Daily Market Report
16 May 2023

EUR/USD managed to regain some poise and advanced to the 1.0890 region not before clocking fresh multi-week lows in the 1.0845/40 band at the beginning of the week.
 
The greenback, on the flip side, gave away some gains following new tops near the 102.80 area when gauged by the USD Index (DXY) in a context dominated by the improvement in the sentiment surrounding the risk complex.
 
Yields on both sides of the Atlantic extended Friday’s recovery amidst steady speculation of a Fed’s pause in June vs. the continuation of the hiking cycle by the ECB.
 
No big news from Atlanta Fed R. Bostic after he suggested a small risk of a recession, at the time when he argued that rate cuts may kick in well into 2024.
 
Furthermore, the European Commission released its projections, predicting a 6.8% unemployment rate this year and a 6.7% rate in 2024. Consumer prices are expected to rise by 5.8% in 2023 and 2.8% in the following year, and the economy is expected to grow by 1.1% in 2023 and 1.6% in 2024.
 
Data wise on Monday, Industrial Production in the euro area contracted 4.1% MoM and 1.4% in the year to March. In the US, the NY Empire State Manufacturing Index worsened to -31.8 in May.
 
The continuation of the strong weekly recovery in the greenback was also accompanied by the move higher in US yields after a couple of sessions navigating with losses. Same situation in the German money market, where the 10-year Bund yields regained the 2.25% level.
 
The potential break of the May low at 1.0844 (May 15) may compel EUR/USD to test the weekly low of 1.0831 (April 10), followed by the intermediate 100-day SMA at 1.0799, and closely thereafter, the April low at 1.0788 (April 3). A breach of this range might trigger a possible examination of the minor level at 1.0712 (March 24), which could further lead to a scrutiny of the March low at 1.0516 (March 15), ultimately approaching the lowest point reached in 2023, 1.0481 (January 6). Conversely, the current focus for the currency pair is on attaining the highest point reached in 2023 at 1.1095 (April 26), followed by the significant round level of 1.1100. Should the pair continue to rise, the peak achieved during the week at 1.1184 (March 31, 2022), as well as another notable round level at 1.1200, will become influential factors in the future. The daily RSI bounced past the 44 level.
 
Resistance levels: 1.0890 1.0935 1.0960 (4H chart)
 
Support levels: 1.0844 1.0831 1.0788 (4H chart)

The resumption of the appetite for the risk-linked galaxy put the Japanese yen under further pressure and sponsored the third consecutive daily uptick in USD/JPY, this time advancing north of the 136.00 hurdle at the beginning of the week.
 
The pair, in the meantime, derived extra upside pressure from another positive session in US yields, particularly in the belly and the long end of the curve vs. a marginal move in the short end.
 
In Japan, further consolidation saw the JGB 10-year yields navigate around the 0.40% region.
 
In Japan, Producer Prices rose at a monthly 0.2% in April and 5.8% from a year earlier. In addition, Machine Tools Orders contracted at an annualized 12.7% in April.
 
The USD/JPY recovery faces an initial resistance level at the key 200-day SMA at 137.02 prior to the May high of 137.77 (May 2) and the 2023 peak of 137.91 (March 8). If further gains are made, it is possible that the weekly highs of 139.89 (November 30, 2022) and 142.25 (November 21, 2022) could be retested. Just the opposite, spot is anticipated to test the weekly low of 133.01 on April 26 if bears regain the upper hand. The break 100-day SMA at 132.92 seems to offer further help for this contention zone. Prior to the April 5 low of 130.62, the March 24 low of 129.63, and the February 8 low of 128.08, a minor contention level of 132.01 appears. The lowest point in 2023, which would be 127.21 (January 16), would be the next downside target. The daily RSI rose to the vicinity of 59.
 
