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Gold price is struggling below the $1,967 support level. Crude oil price is also declining and remains at a risk of more losses below $70.75.

Important Takeaways for Gold and Oil Prices Analysis Today

• Gold price failed to clear the $1,982 resistance and trimmed gains against the US Dollar.
• It is now following a short-term declining channel with resistance near $1,948 on the hourly chart of gold at FXOpen.
• Crude oil prices are also moving lower below $72.80 and $72.00 levels.
• There was a break below a major bullish trend line with support near $73.50 on the hourly chart of XTI/USD at FXOpen.

Gold Price Technical Analysis

On the hourly chart of Gold at FXOpen, the price struggled to start a fresh increase above the $1,982 resistance. The price started a fresh decline below the $1,967 support.

There was a close below the 50-hour simple moving average and $1,950. The price tested the $1,938 support zone. A low is formed at $1,936.68, and the price is now consolidating losses. It is following a short-term declining channel with resistance near $1,948.

The channel resistance is near the 23.6% Fib retracement level of the downward move from the $1,982 swing high to the $1,938 low. The next major resistance is near the $1,950 level.

If the breakout occurs, the price will target resistance of $1,960 near the 50% Fib retracement level of the downward move from the $1,982 swing high to the $1,938 low and the 50-hour simple moving average. An upside break above $1,960 could send the Gold price toward $1,967. Any more gains may perhaps set the pace for an increase toward the $1,982 level.

Initial support on the downside is near the $1,938 level. The first major support is near the $1,932 level. The next support sits near the $1,920 level. If there is a downside break below $1,920, the price might decline heavily towards $1,900, below which the bulls could aim for a test of $1,880.

Oil Price Technical Analysis

On the hourly chart of WTI Crude Oil at FXOpen, the price struggled to rise above the $74.60 resistance against the US Dollar. A high was formed near $74.66, and the price moved down.

There was a break below a major bullish trend line with support near $73.50. The price declined below the 50-hour simple moving average, and the RSI dropped to 25. A low is formed near $70.97, and the price is now consolidating losses.

It is trading near the 23.6% Fib retracement level of the recent decline from the $74.66 swing high to the $70.75 low, above which the price might attempt a recovery.

The first major resistance is near the 50% Fib retracement level of the recent decline from the $74.66 swing high to the $70.75 low at $72.80. Any more gains might send the price toward the $73.50 level in the coming days.

On the downside, support is near the $70.75 level. The next major support on the WTI crude oil chart is near $70.20. If there is a downside break, the price might decline toward $68.80. Any more losses may perhaps open the doors for a move toward the $66.50 support zone.

Yesterday, EUR/USD hit new May’s lows. This week’s latest news contributed to the decline:

→ Germany's GDP in Q1 2023 decreased by 0.3% compared to the previous three months. German media write about the official start of the recession.

→ The US economy in Q1 grew by 1.3% in annual terms.

→ Worrying opinions are spreading about a possible crisis due to the situation in the US housing market. According to JPMorgan analysts, the next shock to the US banking system could be loans for commercial real estate.

→ Traders see the dollar as a reliable asset in the face of the not yet raised US government debt ceiling.

The EUR/USD chart shows that the rate has already fallen by 3.3% from the peaks of May. The rate is approaching the psychological mark of USD 1.07 per euro, which may support the market.

The technical analysis of EUR/USD gives reason to count on another potential support level. We are talking about the lower line (1) of an important ascending channel that has been operating since last year — if it is reached, buyers may become more active using the rebound trading strategy on the EUR/USD market.

USDCAD bounced off its 200-day simple moving average (SMA) and went as high as 1.3653, surpassing a resistance line that had been in effect since March.

The technical picture is feeding optimism for a bullish continuation. The price has bottomed out twice around 1.3300 before drifting higher and beyond its simple moving averages (SMAs). Traders are currently waiting for a decisive close above the 1.3650 neckline to confirm the positive structure.

In momentum indicators, the RSI has crossed above its 50 neutral mark and the MACD has strengthened above its red signal and zero lines, both reflecting improving sentiment in the market.

