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GBPUSD is consolidating after its downward trajectory approached the June 2020 low of 1.2250. Nonetheless, the falling simple moving averages (SMAs) are endorsing the bearish bias that unfolded from June 2021, even though downside forces are currently lacking.

The Ichimoku lines are indicating that selling has temporarily stalled, while the negative bias in the short-term oscillators has yet to be overturned. The MACD is signalling that sellers are not surrendering control, while the negative charge in the stochastic oscillator is revealing some weakness, as the %K line is pointing higher. Meanwhile, the RSI is relatively neutral, flirting with the 30 oversold mark.

If the current downward bearing endures, initial support could transpire from yesterday’s low of 1.2260 and the June 2020 trough of 1.2250. If the pair remains heavy, the 1.2160 barrier may be tested next, prior to sellers’ focus turning toward the May 2020 trough of 1.2075. Should selling pressures persist, the bears could then challenge the 1.1933-1.2000 support band, which stretches back to mid-March of 2020.

Alternatively, if buyers re-emerge, the 1.2410 inside swing low and the nearby red Tenkan-sen line at 1.2451 could act as preliminary friction to any positive developments in the pair. Successfully pushing higher though, the bulls may then tackle the 1.2643-1.2686 resistance band that started to evolve around mid-June 2020. Conquering this obstacle and overrunning the approaching blue Kijun-sen line at 1.2705, the price could take a crack at the 1.2800 hurdle before eyeing the 1.2854-1.2913 resistance boundary, shaped by the lows over the mid-October until early November 2020 period.

Summarizing, GBPUSD is sustaining a broader bearish bias below the SMAs and the 1.3000 border. A dive past the June 2020 trough of 1.2250 may reinforce further deterioration in the pair. That said, for optimism to begin to return, the price would need to initially climb over the 1.2643-1.2686 key barrier.

WTI oil is consolidating above strong $100 support (psychological / Fibo 61.8% of $92.92/$111.33 upleg), following a 7% drop on Monday (the biggest one-day loss since Mar 28), as strong dollar and economic worries soured sentiment, increasing pressure on oil prices.

Coronavirus lockdowns in China raise worries about lower demand from world’s top oil importer, the dollar hit 20-year high and worries that global economy is sliding into recession on soaring inflation and impact from the conflict in Ukraine that would strongly hurt demand for crude oil.

Fresh weakness reversed the most of last week’s advance on signals that the EU is working on plan for total embargo on Russian oil, but the bloc’s member states are still far from the unity on this question that continues to hurt the sentiment, in addition to existing fears that Russia retaliates by cutting off gas supplies to the Europe, whose economies are highly dependent on Russian energy.

Monday’s drop weakened the structure on daily chart, although near-term bias is expected to remain positively aligned as long as price stays above $100 level, as 14-d momentum is turning higher, still in the positive territory.

Potential rebound could be also attracted by daily cloud twist, due on Friday, however, bulls need to clear daily Tenkan-sen ($105.72 and dent daily cloud base ($106.19) to ease downside pressure and shift near-term focus higher.

On the other side, weak fundamentals and Monday’s large bearish daily candle are expected to weigh on near-term price action and keep $100 pivot at risk, with break here expose supports at $98.54 and $95.27 (trendline support / Apr 25 trough).

Res: 105.26; 105.72; 106.19; 107.95
Sup: 100.42; 100.00; 98.54; 97.04

Asian equities remained under pressure on Tuesday as the massive sell-off across financial markets left investors bloodied and worried. Although European futures are pointing to a positive open despite the overall market caution, the lack of appetite for risk may cap upside gains. Mounting fears around rising interest rates and slower global economic growth hammered global sentiment yesterday, with risk assets feeling the burn.

In the currency space, king dollar reached levels not seen in 20 years, thanks to risk aversion and rising Treasury yields which climbed past 3.20% for the first time since 2018. Commodity markets also tumbled as investors looked for the sell button across all asset classes. Although gold prices seem to be stabilising this morning, the precious metal is likely to face headwinds in the form of an appreciating dollar, rising Treasury yields and Fed rate hike bets. Oil prices are not looking too pretty as lockdowns in China and global growth fears weigh on the demand outlook.

