After experiencing the Fed interest rate decision and the release of the April non-farm payrolls last week, gold continues to face significant upward pressure; market participants are closely monitoring the USD and technicals to determine the future direction of gold prices.

Gold prices initially fell back below US$2,300 during the Asian and European sessions on Monday, but showed signs of recovery soon thereafter. However, gold stopped at US$2,331 over time.

In the 1D timeframe, technicals show that gold prices are still in an uptrend. Above are US$2,334 and US$2,351, which are short-term resistance levels, and if the bulls can break out of that range, then the focus of the market will soon shift to the US$2,400 level, while below that there is the US$2,280 level that provides significant support.

Gold started the week well, rebounding to above the 20-day SMA, but the bullish attempts were not strong enough to push the price through the resistance of US$2,334 and it continued to fluctuate in a limited range and stayed below US$2,331 for now.

The stochastics are showing a clear negative signal, indicating a potential continuation of a downtrend during the day. The next major target is at US$2,260. It is crucial to keep the price below US$2,331 to sustain the expected downtrend.

However, a break above this level would stop the corrective bearish scenario and could lead to an attempt to resume a major bullish trend. If bulls break above the near-term resistance of US$2,331 – US$2,334, they may first challenge the US$2,351 range, where prices topped on April 26. If the rally continues, it could meet resistance at US$2,380 before the psychological threshold of US$2,400.

Overall, gold prices need to break above the threshold of US$2,331 to boost buying interest again. Otherwise, the short-term downside could extend to the US$2,280 - US$2,260 range.

Trading Direction: Short

Entry Price: 2325

Target Price: 2178

Stop Loss: 2395

Deadline: 2024-05-21 23:55:00

Support: 2309, 2303, 2300

Resistance: 2326, 2331, 2345

The British pound (GBP) is exhibiting tentative gains against the Japanese yen (JPY) as the new trading week commences. However, trading activity remains subdued due to the UK bank holiday on Monday. Market participants anticipate a return to normal volumes on Tuesday as the UK session gets underway.

The main event this week for the GBP/JPY pair will be the Bank of England's (BoE) monetary policy meeting scheduled for Thursday. Market expectations are firmly positioned for the BoE to maintain its current interest rate stance, with an anticipated 8-1 vote in favor of holding rates steady. Swati Dhingra, an external member of the BoE, is expected to be the lone dissenter, advocating for a modest rate reduction.

The data calendar for the UK this week includes the release of BRC Like-For-Like Retail Sales figures on Tuesday, covering the year ending in April. Analysts forecast a slowdown in UK retail sales growth, with estimates pointing to a 1.6% year-on-year increase compared to the previous reading of 2.5%. Additionally, UK Gross Domestic Product (GDP) figures will be released later in the week, with market consensus anticipating a rebound in QoQ growth to 0.4% in Q1, following a contraction of -0.3% in the previous quarter.

From a technical analysis standpoint, two key scenarios are emerging for the GBP/JPY pair. The first scenario suggests a potential conclusion to the recent corrective decline witnessed in the pair. This scenario hinges on the pair achieving multiple closings above the critical support line of the bullish channel at 192.00. Such a development could pave the way for the formation of bullish waves and a confirmation of a continued uptrend, potentially reaching the 194.5 level.

The second scenario focuses on the possibility of further bullish momentum. This scenario underscores the potential for the 193.50 level to establish itself as a new support zone. Positive signals from stochastic indicators lend credence to this possibility and suggest further attempts to push the pair higher. If successful, potential price targets include 195.00 and 196.00

BUY GBPJPY

ENTY PRICE : 194.00

STOP LOSS : 192.500

TAKE PROFIT : 196.00

The Japanese yen (JPY) is relinquishing its short-lived gains, succumbing to the persistent pressure exerted by the vast interest rate gap between the United States and Japan. This vulnerability is further exposed by the apparent waning intervention efforts from Japanese authorities.

The Asian trading session witnessed the yen losing ground against a basket of major currencies, including the US dollar (USD). This two-day losing streak reverses the yen's ascent to three-week highs witnessed last week. Market analysts attribute this decline to a combination of profit-taking after the recent rally and a renewed focus on fundamental factors, particularly the stark difference in US and Japanese interest rates.

The yen's vulnerability is accentuated by the apparent withdrawal of active intervention by Japanese authorities in the foreign exchange market. The Bank of Japan (BOJ) refrained from intervening to support the yen despite official holidays in both Japan and the UK. These periods were previously considered potential windows for further intervention. This lack of support removes a crucial prop that had helped buoy the yen in recent days.

