Daily Market Report
30 May 2023

A pretty dull start to the new trading week saw EUR/USD wobble just above the 1.0700 neighbourhood amidst the generalized absence of volatility and marginal trading conditions in response to the US Memorial Day holiday.
 
On the back of the inactivity in the US markets, the greenback also gyrated around Friday’s closing levels in the low-104.00s amidst practically no reaction after President Biden and House Speaker McCarthy clinched a deal to raise the debt ceiling over the weekend.
 
The arrangement would suspend the debt limit as far as possible through January 1, 2025. This eliminates it as an expected issue in the 2024 official election. Under the arrangement, non-defence spending would remain somewhat level in fiscal year 2024 and increment by 1% in 2025, after specific changes in accordance with appropriations were made, as per a White House official. After 2025, there would be no budget caps, as per the authority.
 
With the debt ceiling issue sorted (or almost), investors are now predicted to shift their focus on the potential next steps from the ECB and the Fed regarding interest rates. While a 25 bps rate hike is almost fully anticipated by the ECB, speculation of a similar rate hike by the Fed remains on the rise. The upcoming US Nonfarm Payrolls (June 2) should play a key role in the latter.
 
So far, the FedWatch Tool measured by CME Group sees the probability of another 25 bps rate increase at nearly 61% at the June 14 gathering.
 
In the German money market, 10-year bund yields dropped to 3-day lows near 2.43%.
 
There were no data releases scheduled in both the US and Europe on Monday.
 
Should EUR/USD cross below the May low of 1.0701 (May 26), it will face the March low at 1.0516 (March 15) ahead of the lowest point of the year so far, 1.0481 (January 6). On a positive note, there are interim barriers represented by the 100-day and 55-day SMAs positioned at 1.0814 and 1.0880 respectively, below the psychological threshold of 1.1000. Once this region is surpassed, there are no significant hurdles until the pair reaches the highest point of 2023 at 1.1095 (April 26), followed by the rounded level of 1.1100 and the weekly peak of 1.1184 (March 31, 2022). Another rounded level awaits at 1.1200. The daily RSI dropped below the 34 level on a daily basis.
 
Resistance levels: 1.0758 1.0801 1.0831 (4H chart)
 
Support levels: 1.0701 1.0516 1.0481 (4H chart)

The inconclusive session in the greenback coupled with the lack of activity in the US bond market seems to have been enough to spark a corrective move in USD/JPY and drag it to the vicinity of the 140.00 neighbourhood at the beginning of the week.
 
Furthermore, spot clinched fresh tops near the 141.00 barrier for the first time since late November 2022 before coming under some moderate selling pressure on Monday.
 
In the meantime, and following the recent deal on the US debt ceiling, investors should start looking at Friday’s release of the US jobs report to get further details regarding the potential next move by the Fed when it comes to interest rates.
 
In Japan, the JGB 10-year yields extended the consolidative mood just below the 0.45% area.
 
The following up-barrier for USD/JPY is at the 2023 high at 140.91 (May 29). Assuming the pair clears the last option, it could retest the week-by-week highest points of 142.25 (November 21 2022) and 148.84 (October 31 2022). Having said that, there is imminent contention at the significant 200-day SMA at 137.22 prior to arriving at the transitory 55-and 100-day SMAs at 134.48 and 133.57, individually. Further south, the pair could revisit the weekly low of 133.01 (April 26), trailed by minor help at 132.01 (April 13) and the April low of 130.62 (April 5). A more profound move ought to see the March low of 129.63 (March 24) and the February low of 128.08 (February 8) come to the front, trailing by the 2023 low of 127.21 (January 16). The day-to-day RSI receded to the vicinity of the 70 threshold.
 
Resistance levels: 140.91 141.61 142.25 (4H chart)
 
Support levels: 140.17 139.49 138.22 (4H chart)

In line with the rest of the risk-associated universe, sterling traded within a narrow range near recent levels vs. the greenback, leaving GBP/USD hovering around the 1.2360/70 region on Monday.
 
In fact, cable printed humble gains against the backdrop of a broad-based lack of volatility and marginal trading conditions following the extended weekend in the US due to the Memorial Day holiday.
 
Nothing was scheduled data-wise in the UK calendar on Monday.
  
If the GBP/USD falls below its May low of 1.2308 (May 25), it could potentially retest its temporary 100-day SMA at 1.2287 before reaching the April low of 1.2274 (April 3). If the pair continues to decline, it may then test the important 200-day SMA at 1.1979 ahead of the 2023 bottom of 1.1802 (March 8). Conversely, if additional gains occur, the pair will first need to surpass the weekly high at 1.2546 (May 16), followed by the 2023 peak of 1.2679 (May 10). Subsequently, buyers may aim for the 200-week SMA at 1.2864 prior to the psychological milestone of 1.3000. The daily RSI improved past the 42 yardstick.
 
Resistance levels: 1.2395 1.2469 1.2510 (4H chart)
                                                                  
Support levels: 1.2308 1.2274 1.2189 (4H chart)

Further optimism encouraged AUD/USD to add to Friday’s gains and rise to 2-day highs around 0.6550 at the beginning of the week.
 
The second consecutive daily gain in spot came on the back of the irresolute price action in the greenback and the lack of direction in the global markets in response to the inactivity in the US markets.
 
The Australian calendar was empty on Monday, leaving results from the domestic housing data in the limelight on Tuesday.
 
