Daily Market Report
24 May 2023
Fresh peaks in the greenback forced EUR/USD to give away two consecutive daily advances and revisit the area of monthly lows near 1.0760 on turnaround Tuesday.
Indeed, the USD Index (DXY) climbed to new multi-week highs north of 103.60 on the back of persistent jitters surrounding the US debt ceiling issue, particularly after the Biden-McCarthy talks delivered nothing but promises of a "no default" late on Monday.
Further support for the dollar came once again in response to the hawkish narrative from Fed speakers, who signalled that the Fed might not be done when it comes to rate hikes. This view underpins the notion of a potential pause in June and the resumption of rate hikes in the subsequent months.
The sharp uptick in the buck came pari passu with the relentless move higher in US yields across the curve, where the short end and the belly of the curve navigated levels last seen back in mid-March.
The euro also derived further selling pressure after another disheartening print from the preliminary Manufacturing PMI in Germany and the broader Euroland in May at 42.9 and 44.6, respectively. The flash Services PMI, instead, is expected to have improved further to 57.8 and 55.9, respectively.
In the US data space, the advanced Manufacturing PMI is seen at 48.5 and 55.1 when it comes to the Services gauge. In addition, New Home Sales expanded 4.1% MoM in April, or 0.683M units, and the Richmond Fed Manufacturing Index worsened to -15 in May.
Speedy assistance lies ahead for the EUR/USD accepting that it continues to decline, starting with the May low at 1.0759 (May 19) prior to a minor level at 1.0712 (March 24). If the pair breaks below this level, it may actually test the low of March at 1.0516 (March 15) before reaching its absolute low for the year of 1.0481 (January 6). On the other hand, the 55-day SMA at 1.0872, just short of the mental 1.1000 limit, presents a transitory obstacle. Beyond the latter, there are no significant obstacles to overcome until it reaches the 2023 high of 1.1095 (April 26) seconded by the round level of 1.1100 and the week-after-week top of 1.1184 (March 31, 2022), all preceding another round level at 1.1200. The daily RSI receded to the sub-38 area.
Resistance levels: 1.0853 1.0904 1.0948 (4H chart)
Support levels: 1.0759 1.0712 1.0516 (4H chart)
USD/JPY printed a new 2023 peak near 138.90 on Tuesday. That initial uptick, however, lost some traction afterwards and eventually left the pair to the mercy of increased volatility and ended the session near Monday’s closing levels.
The continuation of the move higher in the greenback and the relentless advance in US yields across the curve sustained the earlier bull run to the proximity of the 139.00 mark, while the better tone in the Japanese JGP 10-year yields seems to have lent some support to the yen.
In the Japanese docket, flash Judo Bank Services and Manufacturing PMIs came at 56.3 and 50.8, respectively, for the month of May.
The next resistance level for USD/JPY lies at the 2023 peak of 138.91 (May 23), with the potential for further upward movement. Should the pair continue to appreciate, it may retest the weekly highs of 139.89 (November 30, 2022) and 142.25 (November 21, 2022). On the flip side, the initial support level can be found at the important 200-day SMA at 137.15, ahead of the temporary 55-day and 100-day SMAs at 134.14 and 133.27 respectively. Moving lower, we encounter the weekly low of 133.01 (April 26), followed by minor support at 132.01 (April 13) and the April low of 130.62 (April 5). A deeper decline could lead to a revisit of the March low at 129.63 (March 24) and the February low at 128.08 (February 8), before approaching the 2023 low of 127.21 (January 16). It is worth noting that the daily RSI rose to the proximity of 66.
Resistance levels: 138.91 139.89 141.61 (4H chart)
Support levels: 137.42 135.64 134.93 (4H chart)
After bottoming out in new monthly lows near 1.2370, GBP/USD staged a marked comeback to the area beyond 1.2400 the figure on Tuesday, although it could not help ending the session with modest losses.
