Anticipating Further Decline Post-Gap Reversal

Commodity

Economic

Summary:

Gold prices experienced a significant gap down at the commencement of the week, with an overall depreciation exceeding 3%. The amelioration of Sino-US trade disputes and the ceasefire between India and Pakistan have been the dominant factors, leading to a diminished safe-haven demand and a consequent plunge in gold prices.

SELL XAUUSD

Close Time

CLOSED

3224.46

Entry Price

3136.00

3352.00

4216.87 +18.96 +0.45%

884.6

Pips

Profit

3136.00

3135.98

Exit Price

3224.46

Entry Price

3352.00

Fundamentals

Gold commenced the new week under considerable bearish pressure, trading below the $3,250 threshold, with cumulative daily losses surpassing 3%. The weekend witnessed a de-escalation of tensions between India and Pakistan, marked by a bilateral ceasefire and the resumption of diplomatic engagements, which precipitated a decline in market risk aversion and a substantial retreat in gold prices.

Additionally, the joint announcement by China and the US of their intention to significantly reduce and suspend reciprocal tariffs has ameliorated risk sentiment, exerting downward pressure on gold prices. The agreement's details indicate a mutual aim to reduce tariffs on the majority of imports from each other to 30% within a 90-day period. This 90-day accord signifies a marked reduction in the ongoing trade discord between the two economic superpowers. The agreement was proclaimed following high-level negotiations in Geneva, Switzerland, and is perceived as a pivotal stride towards stabilizing global markets and rejuvenating business confidence.

A joint communiqué disclosed that subsequent to the aforementioned actions, both parties will institute a mechanism to continue dialogues on economic and trade relations. The dialogue will be co-chaired by Chinese Vice Premier He Lifeng, US Treasury Secretary Besant, and US Trade Representative Greer.

In the realm of futures trading, Asian and European equity markets predominantly advanced. US stock indices are anticipated to open with notable gains.

The market appears prudently optimistic that the US-China accord at least signifies a turning point in the broader trade discord in terms of tone and intent. Investors will continue to await further pronouncements before reassessing the long-term prognosis, but for the present, the enhancement in risk sentiment is diminishing gold's short-term allure.

Anticipating Further Decline Post-Gap Reversal_1

Technical Analysis

From a technical vantage point, the protracted descent in gold prices suggests that the rebound from $3,201 has culminated at $3,434. Presently, the decline in the asset's price is construed as the third phase of a correction pattern since the apex at $3,499. Further depreciation is favorable for gold prices to descend to the $3,201 support level, and may even perforate this support.

After breaching this support level, the downside space should be constrained by the 38.2% Fibonacci retracement of the $2,584 to $3,499 move at $3,150, which is proximate to the 55-day moving average (currently at $3,144). It is anticipated that following the correction's completion, a more substantial upward trajectory will ensue.

Trading Recommendations

Trading Direction: Sell

Entry Price: 3222

Target Price: 3136

Stop Loss: 3352

Valid Until: May 27, 2025, 23:55:00

Support: 3201/3193/3189

Resistance: 3292/3326/3349

Risk Warnings and Disclaimers

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Eva Chen

Economic

Commodity

Summary:

The suspension of reciprocal tariffs between China and the US has significantly bolstered the crude oil market, with the details of the trade agreement exceeding market expectations.

BUY WTI

Close Time

CLOSED

62.106

Entry Price

70.540

56.700

59.983 +0.174 +0.29%

187.0

Pips

Loss

56.700

60.236

Exit Price

62.106

Entry Price

70.540

Fundamentals

On Monday during the Asian trading session, WTI crude oil prices surged, reaching $63.00 per barrel, marking the highest level since the end of April, with an intra-day gain of 3.38%.

The primary drivers behind the substantial increase in crude oil prices include the announcement by China and the US on Sunday in Geneva, Switzerland, of a trade agreement that exceeded market expectations. This positive development has helped to alleviate demand-side concerns and propelled crude oil prices upward.

US Treasury Secretary Scott Bessent announced a significant reduction in tariffs on imports from China, bringing them close to the 30% level prior to Liberation Day. This move is substantially lower than the market's anticipated range of 54% - 60%. The initial validity period for this tariff reduction is 90 days, and the same applies to the deferral of other reciprocal tariffs.