The fundamental pressure on the yen stems from the significant interest rate differential between the US and Japan. The US Federal Reserve is expected to maintain its hawkish stance for the foreseeable future, while the BOJ remains committed to ultra-loose monetary policy. This 540 basis point gap continues to favor the USD, making the JPY a less attractive option for investors seeking higher returns.

A potential glimmer of hope for the yen lies in the possibility of the Federal Reserve softening its stance later this year. Weaker-than-expected US jobs data last week has fueled speculation that the Fed might be forced to cut rates multiple times in 2024. If this scenario unfolds, the US-Japan interest rate gap could narrow, alleviating some of the pressure on the yen.

Despite the recent weakness, technical analysis suggests a strong potential for the USD/JPY pair to continue its uptrend. The price remains firmly entrenched within a well-defined bullish channel on the chart, with a target of 156.50 in sight. This bullish bias is further supported by the Relative Strength Index (RSI) indicator, which continues to project positive signals. However, a breach below the critical support level of 152.60 could indicate a shift in momentum and a potential reversal of the recent uptrend.

The 156.50 level acts as a key resistance point for the USD/JPY pair. A decisive break above this level could trigger a further surge towards the 157.00 zone, potentially extending the bullish wave. Conversely, a breakdown below the crucial support level of 152.60 would signal a potential reversal of the uptrend. Traders should closely monitor price action around these key levels for clues about the future direction of the pair.

While the RSI currently supports the bullish bias, it's important to acknowledge that a sustained move above 70 could indicate overbought territory. Should this occur, a short-term pullback might be necessary before the uptrend resumes. Additionally, the Moving Average Convergence Divergence (MACD) indicator should be monitored for any signs of weakening momentum, which could also suggest a potential reversal.

BUY USDJPY 

ENTRY PRICE : 154.500

STOP LOSS : 153.00

TAKE PROFIT : 157.00

The market was relatively thin on Monday, but gold was volatile and overall moved upward. While the U.S. dollar index (USDX) rose briefly in the U.S. trading session, the gold price was not affected. It remained volatile at high levels and closed up 1.04%. Gold's rally on Monday was affected by geographical risks as Hamas and Israel fought again.

However, gold fell slightly on Tuesday not long after the opening as Hamas agreed to a ceasefire proposal which improved risk appetite in the market. Hamas leader Haniyeh informed Qatari Prime Minister Mohammed and Egyptian General Intelligence Director Abbas Kamel of the decision in separate phone calls on the same day.

However, Israeli Prime Minister Benjamin Netanyahu's office later said that Hamas' latest ceasefire offer did not meet Israel's requirements and a delegation would still be sent to meet with negotiators to try to reach an agreement. He added in the statement that Israel's war cabinet has approved the continuation of operations in Rafah.

In other words, the current cease-fire agreement has little impact on gold and may pull it back in the short term, but it's not enough to reverse the uptrend to the downtrend. Israel may withdraw its attacks on Rafah for some reasons later. At that time, investors may expect an incoming cease-fire agreement, thus weighing on gold.

Two Fed officials delivered speeches yesterday. They were the first officials to express their views this week, and their views were similar to those of Fed Chairman Powell's speech last week. To some extent, they were releasing signals to the market.

Richmond Fed President Tom Barkin said he is optimistic that the current interest rates can bring inflation down to 2%. At the same time, he does not think the economy is overheating. He added that the sort of slowdown needed to finish the Fed's inflation battle needn't be all that deep (still expecting a soft landing). With the strong performance of the labor market, the Fed has time to wait until it is convinced that inflation can continue to come down before cutting rates.

New York Fed President Williams said that they will eventually cut rates, and the monetary policy is in a "very good place". U.S. GDP this year is expected to increase by 2% to 2.5% (also expecting a soft landing).

Overall, the two officials' speeches complement each other, sharing the same view: to maintain the current level of interest rates in the short term and to lower interest rates when appropriate.

This is completely different from the previous speeches by Bowman and Goolsbee who held different views. Next, there will be several Fed officials to speak, and the market is trying to figure out the Fed's views on inflation and interest rates. The market now expects the Fed to cut rates by 25 basis points at its September meeting and expects a second cut to take place in December. Fed officials didn't oppose it may mean they agree to it or mean they have little confidence. As long as the market confirms from the officials' speeches or data that the next move is to loosen monetary policy, there is still room for gold to move up. Of course, this will take time and have no impact on the intraday movement of gold. As there is still a lack of important data today, gold may be temporarily affected by the expectation that a ceasefire agreement can be reached.