Should the pair climb the 1.3650 wall, it may initially challenge the 1.3740 barrier and then push towards the crucial 1.3800-1.3830 zone, where the long-term descending line from the 2020 top is placed. The 61.8% Fibonacci retracement of the 2020-2021 downtrend is in the neighborhood as well. Therefore, a successful penetration higher could be the key for a rally towards the 1.3900 mark.

Alternatively, a downside reversal may take a breather near the broken resistance line at 1.3565. If the bears breach that base, the spotlight will fall immediately on the 200-day SMA at 1.3500. Moving lower, the price could retest the 1.3400 region ahead of the important 1.3340-1.3300 area. Notably, the 50% Fibonacci level and the almost flat support line from November are located here.

In brief, USDCAD has been trading within a broad range area for seven months now. While the short-term bias looks positive, the pair will need to claim the 1.3650 barricade in order to post new gains. In the big picture, a decisive rally above the 2022 peak of 1.3976 is required to change the market direction back to an uptrend. 

AUDJPY is hovering around the 91 level, just a tad above a rather busy area that is key for market sentiment. This pair has actually been trading inside an aggressive upward sloping trend channel, but its upside is currently being capped by the 200-day simple moving average (SMA). Therefore, AUDJPY has failed to record a higher high, which means that the bearish pattern of lower highs and lower lows that started on September 13, 2022 remains in place.

The momentum indicators are mixed at this stage as the Average Directional Movement Index (ADX) is pointing to a range-trading market. More interestingly, the stochastic oscillator has moved below both its moving average and overbought territory. Should this continue and the stochastic edges much lower, it could be a strong bearish signal.

If this stochastic move takes place, the bears would come up against a key area. The 89.74-90.31 range is populated by the September 21, 2017 high, the 38.2% Fibonacci retracement of the August 20, 2021 – September 13, 2022 downtrend, and the 50- and 100-day SMAs. If the bears managed to break this area, the path then looks clear until the 50% Fibonacci retracement at 88.19.

On the other hand, should the bulls try to register a higher high, they would have to overcome the 200-day SMA at 91.85. The 23.6% Fibonacci retracement at 93.63 appears to be the next key resistance point, with the ultimate target being the April 20, 2022 high at 95.73.

To sum up, AUDJPY bulls’ attempt to record a higher high appears to have run out of gas as the stochastic oscillator is ready to signal the start of another short-term bearish move.

GBPJPY has been stuck in an uptrend since the beginning of the year, generating a seven-year peak of 172.77 last Wednesday. However, the pair has been flat since then, appearing to be unable to extend its recent rally.

The short-term oscillators currently suggest that bullish forces are waning but remain in control. Specifically, the RSI has flatlined above its 50-neutral mark, while the MACD histogram is softening above both zero and its red signal line.

Should buying pressures intensify, the seven-year high of 172.77 could be the first barricade for the bulls to clear. Slicing through that barricade, the pair could ascend towards levels not seen in years, where the March 2014 resistance of 173.45 could curb any upside attempts. If that barricade fails, the bulls might then attack the April 2015 high of 175.00.

Alternatively, if the positive momentum wanes and the price reverses lower, the recent support of 171.20 could act as the first line of defence. Further declines could then cease at the December resistance of 169.26, which could serve as support in the future. A dive beneath that region could trigger a decline towards the 166.83 support.

In brief, GBPJPY has been rangebound after its advance peaked at a seven-year high of 172.77.  Therefore, a failure to create a fresh higher high may open the door for a moderate downside correction. 

Crude oil has been trading south for the last couple of months, but looks like market is now healthy for a recovery.

Recent strong drop in the 4-hour chart, can be also considered as a final spike into new lows, meaning it can be the end of wave (5) of A, so be aware of recovery, especially now when we have nice intrday impulse from the lows that is also trying to break the trendline resistance. So we think that more upside is coming after a current pullback in wave 2, which can be still in progress as an irregular/expanded flat correction that can retest 70-68 support before a continuation higher.

Looking at the intraday hourly chart, Crude oil is coming back down, ideally for wave (C) of a flat correction in wave 2 that can retest 70 – 68 support zone. Wave (C) is a motive wave and it should be completed by a five-wave cycle of the lower degree, so after current subwave 4 pullback, be aware of another intraday sell-off for wave 5 of (C) before a bullish continuation.