The negative vibe and uncertainty across financial markets may encourage investors to maintain a safe distance from riskier assets this week, resulting in a higher dollar and some support for gold. On the data front, Germany’s ZEW economic confidence survey results will be published later this morning. Markets expect the sentiment index to slip to -42.0 in May versus the -41.0 in April. Later in the day, it’s all about speeches from numerous Fed officials which could spark some dollar volatility. However, the main course and key risk event of the week will be the US CPI report on Wednesday.

Dollar advance unstoppable?

Dollar bulls charged into the trading week with renewed vigour, reaching levels not seen in 20 years on Monday, as U.S Treasury yields climbed to new cycle highs. The greenback has appreciated against every single G10 currency this quarter, powered by Fed hike expectations and risk aversion stemming from ongoing geopolitical risks.

With the Dollar Index (DXY) punching above 104.00, this may open doors to higher levels. However, a technical pullback could be the next course of action before bulls step into a higher gear. Given how the week ahead is jampacked with economic US data and speeches from Federal Reserve officials, dollar volatility should remain a key theme.

Later today, a bunch of Fed speakers will be under the spotlight. If they strike a hawkish tone and revive expectations around a 75-basis point rate hike in June, the dollar could extend gains across the board. Tomorrow sees the release of the latest US inflation report which is expected to show prices rising 8.1% year-on-year in April compared with 8.5% in March. A figure that exceeds market expectations could propel the dollar higher, allowing the DXY to secure a strong close above the 104.00 level.

Oil prices tumble amid China lockdowns

Oil prices have stumbled into the week, closing down 6% on Monday, due a combination of factors weighing on the demand outlook.

The commodity found itself under pressure as Saudi Arabia cut prices for customers in Asia and part of Europe, while weaker export data from China compounded downside losses. Growing concerns over higher interest rates, recession worries and Covid-19 restrictions in China leading to slower export growth are also weighing on prices. However, ongoing geopolitical risks revolving around the Ukraine-Russia conflict could cushion downside losses.

Looking at the technicals, it’s all about the $100 level on both crude benchmarks. Should this point prove to be unreliable support, we could see a sharp selloff. Initial support in Brent is the 100-day simple moving average at $97.24.

Commodity spotlight - Gold

The past few weeks have not been kind for gold. An appreciating dollar, rising Treasury yields and expectations over the Fed maintaining an aggressive approach towards monetary policy have battered the precious metal. With the greenback recently hitting levels not seen in 20 years, the path ahead for gold remains rough and rocky.

On the technical front, prices are bearish on the daily charts with support found at $1855. It will be interesting to see whether bulls can defend this level or bears drag prices even lower. The widely watched 200-day simple moving average sits at $1835. Whatever the outcome, volatility is certainly on the cards.

Bitcoin collapsed 9.5% on Monday and dipped temporarily below $30K in early trading on Tuesday, stabilising at $31.3K. Ethereum has lost 3.9% in the past 24 hours, while other leading altcoins in the top 10 have fallen from 8.7% (Solana, Cardano) to 12% (Avalanche).

Total crypto market capitalisation, according to CoinMarketCap, fell 7% overnight to $1.44 trillion. Bitcoin’s dominance index rose 0.3% to 41.8% on more altcoin weakness.

The cryptocurrency Fear and Greed Index was down 1 point to 10 by Tuesday and remains in a state of “extreme fear”, touching a low point for the seventh time in the past year. An even higher level of fear in the last four years that we have only seen in March 2020 and September 2019.

Terra and TerraUSD continue to lose ground. Against this backdrop, the Luna Foundation Guard (LFG) has committed $1.5bn to protect the “stability of UST and the Terra ecosystem as a whole”. Stablecoin UST, designed to be as close to the value of the USD as possible, lost more than 30% at one point overnight. But at the time of writing, it is trading at a 14% discount to the US currency.

The current plunge is a retouch of the lows made in January and July last year for the first cryptocurrency. This could look like a last line of defence for the bulls, who may try to push back from the lower end of the trading range since early January.

However, many markets are on a similar informal frontier separating a correction from a potential collapse, so the situation in the crypto market could largely determine sentiment in the deeper debt and equity markets.

