Sample Category Title

• Gold stabilizes after last week’s sharp slide
• Oscillators point to corrective phase
• A break of record high could challenge $2,500
• For the outlook to change, a dip below $2,145 may be needed

Gold stabilized on Friday and is recovering ground today, following a decent drop from its record high at around $2,450 on May 20. The precious metal remains well above the uptrend line drawn from the low of October 6 and above all three of the plotted exponential moving averages (EMAs), which means that the broader outlook remains positive.

The daily oscillators are also corroborating that view, suggesting that last week’s slide was just a corrective phase within the broader uptrend. The RSI has started rebounding from near its 50 line, while the MACD, although below its trigger line, is still lying above zero.

If the bulls are strong enough to stay in the driver’s seat, they could soon aim for another test near the record of $2,450, the break of which will take the price into uncharted territory and perhaps aim for the round number of $2,500. With no prior highs and inside swing lows to mark future resistance zones, a break above $2,500 could pave the way for the next psychological area, at around $2,600.

On the downside, for the outlook to start shifting to bearish, a dip below $2,145 may be needed. This would confirm the break of the aforementioned uptrend line as well and may allow declines towards the $2,065 zone.

To sum up, gold corrected lower last week, but the bulls have managed to hold it in an uptrend, which suggests that there are still chances for a new record high soon.

Markets

Bank of France governor and ECB governing council member Villeroy leveraged low volume trading conditions (UK & US markets are closed) to get maximum market impact with some dovish comments. So far, ECB members generally didn’t pre-commit on the H2 2024 ECB policy rate path after the done deal 25 bps June rate cut. Markets interpreted this as ruling out back-to-back moves given the bumpy/sticky inflation path ahead, the Fed delay and the relatively small space from current restrictive levels (4% deposit rate) to more neutral ground. In an interview with German newspaper Boersen-Zeitung, Villeroy said that he sometimes reads the analysis to cut rates only once a quarter, together with the publication of new staff forecasts, and hence exclude July. He asked himself why, given the current meeting-by-meeting and data-driven mindset at the ECB. He doesn’t go as far as saying that the central bank should already commit on July, but wants to keep maximum optionality on the timing and pace. Villeroy labeled current market expectations for the ECB’s terminal rate, somewhere between 2.5% and 2.75% as “not unreasonable”. He doesn’t worry about the impact of a weaker euro stemming from divergence with the Fed as the pass-through to inflation would be rather small while tighter US financial conditions could be disinflationary to Europe. US fiscal policy is the elephant in the room and poses the biggest inflationary treat via structurally higher long-term interest rates and their inflationary impact. ECB Chief economist Lane added to earlier (weekend) comments. He cemented the June rate cut and expects the inflation to hit the 2% target next year. The constraining effects of past rate hikes are still unfolding with the transmission effect possibly only peaking at the turn of 2024. European bonds rallied after the ECB comments with the front end of the curve outperforming. German yields currently cede 2.5 bps (30-yr) to 5 bps (5-yr) after hitting fresh YtD highs at the end of last week for the shorter tenors. The single currency loses slightly ground at EUR/USD 1.0850. European stock markets only marginally profit from Wall Street’s solid performance on Friday, with main indices rising by up to 0.3%.

May German Ifo Business confidence data were on tap today. The headline figure stabilized at 89.3 instead of the hoped-for increase to 90.4. Details showed a deterioration of the current assessment while the forward-looking expectations component improved. US consumer confidence, ECB consumer inflation expectations (tomorrow), EMU May CPI and US PCE deflators (Friday) are highlights later this week.

News & Views

South African president Ramaphosa in a final campaign just before the general elections on Wednesday defended costly pledges made earlier. The leader of the ANC governing party in May signed into law a health insurance bill that aims to create a state fund to cover medical costs for all citizens. The ANC also promised to implement a “basic income grant” for the large cohort of the unemployed. But combined with the country suddenly no longer experiencing blackouts for almost two months (which critics say was done by massive spending on diesel to fuel the turbines), the election giveaways raise concern among voters. They fear that this unsustainable spending will either end shortly after the elections or boomerang back through higher taxes. The ANC according to the latest polls is on track to lose its parliamentary majority for the first time since the post-apartheid election in 1994. While it is still on track to become the largest party (43% vs 57.5% in the 2019 vote), it will probably have to partner up with some of the more radical parties including former-president Zuma’s MK (11% in the polls) or the Economic Freedom Fighters (<10%). South Africa’s main opposition party, Democratic Alliance, would secure about a quarter of the votes.