In fact, the intense bullish move in the greenback kept the British pound and the rest of the risk-associated assets under further pressure on Tuesday, always against the backdrop of omnipresent debt ceiling woes.
In the UK calendar, the flash Manufacturing and Services PMI showed a mild pullback in May vs. the previous month to 46.9 and 55.1, respectively.
Also from the docket, BoE Governor A. Bailey suggested that inflation has turned the corner and reiterated that the MPC will adjust the bank rate as required to bring inflation back to the bank’s target in a sustainable fashion in the medium term.
The GBP/USD pair is facing a possible vulnerability that could result in immediate support levels at the May low of 1.2372 (May 23) followed by the weekly low of 1.2344 (April 10) and the April low of 1.2274 (April 3), which is reinforced by the interim 100-day SMA (1.2276). Extra decline could see the crucial 200-day SMA at 1.1970 revisited prior to the 2023 low of 1.1802 (March 8). On the contrary, if the pair moves upward, the initial obstacle to overcome would be the 2023 high of 1.2679 (May 10). Buyers may also aim for the 200-week line SMA at 1.2864, seconded by the psychological level of 1.3000. The daily RSI dropped below the 46 yardstick.
Resistance levels: 1.2483 1.2510 1.2546 (4H chart)
Support levels: 1.2372 1.2352 1.2274 (4H chart)
AUD/USD reversed the recent strength and resumed the downside on Tuesday, this time revisiting the key 0.6600 neighbourhood, where a solid contention zone emerges.
In fact, sellers forced the Aussie dollar to give away part of the recent gains amidst the resumption of the uptrend in the greenback, while persistent uncertainty around the US debt ceiling issue also weighed on the risk complex.
Extra weakness, in addition, came from the generalized bearish performance of the commodity universe.
In Oz, flash figures saw the Judo Bank Services PMI at 51.8 in May (from 53.7) and the Judo Bank Manufacturing PMI at 48.0 (unchanged).
AUD /USD faces immediate contention at the May low of 0.6604 (May 18) before the April low of 0.6573 (April 28), which seems to have been overtaken by the 2023 low of 0.6563 (March 10). In addition, the weekly lows at 0.6386 (November 10 2022) and the November 2022 low at 0.6272 (November 3) represent other potential support levels. On the upside, the next critical hurdle to overcome is the 200-day SMA at 0.6708 ahead of the May high of 0.6818 (May 10). If this area is cleared, the critical round level of 0.7000 becomes a conceivable target, alongside the weekly top of 0.7029 (February 14) and the 2023 peak at 0.7157 (February 2). The RSI on the daily chart grinded lower to the sub-43 zone.
Resistance levels: 0.6675 0.6709 0.6818 (4H chart)
Support levels: 0.6604 0.6573 0.6563 (4H chart)
Gold prices managed to trim the earlier drop to the vicinity of the $1950 mark per ounce troy and retake the $1970 region – and the positive territory - on Tuesday.
In fact, the precious metal printed humble gains despite the strong resumption of the upside bias in the greenback, which was in turn helped by the still unabated rally in US yields across the curve.
In the meantime, debt ceiling concerns remain a key driver of investors’ sentiment in the very near term in combination with expectations of further rate hikes/impasse by the Federal Reserve in June.
On account of selling pressure fortifying, bullion could fall back to the May low of $1952 (May 18), which seems upheld by the April low of $1949 (April 3) and precedes the 100-day SMA at $1931. South from here arises the key 200-day SMA at $1827, all before the 2021 low of $1804 (February 28). If it climbs, the immediate u-barrier emerges at the key $2000 mark. Further up, there are no resistance levels of note until the 2023 top of $2067 (May 4), approved by the March 2022 high of $2070 (March 8) and the unmatched zenith of $2075 (August 7, 2020).
Resistance levels: $1984 $2003 $2022 (4H chart)
Support levels: $1952 $1934 $1885 (4H chart)
Prices of the ounce of silver briefly retreated to fresh lows in the vicinity of the $23.00 mark for the first time since late March on Tuesday before attempting a rebound afterwards.
