Pressure on Short-term Pullback Increases with RSI in the Overbought Zone

Summary:

The USD has risen too much and too fast, and the market has also partially digested the aggressive rate hike expectations. Pressure on short-term pullback increases, and it requires caution to go long on USDCAD.

SELL USDCAD

Close Time

CLOSED

1.26315

Entry Price

1.25420

1.26700

1.43812 +0.00293 +0.20%

38.5

Pips

Loss

1.25420

1.26700

Exit Price

1.26315

Entry Price

1.26700

Fundamentals

Similar to the U.S. Federal Reserve, the Bank of Canada is implementing aggressive rate hikes in an attempt to reduce high inflation. Last week the Bank of Canada raised rates by 50 basis points as expected, and its hawkish stance is strongly supportive of the CAD.

The market has become increasingly convinced that the Fed may be more aggressive in the next few meetings to tighten monetary policy. Traders are betting that the Fed will raise rates by 50 basis points in the May, June, and July meetings, respectively, which also pushed the USD and U.S. Treasury securities yields continue to move higher. However, the USD has risen too much and too fast, and the market has partially digested the aggressive rate hike expectations. Pressure on short-term pullback increases, and it requires caution to go long for USDCAD.

Technical Analysis

USDCAD: Pressure on Short-term Pullback Increases with RSI in the Overbought Zone_1

In the 1H timeframe, by the impact of the USD's surge, USDCAD once sharply rose to 1.2610, where there is a strong resistance. The indicator RSI comes to the overbought zone, slowing down the short-term rise and increasing the pullback pressure.

Attempts could be made to go short at the highs, namely, to go short near the key pressure level above 1.2610 with a target near 1.2540 and a stop loss above 1.2660.

Support: 1.2540/1.2500

Resistance: 1.2610/1.2660

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Winkelmann

Summary:

USDJPY is correcting at highs, with the trend showing a triangle convergence pattern. Once breaking above the triangle, the USDJPY is expected to hit the previous highs again.

BUY USDJPY

EXP

EXPIRED

128.800

Entry Price

129.300

128.300

157.183 +0.403 +0.26%

Pips

EXPIRED

128.300

128.374

Exit Price

128.800

Entry Price

129.300

Fundamentals

The yield spread between the U.S. and Japan has continued to widen due to the difference between the U.S. tight monetary policy and Japan's accommodative monetary policy. The USDJPY has maintained a strong upward momentum recently. Meanwhile, the Bank of Japan is also continuing its plan to buy Japanese government bonds to curb the rise in 10-year Japanese bond yields, prompting the yen exchange rate to weaken. The market has speculated that the USDJPY exchange rate will rise to the 130 mark in the future.

In Thursday's International Monetary Fund (IMF) meeting on the global economy, Chair of the Board of Governors of the Federal Reserve System Jerome Powell mentioned the benefits of a "front-loading rate hike" strategy. A 50 basis point hike at the May meeting will be one of the options. Powell hinted that he would support the further significant tightening of monetary policy to curb inflation. Concerns about the Fed's increasingly aggressive policy stance have risen, boosting the U.S. dollar again.

Technical Analysis

USDJPY: To Long when It Breaks above the Current Triangle Correction at Highs_1

In the 1H timeframe, USDJPY is correcting at highs, with the trend showing a triangle convergence pattern. The price is now close to the upper edge of the ascending triangle. Once it successfully breaks above the triangle, it is expected to hit the previous highs again, or even possibly to hit the 130 mark. Indicator RSI is located above 50, moving mildly. That can indicate a big bull market in the upcoming sessions.

You can try to go long with small positions after the price breaks above 128.65. The aggressive investors can enter at the current price with the target set near the previous high of 129.3.

Support levels: 128.0/127.0

Resistance levels: 129.3/130.0

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Eva Chen

Russia-Ukraine Conflict

Summary:

EIA crude oil inventories fell by more than 8 million barrels last week, the biggest drop since January 2021, after increasing sharply the week before. Gasoline demand rebounded to "average" levels for this time of year, suggesting demand has not yet declined significantly. In addition, U.S. crude oil production remained steady at a 2-year high. WTI crude hovered near US$102 before the data was released, and moved sharply higher after the data was released.