Judging by the dynamics of Stablecoin, the crypto market is undergoing one of its most massive tests of the entire market periphery, which could determine the credibility of the crypto market for many months or years to come. As we can see, Ether and Bitcoin remain resilient and robust enough to make them somewhat of a safe harbour within the stormy crypto sea.

At the same time, the collapse in quotations has not yet affected miners’ confidence in the cryptocurrency’s future, as the BTC network’s hash rate continues to grow.

Ray Dalio, the founder of Bridgewater Associates, one of the biggest hedge funds, said that bitcoin should be in investors’ portfolios. Still, the cryptocurrency itself is not a good competitor to gold in terms of inflation protection. But that could change in the next five to 10 years.

The sell-off in Wall Street continued Monday as the Dow Jones plunged by over 600 points and the Nasdaq 100 fell by 500 points. Stocks continued declining as investors continued to worry about the rising risk of a recession and thinning margins. Recent data showed that there was a likelihood that the economy will go through a recession. For example, data published in April revealed that the American economy barely grew in the first quarter. Also, the recent inversion of the yield curve led to elevated fears that the situation in the US will worsen. Well-known companies like Tesla, Apple, AMD, Nvidia, and Microsoft declined by more than 5%.

The corporate earnings season continued Monday as more American firms published weak quarterly results. In a statement, Palantir Technologies said that it had a strong first-quarter as its revenue rose to $446 million. However, the stock crashed by more than 20% after the firm warned about its guidance. Electric vehicle companies like Tesla, Rivian, and Canoo declined sharply after Lordstown Motors reported weak results. The top companies that will publish their results today are Hyatt Hotels, Planet Fitness, Electronic Arts, and Roblox.

There will be no major economic events today. In the Asian session, New Zealand published relatively strong electronic card retail sales while Australia released the latest retail sales numbers. Other key events to watch on Tuesday will be the latest Norway consumer inflation numbers and the German ZEW economic sentiment data. Finally, the American Petroleum Institute will release the latest inventories numbers. This data will come as the EU continues to deliberate on a Russian oil ban.

EURUSD

The EURUSD pair remained stuck in a narrow range during the Asian session. The pair is trading at 1.055, which is slightly above last week’s low of 1.0480. The Bollinger Bands have narrowed while the price has moved slightly above the 25-day moving average. The Chaikin Oscillator and the Relative Strength Index (RSI) have pointed upwards. The pair will likely remain in this range as investors wait for the upcoming US inflation data.

XBRUSD

The XBRUSD pair declined ahead of the upcoming US inventories data. It also declined after the Russian Victory Day event. It is trading at 106.53, which was the lowest level since May 4th. It is about to retest the descending trendline. The pair has also dropped below the 25-day moving average while the Stochastic Oscillator and DeMarker have also pointed downwards. The pair will likely resume the bullish trend now that it has formed a break and retest pattern.

EURCHF

The EURCHF pair continued its bullish trend as investors priced in a divergence between the ECB and the SNB. the pair’s bullish trend accelerated when it moved above the important resistance at 1.0370. On the four-hour chart, it has moved above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has continued rising. The pair will likely keep rising in the near term.

NZDJPY experienced a very sharp drop in recent sessions, sliding below its 50-day moving average to find support near its lower Bollinger band. The uptrend that started in late January seems to be unravelling as the pair has printed lower lows and lower highs, particularly on shorter timeframes. 

Short-term oscillators paint a picture of a slightly bearish market. The RSI has stabilized a little, albeit below its neutral 50 line, while the MACD is stuck below its red trigger line.

In the case that sellers remain in charge and manage to pierce back below the 82.30 area, which was also a top back in October, the next region to provide support may be around 81.60. This zone also roughly coincides with the 50% Fibonacci retracement level of the January-April rally.

If buyers seize back control, their first test would be the 83.30 territory and the 50-day moving average just above at 83.50. If that resistance barrier is breached, the next hurdle to provide resistance could be the 84.85 line, marked by the recent highs and the inside swing low in early April.

Summarizing, the picture has turned neutral with the formation of successive lower lows and lower highs. For the outlook to turn firmly negative, traders might need to see a slide below the 200-day moving average.