The loss of the 2023 low at 0.6490 (May 26) could prompt AUD/USD to revisit the weekly low of 0.6386 (November 10 2022) and the November 2022 low of 0.6272 (November 3). On the flip side, the immediate up-barrier lies at the important 200-day line SMA at 0.6701, ahead of the May high of 0.6818 (May 10) and the crucial psychological level of 0.7000. Above this level, the weekly top of 0.7029 (February 14) appears ahead of the 2023 peak of 0.7157 (February 2). The RSI on the daily chart advanced past the 38 mark.
 
Resistance levels: 0.6554 0.6598 0.6675 (4H chart)
 
Support levels: 0.6490 0.6386 0.6272 (4H chart)

Gold prices traded mildly on the defensive around the $1940 region per ounce troy at the beginning of the week.
 
The inactivity in US markets, coupled with the lack of direction in global assets and alleviated concerns following positive news on the US debt ceiling front, all kept the price action in the yellow metal somewhat subdued on Monday.
 
Later in the week, the precious metal is predicted to closely follow the publication of the US jobs report for the month of May due on June 2, which should have a direct impact on the Fed’s decision on the policy rate next month.
     
In spite of Friday's rebound, gold continues to face downward pressure for the time being. However, if it falls below the May low of $1936 (May 26), which seems to have some support from the interim 100-day SMA at $1935, it is likely to experience a further decline towards the 200-day SMA at $1830, well before reaching the bottom observed in 2021 at $1804 (February 28). On the upside, during intermittent recoveries, there may be provisional resistance encountered at the 55-day SMA at $1986 before approaching the significant level of $2000. There are no significant resistance levels until it reaches the peak of 2023 at $2067 (May 4), which is backed by the high seen in March 2022 at $2070 (March 8) and the unmatched top of $2075 (August 7, 2020).
 
Resistance levels: $1957 $1964 $1985 (4H chart)
 
Support levels: $1936 $1885 $1809 (4H chart)

Following its peers, silver initiated the week in a negative fashion and partially reversed the strong upside seen at the end of last week.
 
Indeed, the grey metal could not sustain the earlier bull run to the $23.40 region, an area also coincident with the 100-day SMA, and eventually succumbed to the selling impulse against the backdrop of marginal activity in the commodity universe and irresolute price action in the greenback.
 
As a result, the Gold/Silver Ratio managed to regain some composure and recouped part of the ground lost on Friday’s sharp decline to the boundaries of the 200-day SMA (83.35).
 
If the May low of $22.68 (May 26) is broken, silver could test the 200-day SMA at $22.04 before reaching the significant round number of $20.00 and the 2023 low of $19.90 (March 10). On the flip side, bullish traders should be mindful of the transitory resistance level at the 55-day SMA at $24.20, prior to the 2023 top of $26.12 (May 5). This is followed by the April 2022 peak of $26.21 (April 18), before the weekly high of $26.94 (March 8) and the key $27.00 round level.
 
Resistance levels: $23.37 $23.61 $24.01 (4H chart)
 
Support levels: $22.66 $22.12 $21.45 (4H chart)

WTI prices wobbled about $73.00 on Monday, remaining at the mercy of the global market's general lack of direction.
 
Indeed, the commodity navigated within the optimism surrounding the (almost) resolved US debt ceiling and increasing speculation (and concern) over the possibility that the Federal Reserve might raise the Fed Funds Target Range (FFTR) once more at the June 14 meeting, which ultimately bolstered the resurgence of recession woes.
 
Later in the week, the API and the EIA will report on weekly US crude oil inventories during the week ended on May 26.
 
Clearly, the WTI has been moving within a consolidative theme in the past few weeks. The breakout of this topic should uncover the weekly high of $74.69 (May 24) in front of the impermanent 100-day SMA at $75.89, followed by the key $80.00 limit and the 200-day SMA at $79.86. In addition, the 2023 zenith of $83.49 (April 12) and the November 2022 top of $93.73 (November 7) await in case the recovery takes a more serious note. If bears retake control, the 2023 low of $63.61 (May 4) arises as a key conflict region, backed by the December 2021 low of $62.46 (December 2), all of which are above the fundamental $60.00 per barrel.
 
Resistance levels: $74.69 $76.89 $79.14 (4H chart)

Support levels: $70.94 $70.01 $69.38 (4H chart)

On Friday, the Dow Jones rebounded and made significant gains after experiencing five consecutive days of decline, which resulted in a new monthly low of around 32500 on May 25.
 
Friday’s gains in the index were bolstered by renewed optimism over a solution to the debt ceiling issue.
 
It is worth noting that negotiations between President Biden and House Speaker McCarthy eventually yielded a deal over the weekend. The compromise also suspends the debt ceiling until Jan. 1, 2025, so that it will not be exceeded until the 2024 presidential election. Spending will also remain largely unchanged in 2024, with the exception of defence and veterans spending, while 2025 will see a 1% increase.
 
In summary, the Dow Jones surged by 1.00% to 33093, the S&P500 rose by 1.30% to 4205, and the tech-heavy Nasdaq Composite increased by 2.19% to 12975.
 
The recuperation in the Dow Jones could get more serious once the weekly high of 33652 (May 19) is cleared. Further up comes the May top of 34257 (May 1) ahead of the 2023 peak of 34342 (January 13), and the December 2022 pinnacle of 34712 (December 13). Assuming that the index ascends over this level, it could advance toward the April 2022 high of 35492 (April 21). On the downside, a dip under the May low at 32586 (May 25) could see losses advance rapidly to the 2023 low of 31429 (March 15) before the 2022 low of 28660 (October 13). The RSI got pace and intruded the 45 level.
 
Top Performers: Intel, American Express, Salesforce Inc

Worst Performers: Merck&Co, Travelers, Chevron

Resistance levels: 33162 33334 33652 (4H chart)

Support levels: 32586 31805 31429 (4H chart)