BUY WTI

Close Time

CLOSED

102.723

Entry Price

104.000

101.500

71.579 +0.663 +0.93%

127.7

Pips

Profit

101.500

104.030

Exit Price

102.723

Entry Price

104.000

Fundamentals

WTI crude oil is holding above US$103 per barrel in today's Asian and European sessions, driven by simultaneous reductions on the supply and demand side. Crude oil's near-term upside is gaining support after the EIA reported an 8-million-barrel decrease in crude oil inventories, reflecting strong demand for the commodity, compared to a 9.4 million barrel increase in the previous week. Earlier, the American Petroleum Institute (API) reported a decrease of nearly 4.5 million barrels, highlighting increased purchases spurred by a rebound in business activity and exports to the rest of the world.

Also, reports that the EU is considering a full embargo on Russian oil in the coming week may have been the catalyst for another increase in prices yesterday. However, price gains were limited as the U.S. has pledged to release 180 million barrels of crude oil over the next six months to contain gains during the ongoing conflict between Russia and Ukraine.

On the supply side, Libya's domestic political instability led to its loss of 550,000 barrels of oil production. The Russia-Ukraine conflict continued to exceed expectations, triggering market concerns about a further decline in crude oil supply. The EU is also pushing for an embargo on Russian crude oil, leading to a reduction in oil supply due to multiple factors. On the demand side, the IMF on Tuesday lowered its global economic growth forecast to 3.6% this year from 4.4% in January. COVID-19 pandemic lockdown measures implemented in Asian economies have also led to a reduction in crude oil demand.

Technical Analysis

WTI crude oil is still correcting within its descending triangle pattern in the 4-hour timeframe, with prices moving higher again yesterday for top resistance. In this case, prices could fall again to around US$94.50 per barrel in the near term ahead.

When the 100 SMA is lower than the 200 SMA to confirm the path of least resistance on the downside, the resistance is more likely to be maintained rather than broken. If the selling pressure is strong enough, crude oil prices may even fall through the bottom of the triangle.

However, stochastics is moving higher from oversold zones to reflect the return of bullish pressure. This oscillator can also be interpreted as a bullish divergence, as the stochastics are creating lower lows while the price is at higher lows. In this case, crude oil prices could break above the top of the triangle and rebound to the same volume as the triangle. The RSI is in the middle level, and there is hardly any strong directional clue at present. It is recommended to buy low and sell high in the triangle correction range.

Resistance: 106.00, 107.80, 109.00

Support: 99.80, 98.70, 94.50

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Eva Chen

Central Bank

Summary:

After stabilizing on Wednesday, as global yields rose further, spot gold prices fell again in European hours on Thursday and fell below $1,940, but rallied strongly and did not test (50-day moving average) $1,930. The market outlook will be dominated by going short at high points.

SELL XAUUSD

Close Time

CLOSED

1939.06

Entry Price

1934.00

1960.00

2624.71 +19.11 +0.73%

50.6

Pips

Profit

1934.00

Exit Price

1939.06

Entry Price

1960.00

Fundamentals

Spot gold fell again on Thursday, with a daily loss of nearly $20, or 1%. UBS sees good support for gold around current levels to hold until U.S. inflation falls or geopolitical risks ease. The bank expects gold to hit $1,950 an ounce by the end of June. Against the backdrop of geopolitical and inflation risks, investors should be long gold to be on the safe side, but in the medium term, there are reasons to manage downside risks. For now, UBS's model estimates the fair value of gold at around $1,500 an ounce.

We believe that gold's recent moves suggest that the Russia-Ukraine conflict remains a key focus; as markets grew weary of geopolitical news related to the Russia-Ukraine conflict, the focus began to turn to the tightening policy of the central bank and the tightening of higher interest rates / financial conditions. The goal of gold bears can fall back to the low of $1900, It could even be a test of last month's low of $1890. At least for the foreseeable future, gold can remain in the range of $1900-2000. It is expected that the overall average price of gold will continue to remain above $1,900 per ounce until mid-2023. Gold has tried twice this year to break through the important psychological barrier of $2,000 an ounce, and gold is expected to hit a new high this year. In addition, the price correction in the past two trading days should only be a rebalancing of funds, not a structural change in the outlook for gold.

As investors seek to mitigate portfolio risk, hedge against inflation and more recession signals emerge, gold investing can regain traction. We believe that gold prices are still supported by higher inflation over the next 6 months, and there is still a chance for gold prices to usher in a wave of gains before the Fed tightens policy to control hyperinflation. What buyers need to be aware of in the near term is that this outlook could change as the U.S. 10-year yield rises to 3.0%.