The Minneapolis Fed President Kashkari will speak today. We can see from the content of his previous speeches that he is a hawk. He has said if the disinflation process continues to stagnate, he would doubt the need to cut interest rates. If the economy, employment growth, and consumer spending continue to remain strong, he may further rule out the need to cut interest rates. The recent series of data may not satisfy this hawk, which means that his incoming speech could be hawkish again. Gold may expand its decline after Kashkari's speech.

However, if this big hawk is not that hawkish this time, though this is less likely to happen, interest rate cut expectations are expected may increase again, which will boost gold prices.

In the 4-hour chart, gold is moving in the downward channel. Strong support is at 2300. If gold breaks below this level, it will test the bottom of the downward channel (2275), where the bottom of the fluctuation range (2284.72) is also in its vicinity. It's hard for the gold price to fall below such a robust support zone. The strong resistance is in the 2335.42-2343 range. If the price breaks above this range, a new round of uptrend will begin.

As for indicators, the baseline and the conversion line of the Ichimoku Cloud are running horizontally, and the current price is temporarily supported by the conversion line, showing that gold is pulling back. We need to see whether the price can break below the conversion line. If it can, it will fall further. If not, gold may try to rebound. The +DI line of the DMI indicator has crossed below the -DI line and is located near 17.6, showing that gold will decline first before going up.

Overall, gold's uptrend remains intact but it will pull back in the near term. Considering that gold has fallen currently, investors can wait for a small rise before shorting gold.

Trading direction: Short

Entry price: 2326

Target price: 2284.72

Stop loss: 2350

Support: 2311.55, 2300.58, 2284.75

Resistance: 2326.92, 2355.42, 2343.06

During Tuesday's (May 7) Asian session, EURUSD traded in a narrow range and is currently around 1.076.

With expectations of repeated rate cuts by the Fed, the prospect of simultaneous rate cuts by the ECB and the Fed in June has largely faded. It is highly probable that the ECB will take the lead. On April 11, the ECB announced its rate decision, maintaining borrowing costs at record highs as expected, but also hinting at a possible imminent rate cut. The ECB is highly likely to make its first rate cut in June, a move already seen as inevitable by market investors. Additionally, it is anticipated that the ECB may cut rates earlier and more aggressively than the Fed within the year. The substantial interest rate differential significantly constrains the upside potential for EURUSD, indicating a downward trajectory. However, it is worth noting that a weaker euro would elevate import costs and potentially induce inflationary pressures, which might restrain the ECB's willingness to adopt loose monetary policies. Overall, I believe EURUSD is more likely to experience a period of oscillation and retracement, but the downside is not as optimistic as market expectations of returning to parity. Key support levels lie within the 1.04-1.05 range.

Regarding recent geopolitical tensions, according to the latest news from Xinhua News Agency, the Israeli Prime Minister's Office issued a statement on the evening of May 6 declaring that the wartime cabinet unanimously decided to continue operations in the southern city of Rafah in the Gaza Strip, aiming to exert military pressure on the Palestinian Islamic Resistance Movement (Hamas), thereby advancing the release of detained individuals by the Israeli side and achieving other operational objectives. Earlier, Daniel Hagari, the spokesperson for the Israeli Defense Forces, stated that Hamas had accepted Egypt's mediated ceasefire proposal.

Focus of the Day: No major data releases. Key focuses include Wednesday's 10-year bond auction, Thursday's Bank of England monetary policy decision, the US Treasury's 30-year bond auction, as well as Friday's release of preliminary University of Michigan Consumer Sentiment data.

EURUSD experienced oscillations and retracement yesterday, mainly within the range of 1.0750-1.0790, predominantly influenced by fluctuations in the US dollar. Currently, EURUSD has been oscillating upward from the bottom around 1.06, with the highest rebound reaching near 1.08, but facing resistance at the 60-day SMA. This marks a turning point in the strength of the current trend, with short-term pressure likely to dominate, and the market leaning towards a downward trajectory.

Looking at the technical aspect, the long upper shadow seen in EURUSD two days ago has led the market into an oscillating phase, with a lack of follow-up buying momentum after the upward surge. If sentiment diminishes, a downward movement may naturally follow.

From the perspective of the 1-hour candlestick chart, a death cross occurred in the MACD and widened, currently near the zero line, indicating there is still room for bearish momentum to be released. The support around 1.075 is being closely monitored; if it holds, there may be another test of resistance near 1.080. In the 4-hour chart, the MACD shows a trend of forming a death cross, suggesting that bullish momentum is nearing exhaustion. From a larger time frame perspective, there may still be downward pressure, with support seen at 1.06, while in the smaller time frame, support is observed at 1.07. The market conditions are suitable for shorting on rebounds. Looking at the daily chart, the market formed a long upper shadow the day before yesterday, indicating a lack of momentum for further upward movement. If today's market closes with a bearish or doji candlestick, EURUSD may see a daily-level retracement opportunity. Once it breaks below the support zone of 1.07-1.075, the initial downside target could be around 1.06-1.065, with further potential towards the 1.050 level.