Resistance levels: 136.32 137.77 137.91 (4H chart)
 
Support levels: 133.99 133.74 133.49 (4H chart)

In line with the broad-based recovery in the risk-associated universe, GBP/USD left behind two sessions in a row with losses and reclaimed the area beyond the 1.2500 barrier at the beginning of the week.
 
Indeed, the combination of some profit taking in the greenback with a better tone among the risky assets propped up the marked advance in Cable on Monday after meeting quite decent support near 1.2440.
 
In the UK money market, the 10-year Gilt yields advanced marginally past the 3.80% level, in line with their G10 peers.
 
There were no data releases across the Channel on Monday.
 
On the upside, GBP/USD is currently targeted at the 2023 high of 1.2668 (May 8), with buyers also focused on the 200-week SMA of 1.2865 ahead of the psychological level of 1.3000. If Cable experiences further downside momentum, it is likely to encounter immediate support at the May low of 1.2435 (May 2), and subsequently at the weekly low of 1.2344 (April 10). In the event that these levels are breached, a test of the temporary 55-day SMA at 1.233 is expected, followed by the April low at 1.2274 (April 3). If the pair continues to decline, it may potentially reach the significant 200-day SMA at 1.1960, before falling to the 2023 low of 1.1802 (March 8). The daily RSI rebounded beyond the 53 yardstick.
 
Resistance levels: 1.2540 1.2568 1.2679 (4H chart)
                                                                  
Support levels: 1.2442 1.2386 1.2367 (4H chart)

The marked daily decline in the dollar motivated AUD/USD to bounce off the area of multi-day lows near 0.6640 and revisit the area just above 0.6700 the figure at the beginning of the week.
 
Some extra support for the Aussie dollar came after the PBoC left unchanged its 1-Year MLF at 2.75%, as expected, while daily gains in copper prices and the iron ore also accentuated the bullish session in the pair on Monday.
 
Data wise Down Under, final prints saw Building Permits contract 0.1% MoM in March and 17.3% vs. the same month of 2022. Additionally, Private House Approvals contracted 2.8% in March vs. the previous month.
 
The weekly low of 0.6636 (12 May) is proving to be the AUD/USD's immediate conflict region. Further weakness may lead to a drop towards the April low of 0.6573 (28 April), ahead of the 2023 low of 0.6563 (10 March), as well as the weekly lows of 0.6386 (10 November 2022) and 0.6272. (3 November). The next upward hurdle, on the other hand, is the May high of 0.6818. (May 10). Once this level is breached, the crucial round level of 0.7000, followed by the weekly high of 0.7029 (February 14) and the 2023 high of 0.7157, might be a plausible goal (February 2). The RSI on the daily chart leapt to the proximity of 51.

Resistance levels: 0.6696 0.6718 0.6818 (4H chart)
 
Support levels: 0.6636 0.6620 0.6573 (4H chart)

Gold prices reversed three daily pullbacks in a row and regained the smile somewhat at the beginning of the week.
 
Indeed, the precious metal managed to advance modestly on Monday in response to the resurgence of the selling bias in the greenback, while further gains in US yields across the curve curtailed potential gains in the metal.
 
So far, bullion should continue to track speculation around a potential impasse at the Fed’s tightening cycle as soon as at the June 14 gathering, while extra interest rate hikes by the ECB could put a more serious advance to the test.
 
The $2000 region appears to be a psychological threshold for gold bears at the moment. If the bearish pressure persists, the metal could possibly decline to the 2021 low of $1804 (February 28). Before this, it would have to break through the minor support level of $1999 (May 5), the weekly low of $1969 (April 19), the April low of $1949 (April 3), and the 100-day SMA at $1921. On the upside, the primary obstacle will be the highest point of 2023 at $2067 (May 4), followed by the March 2022 top of $2070 (March 8) and the record peak of $2075 (August 7, 2020).
 
Resistance levels: $2022 $2048 $2067 (4H chart)
 
Support levels: $2000 $1969 $1949 (4H chart)

Silver prices followed the rest of its peers on Monday and printed decent gains north of the $24.00 mark per ounce, reversing at the same time Friday’s multi-week lows near $23.90.
 