The Turkish fell to new record low against US dollar in early Friday, on probe through psychological 20 level.

Fresh weakness came ahead of this weekend’s presidential election runoff, with President Erdogan so far being well ahead of his main rival and having a chance to extends his rule into a third decade.

Lira has weakened nearly 8% so far this year, mainly due to devastating earthquakes in February. The currency has lost around 40% of its value in 2022, when high inflation strongly hit investors’ sentiment, along with unorthodox methods of the central bank, on cutting interest rates against widely expected hikes in such situation.

President Erdogan was blamed by the media of influencing the central bank’s monetary policy decisions, while he argued that lower borrowing cost would boost production and the latest results showed that inflation in Turkey was halved.

Markets keep bearish outlook for lira and expect it to accelerate loses if President Erdogan wins another mandate, while sustained break of pivotal 20 barrier would also generate strong bearish signal and expose targets at 21 (round figure), followed by Fibo projections at 21.45 and 22.41.

Res: 20.0000; 20.2031; 20.5000; 21.0000.
Sup: 19.9742; 19.9332; 19.8953; 19.8105.

• Tokyo core-core CPI (excluding fresh food & energy) accelerated to a 31-year high
• BoJ’s latest guidance from Governor Ueda is no longer making wage growth as a main priority, raising the possibility of a monetary policy normalization in H2 2023.
• The 5-month rally of USD/JPY is now coming close to key short-term resistance at 141.00.

This week’s latest release of key leading economic data out of Japan has indicated signs of sustained inflationary growth and a recovery in demand that could boost economic growth in the second half of 2023.

The May flash manufacturing purchasing managers’ index (PMI) has increased to an eight-month high of 50.8 from 49.5 printed in April and exited from a contraction mode. Likewise, the services PMI has shown signs of resilience, increasing to 56.3 in May from 55.4 in April, its ninth consecutive month of growth expansion.

Tokyo (excluding fresh food & energy) CPI for May accelerated to a 31-year high

Fig 1:  Tokyo inflation, Japan manufacturing & services PMIs for May 2023 (Source: TradingView, click to enlarge chart)

Tokyo consumer inflation data for May, a leading indicator for Japan’s nationwide price trends grew at a slower pace of 3.2% year-on-year for its core component (excluding fresh food) from an increase of 3.5% in April, slightly below the consensus forecast of 3.3%. But it has surpassed the Bank of Japan’s (BoJ) 2% inflation target for twelve consecutive months.

In addition, the Tokyo core-core inflation (excluding fresh food and energy), a measurement of sticky inflationary pressure is on a path of acceleration where it rose to 2.4% year-on-year, its highest level in almost 31 years from a gain of 2.3% recorded in April.

Thus, this latest set of upbeat leading economic data has further opened the “window of opportunity” for BoJ not to “drag its feet” to normalize its current ultra-easy monetary policy in 2023 amid rising global interest rates.

BoJ is playing a “Game of Thrones” with speculators

The latest public speeches and guidance made by the new BoJ Governor Kazuo Ueda have been less direct and clear in terms of the type of economic data and variables that BoJ is watching for it to be more confident to bring forward monetary policy normalization.

Yesterday, 25 May, Ueda in his first group media interview indicated a shift on its “core data watchlist”; stated that wage growth in Japan was not a sole target to determine the setting of BoJ’s monetary policy and the key point was whether inflation would rise in a stable and sustainable manner at 2%.

This latest remark from Ueda has played down the importance of wage growth, a reversal in April when Ueda chaired his first monetary policy meeting that highlighted wage growth as BoJ’s new policy guidance; as wage growth is still lacklustre, this prior guidance has generated some form of expectations that BoJ will be more patient in changing course, wait for more clear signs of upward momentum in wage growth and wait until the results of next year spring’s wages negotiation before it decides to normalize its accommodative monetary policy.

It seems that BoJ does not want to give clear-cut guidance of its monetary policy to prevent speculators from timing its exit from negative interest rates and its Yield Curve Control programme (YCC) on the yield of the 10-year Japanese Government Bond (JGB). Hence, an element of surprise needs to be implemented to prevent a significant spike in the JGBs yields that can trigger a massive bond selloff in the financial markets reinforced by microstructure risk in terms of liquidity absorption where BoJ has owned a record of 52% of outstanding JGBs as of end December 2022.