The trading range for the current phase can be considered between 1.060 and 1.080. Aggressive traders may engage in buying low and selling high within this range, with a focus on participating in selling high.

Trading Direction: Short

Entry Price: 1.0760

Target Price: 1.0600

Stop Loss: 1.0830

Support: 1.0650, 1.0450

Resistance: 1.0800, 1.0900

During the Asian session on Tuesday (May 7), spot gold fluctuated in a narrow range and is currently trading around 2322. 

Since Friday's disappointing non-farm payrolls, the market has shifted to trading in rate cut expectations. Gold prices are trending to hold firm, and bulls are starting to move. The main reason is that the release of weaker data in the US has strengthened expectations of rate cuts. However, it is too early to talk about a rate cut, and further attention needs to be paid to the later key data, that is, the inflation data for April and May, especially the CPI data next week.

On the other hand, ongoing tensions in the Middle East also provided strong support for gold prices. Israel's military operation in Rafah has added to the uncertainty in the market. According to Israeli media reports, Israel's wartime cabinet on Monday passed the decision to attack Rafah, and the ground and air strikes on Rafah were immediately carried out within a day. The geopolitical situation is an unavoidable topic for the future. One piece of news can make gold prices soar again, which also provides enough confidence for bulls. 

Geopolitical: According to the latest news from China Xinhua News Network, the Israeli Prime Minister's Office stated on the evening of the 6th, saying that the wartime cabinet unanimously decided to continue the operation in the southern Gaza Strip city of Rafah to exert military pressure on the Palestinian Islamic Resistance Movement (Hamas). The action can promote the release of Israeli detainees and achieve other combat goals. Earlier, Israel Defense Forces(IDF) spokesman Daniel Hagari issued a statement saying that Hamas accepted the Egyptian-brokered ceasefire proposal. 

There are no major data releases today. The main data to watch out for are the 10-year bond auction on Wednesday, the Bank of England's monetary policy decision on Thursday, and the US Treasury 30-year bond auction, as well as preliminary data on consumer confidence from the University of Michigan released on Friday.

Yesterday, the trend of gold prices was basically in line with expectations. After coming out of the Doji Star the day before yesterday, gold showed signs of a firm rebound and began as scheduled. Gold prices rose as high as 2332 from the lowest point of 2291 without breaking through the resistance level. Subsequently, the price of gold fluctuated and retreated, and finally closed with a bull candle. At this point, the weakness of gold prices may turn into a short-term rebound. Resistance levels remain in focus at 2344 and 2352. During the day, gold prices will be bullish in an oscillation pattern.

Yesterday, the gold price fluctuated at $42 throughout the day and finally closed with a bull candle. Today, the trend of the gold price is crucial. If it can effectively break through the peak of yesterday at 2332 and close higher, gold prices will shift to bullishness in the short term. Today, the support is focused on 2315 and 2300. Traders can stop loss with small positions at the support level and try to go long in the short term, rather than chase the market or go short rushly and greedily.

In the 1-hour chart, the MACD line crosses below the signal line at the high level and the death cross is widening. During the day, there is a demand for the release of bearish momentum, and gold prices will have a small pullback at the 1-hour level, so as to seek support and choose a direction in volatility. In the 4-hour chart, the MACD line crosses above the signal line and the golden cross is widening, which is currently near the 0 axis. As the bullish momentum is still being released, there is still room for gold prices to rebound and rise. On the daily chart, the MACD line crosses below the signal line in the heavily overbought zone and the death cross starts to widen. The overbought technical indicators have eased sharply, but the bearish momentum is still being released, with a tendency to fall further to around the 0 axis, at which point the market will enter an equilibrium zone. At present, bears are dominant, and traders should maintain a trading strategy of going short in the rebound in a larger cycle. Meanwhile, it is not appropriate to chase the market. At the same time, traders should also be well-prepared for the drawdown and profit-taking. During the day, it is more important to observe the trend of small cycles. We should emphasize that, like any indicator, technical indicators are only suitable for reference in common periods and will not be accurate in extreme markets. During the day, aggressive traders can buy low and sell high in the range of 2300-2352.

Trading Direction: Short

Entry Price: 2352

Target Price: 2300

Stop Loss: 2362

Support: 2300.000/2278.000

Resistance: 2332.000/2352.000