The soft tone in the US dollar and the generalized upbeat mood in the commodity complex seem to have been enough to spark some recovery in the grey metal at the beginning of the week.
 
Simultaneously, the Gold/Silver Ratio could not sustain a move above the 84.00 barrier and retreated to the negative territory near 83.70, halting at the same time five consecutive daily advances.
 
Given the current market movement, silver now confronts immediate contention at the temporary 55- and 100-day SMAs of $23.71 and $23.39, respectively. If the price continues to fall, the 200-day SMA at $21.87 will provide support, followed by the 2023 low at $19.90. (March 10). On the other hand, bulls should be mindful of the first level of resistance, which is the 2023 top at $26.12 per ounce (May 5). This is followed by the April 2022 peak of $26.21 (April 18), and then the March 8 high of $26.94, before hitting the major round level of $27.00.
 
Resistance levels: $24.20 $24.90 $25.91 (4H chart)
 
Support levels: $23.72 $23.54 $22.80 (4H chart)

Prices of the WTI began the week in a positive style and surpassed the key $71.00 mark per barrel, bouncing off earlier lows near $69.50.
 
After three continuous everyday pullbacks, prices of the barrel of the commodity accumulate some steam and float around the $71.00 area on the rear of traders’ interests over the ongoing tight stock conditions of the market, while progressing output cuts by the OPEC+ likewise add to the energetic state of mind in crude oil.
 
Supporting the daily improvement additionally arises US intends to begin topping off the SPR and the recharged selling predisposition in the greenback.
 
Later in the week, the API and the EIA will give an account of week after week US crude oil inventories on Tuesday and Wednesday, separately.
 
Despite some recent advancements, crude oil prices have been steadily falling in the last sessions. For instance, on May 4, WTI reached a new 2023 low of $63.73 per barrel. Oil prices could fall further to the crucial $60 level if the December 2021 low of $62.46 (December 2), is cleared. Going against the norm, inconsistent higher swings ought to meet the starting obstacle at the week-by-week high of $79.14 (April 24), which goes before the key $80.00 mark and the basic 200-day SMA at $80.67. The peak of $83.49 in 2023 (April 12) comes next prior to the November 2022 high of $93.73 (November 7).
 
Resistance levels: $71.72 $73.83 $76.88 (4H chart)

Support levels: $69.38 $63.61 $62.42 (4H chart)

Stocks tracked by the three major US benchmark indices started the week on a positive foot, leaving behind part of last week´s strong bearish performance.
 
Indeed, the Dow Jones managed to edge modestly up amidst growing unease among investors over the debt ceiling, as policy makers still struggle to find common ground on the issue.
 
In addition, another poor print from regional manufacturing gauges lent support to the idea of a Fed´s pause in June, while the hawkish narrative from rate setters appears somewhat mitigated so far.
 
All in all, the Dow Jones gained 0.24% to 33382, the S&P500 advanced 0.38% to 4140 and the tech-reference Nasdaq Composite rose 0.74% to 12375.
 
If the Dow continues to fall, it may find support at the May low of 32937 (May 4), ahead of the key 200-day SMA of 32758. Should the index keep dropping, the 2023 low of 31429 (March 15) could offer additional support prior to the 2022 low of 28660 (October 13). Having said that, the index is likely to meet initial resistance at the May peak of 34257 (May 1), followed by the 2023 high of 34,342 (January 13) and the December 2022 top of 34712 (December 13). If the index surpasses this point, it could generate momentum towards the April 2022 high of 35492 (April 21). The daily RSI advanced marginally to the 47 region.
 
Top Performers: Inter, Caterpillar, Salesforce Inc

Worst Performers: Verizon, Merck&Co, UnitedHealth

Resistance levels: 33772 34257 34334 (4H chart)

Support levels: 33110 32937 31805 (4H chart)