Net foreign inflow into the Japanese equities for the eighth consecutive week

Meanwhile, the Japanese stock market has roared back to life, the benchmark Nikkei 225 has recorded a month-to-day return of +7.10% for May at this time of the writing and surpassed its previous major swing high of 30,715 printed on February 2021.

It has also outperformed the MSCI All-Country World Index on a year-to-date basis; 18.5% versus 7.8%. These positive observations have led to significant foreign inflows into the Japanese stock market. Net buying by foreign investors totalled 747.6 billion yen between 15 May 15 and 19 May, up 32% from the previous week. This extended the streak into an eighth week, the longest since June 2017. A net amount of 3.6 trillion yen in stock was purchased over that period, the largest eight-week sum in nearly a decade.

In our previous analysis dated 19 April, we have highlighted the key supporting factors that may see a persistent tactical outperformance of the Japanese stock market into the second half of 2023.  

Overall, the improving economic backdrop in Japan with accelerating sticky inflation coupled with a buoyant stock market that is supported by foreign net inflows has opened a window of opportunity for BoJ to normalize its ultra-easy monetary policy at least via a further widening of the YCC band in the first step, perhaps in July when it publishes its latest quarterly outlook report that comes with its latest projections of inflation and economic growth trend.

USD/JPY Technical Analysis – Below key 141.00 short-term resistance with exhaustion elements

Fig 2:  USD/JPY trend as of 26 May 2023 (Source: TradingView, click to enlarge chart)

In the recent week, the USD/JPY has rallied to its highest level so far seen this year, printing an intraday high of 140.23 during yesterday, 25 May US session.

Interestingly, the 5-month up move from its 16 January 2023 low of 127.22 is now coming close to the upper boundary of an ascending channel now acting as a resistance at around 141.00. The upside momentum of the most recent up move from the 11 May 2023 low of 133.75 is showing signs of exhaustion as the 4-hour RSI oscillator has just flashed out a bearish divergence signal at its overbought region.

Hence, the USD/JPY is now at risk of at least a short-term bearish reversal below the 141.00 key short-term pivotal resistance with the next supports coming in at 138.75 and 137.55 (also confluences with the 200-day moving average).

However, a clearance above 141.00 sees the next resistance at 142.25 which is defined by the 61.8% Fibonacci retracement of the prior major down move from the 21 October 22 high to the 16 January 2023 low and the swing high area of 21/22 November 2022

On the hourly chart of EUR/USD at FXOpen, the pair started a fresh decline below the 1.0790 support. The Euro declined below the 1.0765 support against the US Dollar.

The pair traded close to the 1.0700 zone and tested 1.0705. It is now consolidating losses and facing resistance near the 50-hour simple moving average at 1.0745. The first major resistance is near a connecting bearish trend line on the same chart at 1.0765.

A break above the 1.0765 resistance zone could start a decent increase toward the 1.0790 zone. A close above the 1.0790 level might start a strong increase toward the 1.0830 resistance.

Conversely, the pair might resume its decline from the 1.0745 level. Initial support is near the 1.0705 zone. The next major support is near 1.0680, below which EUR/USD could test the 1.0650 support.

Daily Pivots: (S1) 1.3605; (P) 1.3626; (R1) 1.3664; More....

Intraday bias in USD/CAD remains on the upside at this point. Break of 1.3666 resistance will extend the rise from 1.3313 to 1.3860 resistance next. Price actions from 1.3976 are seen as a triangle consolidation pattern. Firm break of 1.3860 will argue that larger up trend is ready to resume through 1.3976 high. Nevertheless, break of 1.3483 minor support will turn intraday bias neutral again.

In the bigger picture, as long as 55 W EMA (now at 1.3333) holds, up trend from 1.2005 (2021 low) is still in favor to resume through 1.3976 at a later stage. However, sustained trading below the EMA and 38.2% retracement of 1.2005 to 1.3976 at 1.3233 will raise the chance of bearish reversal. Deeper should then be seen to 61.8% retracement at 1.2758 next.