Belgian business confidence improved from -11.9 to -11 in May, erasing some of the April setback but doing less so than hoped for (-10.8). Business climate improved considerably in manufacturing, driven by a significantly better assessment of total order books and a much more favourable opinion on both demand and employment expectations. Sentiment in trade improved slightly with weaker demand expectations offsetting a positive evolution in employment and intentions of placing orders. Business-related services confidence fell for the third month in a row due to a sharp downward revision in both demand and activity expectations. A downturn in all components weighed on sentiment in the building industry. Demand expectations were the exception to the rule, as they have been improving steadily since this past February.

Graphs

EMU 2-y swap eases off YTD top as ECB’s Villeroy doesn’t exclude back to back July rate cut.

USD/ZAR: Rand trades mildly constructive going into this week’s Parliamentary election.

EuroStoxx 50 holding within reach of cycle top.

EUR/GBP testing key 0.85 support area on potential ECB-BoE divergence.

In a speech today, ECB Governing Council member Olli Rehn indicated that the ongoing disinflationary process is bringing inflation closer to the 2% target in a sustained manner. He stated, "the time is thus ripe in June to ease the monetary policy stance and start cutting rates," provided the current disinflationary trend continues and there are no new geopolitical or energy price shocks.

Rehn emphasized ECB's commitment to a data-dependent, meeting-by-meeting approach in determining its policy stance. He noted, "We will set our rates based on our analysis of the inflation outlook, the dynamics of underlying inflation, and the strength of monetary transmission," adding that the ECB is not pre-committing to any specific rate path.

The Japanese yen has been drifting since late last week and is calm on Monday. USD/JPY is trading at 156.85, down 0.09% on the day at the time of writing.

Ueda: BoJ will proceed with caution

The Bank of Japan has been outlier, as it looks to raise interest rates at a time when other major central banks are aiming to cut rates as inflation falls. What the BoJ and its colleagues share is a determination to proceed with caution as the economic landscape remains uncertain.

The name of the game for central banks is to achieve 2% inflation in a sustainable manner. For the Federal Reserve, Bank of England and most other major central banks, this means pushing inflation lower. For the BoJ, its means tightening policy after decades of deflation and interest rates around zero.

The path to raise inflation hasn’t been easy. Core CPI for April, which came out on Friday, slowed for a second straight month and fell to 2.2% y/y, down from 2.6%. This matched the market estimate. The headline reading eased to 2.5% y/y, down from 2.7% in March.

BoJ Governor Ueda said on Monday that the central bank faces “uniquely difficult” challenges in tightening policy, but that progress had been made in “moving away from zero and lifting inflation expectations”.

In March, the BoJ lifted rates out of negative territory for the first time in eight years but interest rates remain around zero and the US/Japan rate differential has kept the yen at low levels. The BoJ is expected tread very carefully and the next interest rate hike, which is expected before the end of the year, will likely be a modest 0.1% move.

USD/JPY Technical

• There is resistance at 157.69 and 158.37
• 156.59 and 155.91 are the next support levels

The Japanese yen slightly increased against the US dollar on Monday, with the USD/JPY pair holding near 156.73.

Investors have already priced in previous remarks from Bank of Japan (BoJ) officials. BoJ Governor Kazuo Ueda emphasized the need to anchor inflation expectations before revisiting interest rate decisions, highlighting the challenge of accurately determining the necessary interest rate level.

BoJ Deputy Governor Shinichi Uchida stated that the final battle against deflation is close, predicting continued wage growth.

