All in all, GOLD looks to strengthen further.

Dollar was sold off broadly last week as sentiments were rocked by political turmoil in the White House, regarding US President Donald Trump's alleged intervention in FBI investigation. Selloff in equities triggered massive safe haven flows into Swiss Franc and Japanese Yen. But Euro followed closely as political risks in the Eurozone faded and on ECB expectations. Commodity currencies performed poorly in spite of the rally in oil and gold price. Aussie and Kiwi ended the week as two of the weakest major currencies, just next to Dollar. Sterling and Canadian Dollar were among the weakest batch too but showed a turnaround as oil broke 50 handle. Political uncertainty in US is set to continue as former FBI director James Comey, fired by US President Donald Trump earlier this month, agreed to testify in open session before the Senate Intelligence Committee. Dollar is vulnerable to more selling against Euro and Yen.

Dollar index could be in a medium term correction

As noted during the week, the downside acceleration in the Dollar index is now raising the chance that fall from 103.82 is indeed a medium term correction. That is, the five wave sequence from 72.69 (2011 low) has completed at 103.82 last year. This is also reflected in the decisive break of 55 week EMA. Next near term focus is 61.8% retracement of 91.91 to 103.82 at 94.46. Sustained break there should pull the index down to key long term cluster support at 91.91 (38.2% retracement of 72.69 to 103.82 at 91.93) before having solid support for rebound. And this will now be the slightly favored case as long as 99.88 near term resistance holds.

10 year yield's fall halted but stays vulnerable

The decline in 10 year yield (TNX) somewhat halted after hitting 2.191. It's trying to draw support from 2.177 chart support, 55 week EMA (now at 2.175), as well as 55 month EMA (now at 2.186). Also, Friday's rebound in US stocks also helped stabilize yields. But TNX remains vulnerable to deeper decline too. Another round of downside acceleration will take out the mentioned cluster support level. And in that case, TNX could dive through 38.2% retracement of 1.336 to 2.621 at 2.130 to 61.8% retracement at 1.826 and below.

DOW in risk of a larger reversal

DJIA's rebound and close above 55 EMA last week showed some relief from selling pressure. But downside risk is quickly increasing. Firstly, lost of momentum is clear after hitting long term channel resistance. Secondly 55 week EMA has been staying below signal line for a while. Thirdly, bearish divergence condition is seen in daily MACD. 20379.55 support will be the key level to watch in near term and break there will at least bring deeper pull back to 38.2% retracement of 17883.56 to 21169.11 at 19914.02. And in that case, there is even risk of deeper fall to 55 week EMA (now at 19453.00). Meanwhile, in case of a break of 21169.11 and up trend resumption, we'll remain skeptical until there is solid proof of upside acceleration.

Politics, FOMC minutes, Eurozone data, BoC and oil to watch

There are a couple of things to watch in the coming week, politics aside. After all the sentiments shift and market volatility, the markets are still convinced that Fed will continue with a rate hike in June. Fed fund futures are pricing in 78.5% chance of that. Markets will look into minutes of the May 3 FOMC meeting to affirm that expectation. A bunch of Eurozone data will also be closely watched, including PMIs and German IFO sentiments. Euro's strength is built on optimism of improving Eurozone economic outlook. Also, there is expectation of an upgrade in ECB staff forecast in June, a hawkish twist in the press conference. And that could be followed by announcement of stimulus exit of some sort in September. More upside surprises in Eurozone data will give the common currency another boost.

Canadian Dollar will be a currency to watch this week. BoC is widely expected to hold interest rate unchanged at 0.50%. The central bank will likely maintain a neutral stance in spite of recent mixed batch of data. The Loonie, however, would possibly re-couple with oil price again. This could be seen in the late dive in USD/CAD through 1.3534 key support level, accompanied by WTI crude oil's surge through 50 handle. The rally in WTI should have confirmed that the fall from 55.24 has completed as a corrective move to 43.76, after drawing support from 38.2% retracement of 26.05 to 55.234 at 44.09. The rally in oil price is set to extend to 53.76/55.24 resistance zone. That would possibly pull USD/CAD lower to 1.3222 support level.

Trading strategy - Hold EUR/AUD long, sell USD/CAD

Regarding trading strategies, we bought EUR/AUD at 1.4790 last week and the strategy is correct so far as EUR/AUD jumped to as high as 1.5074. The cross lost momentum ahead of 1.5094 resistance but there is no clear sign of topping yet. We maintain the view that the trend in EUR/AUD has reversed and further rise should be seen to 1.5455 fibonacci level and above. Hence, we'll hold on to the long position while raising the the stop from 1.4640 to 1.4850 to protect our profits in case of rejection from 1.5094. 1.4850 is slightly below 4 hour 55 EMA.