Silver edged lower as US Treasury yields stayed high. A break below the recent consolidation range at 22.20 suggested a lack of buying interest and prompted early bulls to bail out. The price is testing last December’s low at 21.50. As the RSI shows an oversold condition on both daily and hourly charts, profit-taking from the short-side and dip-buying could cause a rebound. 22.50 is a fresh resistance and 23.25 a major hurdle before buyers could push for a reversal. Otherwise, the psychological level of 20.00 might be next.

The pound weakens as fears of a recession in the UK take hold. The pair’s recovery accelerated after it broke above this year’s high at 0.8510. A bullish reversal in the medium-term could be in the making as sentiment turns around. The RSI’s double top in the overbought area may temporarily limit the rally. The bulls may look to accumulate at the next retracement. 0.8510 is the closest support and 0.8440 an important demand zone for the latest rally. A bounce above 0.8590 would trigger a runaway rally towards 0.8700.

The US dollar continues upward over the interest rate differential. The pair’s steep climb over the past month pushed the RSI into an extremely overbought condition on the daily chart. A pullback may be due to let the bulls catch their breath, but a confirmation is yet to materialise. Sentiment would stay intact if the price action maintains its course above the rising trend line. November 2019’s high at 1.0020 is the next target. The resistance-turned-support at 0.9820 sits next to the trendline, making it an area of interest.

EUR/USD

Neither the bears, nor the bulls managed to gain enough momentum and the EUR/USD remained locked in the zone between 1.0480 – 1.0570. The market sentiment remains negative – for a depreciation of the single European currency against the greenback, but only a confirmed breach of the critical support at 1.0480 could deepen the sell-off and head the pair towards a test of the next significant support at 1.0400. However, before a potential resumption of the downtrend is to occur, we may first witness an appreciation of the euro towards the resistance at 1.0630 – a level that may present the sellers with an opportunity to enter the market at better levels than the current ones. In case the resistance at 1.0630 is breached, then the corrective move may deepen and the pair could head towards the next key resistance at 1.0700.

USD/JPY

During yesterday’s trading session, the bulls made another attempt at breaching the critical resistance level at 131.20, but the bears took complete control over the market and convincingly led the pair towards a test of the support at 130.00. In the early hours of today’s trading session, the downward movement continued and the sellers are trying to overcome the psychological level at 130.00. In case this level is successfully breached, we may expect the sell-offs to deepen and the pair to head towards the support at 129.30. An increase in the value of the U.S. dollar against the yen above the level at 131.20 would most probably require more time, therefore the expectations are for a corrective movement towards the support at 129.30, followed by the level of 128.60.

GBP/USD

After the strong depreciation of the sterling against the dollar, the pair has found itself in a consolidation phase in the range of 1.2260 – 1.2390. A potential breach of the upper border, followed by a violation of the next target at 1.2470, could lead to a recovery and a move towards the major resistance at 1.2600. If the bears take control, then a breach of the support zone at 1.2260 could deepen the sell-off and could easily lead to new future losses for the sterling against the greenback and to a test of the next key support level at 1.2200.

EUGERMANY40

The German index began the day with a new sell-off and an approx. 1.2% decrease in its price. The panic sell-offs, caused by the uncertain situation between Russia and Ukraine, as well as by the increasing interest and inflation rates, seem to continue and the bulls still cannot manage to gain enough control and limit the downward movement. The expectations therefore are for the sell-offs to deepen and for the index to head towards a test of the psychological level at 13000. High volatility could be expected during today’s trading session, and if the bulls manage to take control over the market, then the price could make a corrective move towards the resistance at 13576 before the bearish pressure continues. Worse-than-expected data for the German ZEW economic sentiment (today; 09:00 GMT) could help the bears to take hold of the market. If this happens and they manage to violate the support at 13200, then we could expect a deepening of the sell-off towards the major support zone at 13000.

US30

In the beginning of today’s trading session, the decrease in the price of the index continued, but at the time of writing, the bulls have managed to limit the sell-offs to just above the psychological level at 32000. If the bears prevail and overcome this level, then we may expect a further decline towards the support at 31500. However, before a possible resumption of the downtrend is to take place, we could first witness a price correction towards the resistance zone at 32600. The market sentiment remains strongly negative and the most probable scenario at the moment is for the index to continue to lose its value as a result of the rising interest rates, Russia’s war on Ukraine, and China’s COVID-related lockdowns.