Another firm session in the US dollar, higher yields, and the broad-based negative performance of the commodity complex all sent prices of the grey metal lower and added to the discouraging start of the week.
At the same time, the Gold/Silver Ratio extended Monday’s advance to the 84.60 region, or multi-week highs, just to lose momentum afterwards and recede to the sub-84.00 region.
If the May low of $23.11 (May 23) is breached, there is a possibility that silver will tackle the 200-day SMA at $21.97. This would be followed by the 2023 low at $19.90 (March 10). On the opposite side of the coin, bullish investors should watch out for an interim hurdle at the 55-day SMA at $24.02 ahead of a notable resistance level corresponding to the highest reached in 2023, $26.12 (May 5). This is followed by the April 2022 top at $26.21 (April 18), which precedes the 2022 peak at $26.94 (March 8) just ahead of the significant round level of $27.00.
Resistance levels: $24.01 $24.20 $24.87 (4H chart)
Support levels: $23.11 $22.80 $22.12 (4H chart)
Prices of the American reference for sweet light crude oil advanced to multi-session highs and flirted with the key resistance area near the $74.00 mark per barrel on Tuesday.
The marked bounce in costs of the commodity came after another uptick in prices of gasoline futures, which rose to levels last seen in mid-April beyond the $2.70 mark. It is worth noting that these prices have already gained around 20% since their monthly lows of around $2.25 (May 4).
In addition, the remarks made by the energy minister of Saudi Arabia appear to have exacerbated the tightness of the crude oil market at the moment by warning short-sellers, a message that may suggest that OPEC+ could reduce oil output again in the near term.
Later on Tuesday, the API will publish its weekly report on US crude oil inventories for the week ending May 19 ahead of the DoE’s report on Wednesday.
The WTI price trend has exhibited considerable volatility thus far. Further gains are expected to meet the next obstacle at the weekly high of $79.14 (April 24), followed by the key level of $80.00 and the crucial 200-day SMA at $80.14. Furthermore, subsequent resistance levels can be identified, such as the 2023 peak at $83.49 (April 12) and the November 2022 top at $93.73 (November 7). In the event that sellers regain dominance in the market, it is important to monitor the next significant support levels. These include the 2023 low of $63.61 (May 4), followed by the December 2021 low of $62.46 (December 2), and the critical level of $60.00 per barrel.
Resistance levels: $73.72 $75.53 $76.89 (4H chart)
Support levels: $71.85 $70.01 $69.38 (4H chart)
Determined anxiety around the US debt ceiling talks kept on burdening investors’ opinion and kept any endeavor from bulls to recover control of the market discouraged on Tuesday.
In fact, market participants appeared prudent in light of the Democrats' and Republicans' resumption of negotiations in the following hours, all of which followed the constructive tone from Monday's meeting between House Speaker McCarthy and President Biden.
On the whole, the Dow Jones retreated 0.09% to 33255, the S&P500 dropped 0.48% to 4172, and the tech-benchmark Nasdaq Composite deflated 0.58% to 12647.
The May low of 32937 (May 4) is proving to be an immediate point of attack for the Dow Jones if losses accelerate in the near term. Further down, the important 200-day SMA is at 32776, before the 2023 low at 31429 (15 March) and the 2022 low at 28660 (13 October). On the upside, the May top at 34257 (May 1) is the first possible target, followed by the 2023 peak at 34342 (January 13) and the December 2022 high at 34712 (December 13). If the index exceeds this level, it could accelerate towards the April 2022 top at 35492 (April 21). The step-by-step RSI receded to the vicinity of 46.
Top Performers: Chevron, Verizon, Walgreen Boots
Worst Performers: Visa A, Intel, Microsoft
Resistance levels: 33652 33772 34257 (4H chart)
Support levels: 33006 32937 31805 (4H chart)