As mentioned above, we're expecting more weakness in Dollar in near term. Euro will likely be the better performer in the markets but we've already got EUR/AUD on hand. USD/JPY's fall hesitated a bit after hitting 110.23 and therefore we prefer not to sell this one. Instead, we'll turn to sell USD/CAD at market this week for anticipation of more strength in oil. Stop will be set at 1.3600, with slightly above 1.3570 minor resistance. 1.3222 is seen as the first target. We'll assess the outlook later to decide the chance for reversing the whole trend from 2016 low at 1.2460.

USD/CAD Weekly Outlook

USD/CAD's fall from 1.3793 extended to as low as 1.3507 last week and broke 1.3534 resistance turned support. The development confirmed completion of rise from 1.2968. Initial bias remains on the downside for 1.3222 support next. Also, the corrective rally from 1.2460 could have finished too, ahead of 1.3838 fibonacci level. Break of 1.3222 will affirm this case and target 1.2968 key support level for confirmation. On the upside, break of 1.3668 minor resistance is needed to indicate completion of the fall from 1.3793. Otherwise, outlook will remain cautiously bearish in case of recovery.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. Rise from 1.2460 is seen as the second leg and would end at around 61.8% retracement of 1.4689 to 1.2460 at 1.3838. Break of 1.3222 should indicate the start of the third leg while further break of 1.2968 should confirm. Nonetheless, sustained trading above 1.3838 would pave the way to retest 1.4689 high.

In the longer term picture, rise from 0.9056 (2007 low) is viewed as a long term up trend. It's taking a breath after hitting 1.4689. But such rise expected to resume later to test 1.6196 down the road.

EUR/USD's rally extended to as high as 1.1211 last week after some intra-week consolidation. Initial bias remains on the upside this week for 138.2% projection of 1.0339 to 1.0828 from 1.0569 at 1.1245, which is close to 1.1298 key resistance. We'll stay cautious on strong resistance from 1.1245/98 to limit upside and bring reversal. Break of 1.1075 minor support will turn bias back to the downside for 1.0838 support. However, sustained break of 1.1298 will carry larger bullish implications.

In the bigger picture, the case for medium term reversal continues to build up with EUR/USD now far above 55 week EMA. Also, bullish convergence condition is seen in weekly MACD. Focus will now be on 1.1298 key resistance. Rejection from there will maintain medium term bearishness and would extend the whole down trend from 1.6039 (2008 high). However, firm break of 1.1298 will indicate reversal. In such case, further rally would be seen back to 1.2042 support turned resistance next.

In the long term picture, the case for completion of down trend from 1.6039 (2008 high), and long term bottoming at 1.0339, is starting to build up. Decisive break of 1.1298 will bring rise back to 1.2042 as first resistance. And in that case, we should at least see rally back to 38.2% retracement of 1.6039 to 1.0339 at 1.2516.

USD/JPY dropped sharply to as low as 110.23 last week. It then drew support from 61.8% retracement of 108.12 to 114.36 and recovered. Initial bias is neutral this week first. Overall, the development suggests that whole corrective decline from 118.65 is going to extend lower. Below 110.23 turn bias back to the downside and send USD/JPY through 108.12 low. In that case, we'll look for bottoming signal again at 61.8% retracement of 98.97 to 118.65 at 106.48.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

In the long term picture, the rise from 75.56 long term bottom to 125.85 medium term top is viewed as an impulsive move. Price actions from 125.85 are seen as a corrective move which could still extend. But, up trend from 75.56 is expected to resume at a later stage for above 135.20/147.68 resistance zone.

GBP/USD rose to 1.3047 last week but quickly lost momentum again and turned sideway. Initial bias remains neutral this week first. Further rise is in favor as long as 1.2844 support holds. However, as we are still viewing price actions from 1.1946 as a corrective move, we'd expect upside to be limited below 1.3444 resistance to bring near term reversal. On the downside, break of 1.2844 will indicate short term topping and turn bias back to the downside for 1.2614 resistance turned support first.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There are signs of reversal, like breaking of 55 week EMA, weekly MACD turned positive, and monthly MACD crossed above signal line. But still, break of 1.3444 resistance is need to confirm medium term bottoming. Otherwise, outlook will remains bearish for extend the down trend through 1.1946 low.

In the longer term picture, no change in the view that down trend from 2.1161 is still in progress. On resumption, such decline would extend deeper to 100% projection of 2.1161 to 1.3503 from 1.7190 at 0.9532.