XAUUSD: Go Short on Price High After Short-Term Test of Downward Support and Rally_1

Technical Analysis

Over the past few sessions, the price of gold has continued to fall below the short-term ascending trendline and the 200-period simple moving average (SMA).

The 20- and 40-period SMA is poised to form a bearish crossover after gold attracted bear interest at $1998. Technical indicators show that the RSI is close to oversold territory with stronger momentum than before, while the MACD reinforces its bearish trend below the dotted and zero lines. Both are confirming a negative impact on prices.

If the downward momentum extends to the $1,927 mark, the further downside will find support at the $1,915 level, and a break above the resistance will test the $1,890 level, which was tested at the end of March.

In a bullish scenario, gold needs to break out to stabilize near $1949 for the 200-period SMA to gain further upside. In the short term, the market sentiment turned bearish after the price fell below the ascending trendline. A break above the aforementioned resistance and the short-term SMA could turn the outlook back to positive.

Resistance: 1952, 1958, 1966

Support: 1934, 1927, 1915

Risk Warnings and Disclaimers

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Eva Chen

Summary:

Canada's March CPI accelerated to 6.7% YoY, up from 5.7% in February; at the same time, the March CPI growth rate was even higher than the market consensus of 6.1%, which was the highest level since January 1991.

BUY USDCAD

Close Time

CLOSED

1.24938

Entry Price

1.25900

1.24000

1.43812 +0.00293 +0.20%

96.2

Pips

Profit

1.24000

1.25900

Exit Price

1.24938

Entry Price

1.25900

Fundamentals

Statistics Canada reported that the CPI rose 6.7% in March from a year earlier, compared with a 5.7% increase in February. The CPI increase in March was the highest since January 1991, when the CPI rose to 6.9% in March, well above the upper end of the Bank of Canada's 1% to 3% comfort zone. The index was 1.4% higher than in February, after rising 1% month-on-month in the previous month.

The goods and services measured by Statistics Canada fall into eight categories, all of which rose in the March price monitor, and nearly all goods well above their 2021 levels. Excluding gasoline, the index has risen 5.5 percent since March 2021, the biggest gain since Statistics Canada launched the indicator in 1999. The figure was 4.7% in February, indicating that inflationary pressures have spread and become more intense in the last month. Gasoline remained the main driver, accounting for nearly 40 percent of year-over-year growth, according to Statistics Canada.

After our observation of the market, before Statistics Canada announced the March CPI, the market had predicted that inflation in Canada would increase rapidly in March, but the growth rate was stronger than expected after the data was released. For those who filled up their gas tanks in March, it's no surprise that higher gasoline prices have driven a sharp rise in consumer prices. With geopolitical tensions such as the Russia-Ukraine conflict making it harder than usual to predict oil prices, inflation is likely to stay above the Bank of Canada's target range in 2023, dampening consumer purchasing power and pushing up interest rates.

Data for March suggested that policymakers may have underestimated the strength of inflation when they updated their forecasts last week. The latest monetary policy report showed headline inflation was just 5.8% in the second quarter, and the economy would have to cool sharply to hit the central bank's target.

The Bank of Canada has already responded to the rapid rise in inflation by raising interest rates (by 50 basis points) last week, an aggressive move to show that it is serious about getting inflation under control. The central bank will have to continue to take aggressive steps in the coming months. We think this inflation report will continue to support a 50bps hike in June. USDCAD: Canada's March Inflation Far Exceeds Expectations, USDCAD in Oversold Rally Pattern_1

USDCAD: Canada's March Inflation Far Exceeds Expectations, USDCAD in Oversold Rally Pattern_1

Technical Analysis

USD/CAD faces severe upward pressure at the 50 SMA and ascending trendline resistance, pulling back below the 1.2500. Prices are testing support at 1.2460, which provided support on April 5; currently, the 50 SMA acts as resistance for any upside. Bulls will be looking for a break above the 50SMA/1.2650 and the ascending trendline to the January high of 1.2790.

Judging from the current trend of USD/CAD, the price drop has completely tested the starting up point of 1.2473. I believe that even if there is an oversold rebound pattern, this level will attract more buy the dips. Buyers don't have to rush to bargain-hunting; they can wait for the bottom oscillation interval to stabilize and go long.