Last week, the yen experienced pressure from statistics, which reflected a slowdown in Japan's core inflation to 2.2% in April from 2.6% in March, with food inflation contributing significantly to the decrease. Overall inflation fell to 2.5% in April from 2.7% in March, marking the second consecutive month of decline. Given the BoJ's efforts to reduce price pressure, these figures are concerning.

Externally, the yen experienced further pressure from robust US economic data and the hawkish tone of the Fed minutes.

Technical analysis of USD/JPY

On the H4 chart, USD/JPY has completed a correction wave towards 157.18 and is now forming a consolidation range below this level. An upward breakout could extend the structure to 157.51. Conversely, a downward breakout could initiate a new decline wave towards 153.20, potentially extending to 149.00. This scenario is technically supported by the MACD indicator, with its signal line above zero and pointing strictly downwards.

On the H1 chart, USD/JPY has completed a growth wave towards 157.18, followed by a downward impulse to 156.84. A narrow consolidation range has now formed around this level. A downward breakout from this range could lead to a continuation of the decline to 156.50, with a subsequent correction to 156.84 (testing from below). Further decline to 155.90 is possible. This scenario is technically confirmed by the Stochastic oscillator, with its signal line below 50 and ready to drop to 20.

Summary

The Japanese yen's slight rise against the US dollar is influenced by BoJ officials' comments and recent economic data. Technical indicators suggest the potential for both upward and downward movements, with significant support and resistance levels to watch. Investors should closely monitor these levels and market conditions.

The dollar moved within a narrow range in Asian / early European session on Monday, but near-term picture remains bearishly aligned, weighed by Friday’s 0.3% drop and formation of bearish engulfing pattern on daily chart.

Rising negative momentum adds to downside risk, though close within daily cloud (top lays at 104.65) and firm break of 10DMA (104.57) which kept the downside protected in past four sessions, is required to generate fresh bearish signal and expose next pivotal supports at 104.35/20 (Fibo 61.8% of 103.67/105.03 / daily cloud base/ bull-trendline, reinforced by 200DMA).

Conversely, repeated close above daily cloud top would ease immediate downside pressure and keep in play prospects for fresh recovery as rising daily cloud continues to underpin the upleg from 103.93 (May 16 low).

The US will be shut today for holiday and lower volumes may keep the action limited, with focus shifting on releases of German and EU inflation, as well as US Personal Consumption Expenditure price index, Fed’s preferred inflation measure, which will provide fresh signals to the US and European central banks and influence dollar’s performance in coming days.

Res: 104.77; 105.03; 105.15; 105.43.
Sup: 104.35; 104.20; 103.93; 103.80.

Hello fellow traders. In this article we’re going to take a quick look at the Elliott Wave charts of DAX published in members area of the website. DAX is showing impulsive bullish sequences in the cycle from the October 2023 low. Recently we got a 3 waves pull back that has ended right at the Blue Box zone (buying area). In the further text we are going to explain the Elliott Wave Forecast and trading setup.

DAX Elliott Wave 1 Hour Chart 05.23.2024

DAX remains bullish against the 17624.8 pivot. The Index is currently giving us pull back in 3 waves , wave ((iv)) black. The price made 5 waves from the peak, suggesting DAX ended only first leg (a) of ((iv)) that is unfolding as Elliott Wave Zig Zag pattern. We expect DAX to make another leg down toward extreme area at 18525.23-15352.42 blue box ( buying zone). From there, DAX index should ideally make a rally toward new highs or 3 waves bounce alternatively .As our members know Blue boxes are based on 100% – 161.8% Fibonacci extension area , that we trade in 3, 7, or 11 swing corrective sequence.

Once the price touches the 50 fibs against the (b) blue connector, we’ll make positions risk-free and set the stop loss at breakeven and book partial profits. Breaking below the 1.618 Fibonacci extension level at 15352.42 would invalidate the trade.

Official trading strategy on How to trade 3, 7, or 11 swing and equal leg is explained in details in Educational Video, available for members viewing inside the membership area.