USD/CHF's decline extended to as low as 0.9724 last week after brief intra-week consolidation. Initial bias stays on the downside this week. Current decline from 1.0342 would now target 100% projection of 1.0342 to 0.9860 from 1.0099 at 0.9617. We'll start to look for bottoming signal again below there. On the upside, above 0.9824 minor resistance will turn intraday bias neutral again and bring consolidations first, before staging another fall.

In the bigger picture, USD/CHF is bounded in medium term range of 0.9443/1.0342 for the moment. Consolidative trading would likely continue and medium term outlook remains neutral. Break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the pair. Meanwhile, downside attempts should be contained by 0.9443 key support level.

AUD/USD's consolidation from 0.7328 continued last week and outlook is unchanged. Further recovery could be seen this week. But upside should be limited below 0.7555 resistance to bring fall resumption. Below 0.7388 minor support will turn bias to the downside. Break of 0.7328 will extend the decline from 0.7748 to 0.7144/7158 support zone. However, firm break of 0.7555 will argue that fall from 0.7748 is completed and turn bias back to the upside.

In the bigger picture, we're still treating price actions from 0.6826 low as a corrective pattern. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seen to 55 month EMA (now at 0.8115) and above.

In the longer term picture, while the down trend from 1.1079 might extend lower, we're not anticipating a break of 0.6008 (2008 low) yet. We'll look for bottoming above there to reverse the medium term trend.

USD/CAD's fall from 1.3793 extended to as low as 1.3507 last week and broke 1.3534 resistance turned support. The development confirmed completion of rise from 1.2968. Initial bias remains on the downside for 1.3222 support next. Also, the corrective rally from 1.2460 could have finished too, ahead of 1.3838 fibonacci level. Break of 1.3222 will affirm this case and target 1.2968 key support level for confirmation. On the upside, break of 1.3668 minor resistance is needed to indicate completion of the fall from 1.3793. Otherwise, outlook will remain cautiously bearish in case of recovery.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. Rise from 1.2460 is seen as the second leg and would end at around 61.8% retracement of 1.4689 to 1.2460 at 1.3838. Break of 1.3222 should indicate the start of the third leg while further break of 1.2968 should confirm. Nonetheless, sustained trading above 1.3838 would pave the way to retest 1.4689 high.

In the longer term picture, rise from 0.9056 (2007 low) is viewed as a long term up trend. It's taking a breath after hitting 1.4689. But such rise expected to resume later to test 1.6196 down the road.

GBP/JPY's pull back from 148.09 extended to 143.34 last week. But the cross drew support from 38.2% retracement of 135.58 to 148.09 at 143.31 and recovered. Initial bias is neutral this week first. On the upside, above 145.78 will turn bias back to the upside for retesting 148.09 first. Meanwhile, break of 143.34 will extend the pull back from 148.09 to 61.8% retracement at 140.35. Overall, we'd still expect the rise from 122.36 to resume after pull back from 148.09 completes. Break of 148.09 will target 150.42 long term fibonacci level first.

In the bigger picture, based on current momentum, rise from 122.36 bottom should be developing into a medium term move. Break of 38.2% retracement of 195.86 to 122.36 at 150.42 should pave the way to 61.8% retracement at 167.78. This will now be the favored case as long as 135.58 support holds.

In the longer term picture, based on the impulsive structure of the decline from 195.86 to 122.36, such fall should not be completed yet. But we will now pay close attention to the structure of the rise from 122.36 to determine whether it's a corrective move, or an impulsive move. That would decide whether a break of 116.83 low would be seen.

EUR/JPY edged higher to 125.80 last week but formed a short term top there, on bearish divergence condition in 4 hour MACD, ahead of 126.09 resistance. Initial bias remains neutral this week for more consolidation. Another fall cannot be ruled out, but downside should be contained by 38.2% retracement of 114.84 to 125.80 at 121.61 to bring rise resumption. We're staying mildly bullish in the cross. And, break of 126.09 key resistance will extend the whole rebound from 109.03 to 100% projection of 109.03 to 124.08 from 114.84 at 129.89.

In the bigger picture, focus is back on 126.09 support turned resistance. Decisive break there will confirm completion of the down trend from 149.76. And in such case, rise from 109.20 is at the same degree and should target 141.04 resistance and above. Meanwhile, rejection from 126.09 and break of 114.84 will extend the fall from 149.76 through 109.20 low.

In the long term picture, medium term decline from 149.76 is seen as part of a long term sideway pattern from 88.96. We're not seeing any sign of an established long term trend yet. Hence, we'll be cautious on strong support at 94.11 in case of another fall. Also, there could be strong resistance at 149.76 in case of a medium term rise.