Resistance: 1.2640, 1.2670

Support: 1.2440, 1.2400

Risk Warnings and Disclaimers

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Jason

Summary:

As there is depreciation pressure on the CNH exchange rate, it is recommended to go short with quick entry and quick close in the short term.

SELL USDCNH

Close Time

CLOSED

6.47100

Entry Price

6.45700

6.48300

7.33499 +0.02223 +0.30%

7.5

Pips

Loss

6.45700

6.47175

Exit Price

6.47100

Entry Price

6.48300

Fundamentals

China's COVID-19 pandemic repeatedly breaks out. There is downward pressure on its economy. And China's central bank has introduced relatively accommodative monetary policies after a 25 bp deposit reserve ratio cut. At the same time, the Fed's interest rate hike will cause global capital to flow back to the U.S., while the Sino-U.S. yield spread has been inverted, which may reduce the attractiveness of CNH assets in the short term. There is depreciation pressure on the CNH exchange rate.

However, the People's Bank of China unexpectedly kept interest rates unchanged on April 20. The expectation of a rate cut fell through, which slightly supported the CNH exchange rate. But after the USDCNH oscillated at the bottom for nearly half a year and then successfully broke above the 6.400 mark, it has begun to rise. It is recommended to go short with quick entry and quick close in the short term.

Technical Analysis

USDCNH: To Sell in the Short Term as Indicators Become Ineffective_1

In the 1H timeframe, USDCNH recently surged, all the way above the 6.4000 mark and to the 6.4800 level. Multiple cycle indicators are in the overbought areas in the short term. Indicator RSI in the 1H timeframe continues to see a bearish divergence pattern. The indicators become ineffective, meaning that there is a need for a downward adjustment in the short term. You need to focus on the support and resistance between 6.4552 and 4.4800 today.

You can try to short at highs around 6.4715. The target can be set around 6.4552, and stop-loss is set above 6.4800.

Support: 6.4552/6.4361

Resistance: 6.4800/6.5000

Risk Warnings and Disclaimers

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Winkelmann

Summary:

As the U.S. dollar and U.S. bond yields are both down, XAUEUR tends to decline in the short term.

SELL XAUEUR

EXP

EXPIRED

1804.00

Entry Price

1786.00

1810.00

2535.11 +33.02 +1.32%

Pips

EXPIRED

1786.00

1782.82

Exit Price

1804.00

Entry Price

1810.00

Fundamentals

Recent high inflation and geopolitical risks continue to support gold prices higher. However, hawkish statements from U.S. Federal Reserve (Fed) officials have pushed up U.S. nominal and real interest rates, putting some short-term pressure on gold.

A report released by the Fed on Wednesday showed that the U.S. economy expanded at a moderate pace from mid-February to early April, with little relief from the impact of high inflation and worker shortages on businesses. With the market gradually digesting expectations of an aggressive Fed rate hike, both the U.S. dollar and U.S. bond yields dipped and profit-taking occurred at highs. That can lead to a weak consolidation, prompting the euro to strengthen in the short term. Overall, XAUEUR tends to decline in the short term.

Technical Analysis

XAUEUR: Try to Short at Highs due to Short-Term Weakness_1

In the 1H chart, XAUEUR continues the trend of falling from highs. Bulls can be forced to become bears. The indicator RSI is in a neutral position near 50, so the short-term rebound is not strong. It seems just to try to attract bulls. Then it is expected to decline further after the adjustment. Intra-day attention can be put on the key resistance near 1804.

You can try to go short at the current price near 1804. The target can be set at the key support level near 1785, and stop loss can be located above 1804.

Support: 1785/1790

Resistance: 1804/1830

Risk Warnings and Disclaimers

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Data

Pressure on Short-term Pullback Increases with RSI in the Overbought Zone

Fundamentals

Technical Analysis

To Long when It Breaks above the Current Triangle Correction at Highs

Fundamentals

Technical Analysis

It Is Recommended to Buy Low and Sell High in the Triangle Correction Range

Fundamentals

Technical Analysis

Go Short on Price High After Short-Term Test of Downward Support and Rally

Fundamentals

Technical Analysis

Canada's March Inflation Far Exceeds Expectations, USDCAD in Oversold Rally Pattern

Fundamentals

Technical Analysis

To Sell in the Short Term as Indicators Become Ineffective

Fundamentals

Technical Analysis

Try to Short at Highs due to Short-Term Weakness

Fundamentals

Technical Analysis

Risk Disclosure