Quick reminder on how to trade our charts :

Red bearish stamp+ blue box = Selling Setup
Green bullish stamp+ blue box = Buying Setup
Charts with Black stamps are not tradable. 🚫

DAX Elliott Wave 1 Hour Chart 05.25.2024

DAX the drop toward our Blue Box area and found buyers as expected. We got nice reaction from our buying zone. The index has reached and exceeded 50 fibs against the (b) blue high. So members who took the long trade are enjoying profits now in a risk free positions. We would like to see break of (iii) black high, to confirm next leg up is in progress.

As the USD/JPY chart shows today:

→ The price is in an upward trend (indicated by the blue channel) that has been relevant since the beginning of 2024.

→ On Thursday, May 23, the exchange rate nearly reached 157.2 yen per US dollar, surpassing the peak of May 14.

→ Following this, the market began to stabilise – indicated by the Bollinger Bands' width showing low volatility, which can be interpreted as a sign of market equilibrium or indecision among participants.

What balances the market? The equilibrium of supply and demand forces and the anticipation of important news in the week ahead.

Bullish arguments:

→ The price has twice (shown by arrows) rebounded sharply from the median line of the upward channel. On both occasions, bulls managed to reverse aggressive declines in the USD/JPY price and return to the upper line.

→ The Bank of Japan's interest rates are much lower than those in the US. Judging by the latest US economic data, the Federal Reserve may maintain high rates for a longer period.

Bearish arguments:

→ We do not see continued upward momentum in the price after surpassing the May 14 peak. Moreover, the USD/JPY price cannot sustain above the "round" level of 157.00.

→ The price is near the upper boundary of the channel, which could act as resistance.

→ It is important to note the levels of 160 and 157.9 in the background, from which the price fell sharply, indicating possible intervention by the Bank of Japan to support the excessively weak yen.

Given that today is a holiday for financial institutions in the US and the UK, indecision may continue until tomorrow when Japan's inflation data is released at 8:00 GMT+3. Also noteworthy:

→ US GDP news will be published on Thursday at 15:30 GMT+3.

→ The US Personal Consumption Expenditures (PCE) index will be released on Friday at 15:30 GMT+3.

These and other fundamental drivers may disrupt the current balance of the USD/JPY price, which still appears stable for now.

Trade over 50 forex markets 24 hours a day with FXOpen. Take advantage of low commissions, deep liquidity, and spreads from 0.0 pips. Open your FXOpen account now or learn more about trading forex with FXOpen.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

German Ifo Business Climate was unchanged to 89.3 in May, below expectation of 90.3. Current Assessment Index fell from 88.9 to 88.3, below expectation of 89.9. Expectations Index rose from 89.7 to 90.4, slightly below expectation of 90.5.

By sector, manufacturing rose from -8.6 to -6.2. Services fell from 3.2 to 1.8. Trade rose from -22.0 to -16.9. Construction rose from -28.9 to -26.0.

Ifo said, "The manufacturing, trade, and construction sectors are recovering, although the service sector took a slight hit. Germany's economy is working its way out of the crisis step by step."

Full German Ifo release here.

• EURUSD retreats from a fresh 2-month high of 1.0894
• But meets support a tad above its long-term restrictive trendline
• Oscillators suggest bulls remain in charge despite the latest drop

EURUSD had been in a steady advance following its 2024 bottom of 1.0600 on April 16. However, the pair reversed lower after its rejection at a fresh two-month high of 1.0894 in mid-May, with the price finding strong support just above its long-term downward sloping trendline.

Should the latest uptick gain momentum, the price might revisit the recent two-month peak of 1.0894. Conquering that hurdle, the bulls may attack a series of lower highs that have formed the pair’s descending trendline such as 1.0941, 1.0963 and 1.0980 all registered in March.

Alternatively, if the short-term weakness persists, the recent support of 1.0805 could act as the first line of defence. Violating that zone, the pair could challenge the descending trendline in place since December 2023 before it descends towards 1.0723, a region that provided support in February, April and May. A violation of that barrier could set the stage for the February bottom of 1.0694.

In brief, EURUSD came under some selling pressure after posting a fresh two-month high of 1.0894, but the bulls appear to retain the upper hand. That being said, a break below the crucial downward sloping trendline is needed for the technical picture to shift back to bearish.