It is worth noting that since Liberation Day, the market's consensus forecast for US economic growth in 2025 has been downgraded from 2.2% to 1.4%, implying an upward revision of the previously estimated 0.8% negative impact. Therefore, if today's tariffs are confirmed to be permanent, they could pose an upside risk to the current consensus growth outlook. Although the easing of tariffs does not automatically mitigate all the negative effects already seen in international trade and consumer or business confidence, we believe that today's announcement significantly reduces the risk of a full-blown recession in the future.

Confirming the Path of Least Resistance Is Upward _1

Technical Analysis

WTI crude oil has been on a bullish trajectory since rebounding from its April low of around $56.00 per barrel, and the current price movement has broken through the $63.00 level.

Since early May, the formation of a series of higher lows and higher highs in oil prices indicates that an upward trend is taking shape. WTI crude oil prices have successfully breached the 100-day and 200-day moving averages, confirming that the path of least resistance is upward.

In terms of momentum, the signals from oscillating indicators are mixed. The stochastic indicator is hovering near the upper end of its range but has not yet reached overbought territory, suggesting that there is still room for buyers to push prices higher before they exhaust their strength. Meanwhile, the relative strength index (RSI) appears to be flattening out in the bullish zone above the 50 level, indicating that sustained buying pressure is increasing.

If WTI crude oil prices remain above the psychological level of $60.00 and the moving averages in subsequent trading, we anticipate that oil prices will continue to surge towards the next resistance level at $64.00. A successful break above this resistance could lead to a test of the recent highs near $66.50.

On the other hand, investors should remain cautious of potential pullbacks, with immediate support currently located near the 100-day moving average at $59.00. A breach of this support level could find another buffer near the 200-day moving average at $58.50. Any reversal below these moving averages could signal a further correction towards the $56.00 support zone.

Trading Recommendations

Trading Direction: Long

Entry Price: 62.00

Target Price: 70.54

Stop Loss: 56.70

Valid Until: May 27, 2025, 23:55:00

Support: 59.95/59.00/58.50

Resistance: 63.47/64.71/66.89

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The Pound plunges below 1.3200 as a US-China tariff truce boosts the Dollar; markets now await key UK jobs and US inflation data.

SELL GBPUSD

Close Time

CLOSED

1.31700

Entry Price

1.30000

1.33100

1.33325 +0.00013 +0.01%

140.0

Pips

Loss

1.30000

1.33100

Exit Price

1.31700

Entry Price

1.33100

The British Pound (GBP) fell sharply on Monday, sinking to a one-month low against the US Dollar (USD), after a landmark agreement between the United States and China to ease tariffs drove a broad rally in the Greenback. The GBP/USD pair breached the critical 1.3200 level, plunging to around 1.3140 in early European trading, as market sentiment swung decisively in favor of the US currency.

At the heart of the move was a surprise announcement from US Treasury Secretary Scott Bessent, who confirmed that both Washington and Beijing had agreed to reduce existing tariffs for a temporary 90-day period by a striking 115%. While the headline figure raised eyebrows due to its mathematical complexity—since tariffs remain asymmetric at 10% for US imports and 30% on Chinese goods—it nevertheless marked a significant de-escalation in a trade standoff that has long weighed on risk sentiment.

The US Dollar Index (DXY), which tracks the performance of the greenback against a basket of six major currencies, surged to 101.80—its highest level since early April—on the news. Global markets responded with relief, as risk appetite improved and safe-haven demand waned. Equities rose across Asia and Europe, while US Treasury yields edged higher, pricing in a less hawkish Federal Reserve amid easing inflationary pressure.

“Although not all issues have been resolved—fentanyl-related concerns remain particularly contentious—the agreement is a meaningful breakthrough,” Bessent noted in a press briefing. Analysts see the détente as laying the groundwork for a potential resumption of the Fed’s easing cycle, paused since January, especially if inflation expectations soften further in the months ahead.

The trade accord also capped a turbulent period for the US Dollar, which had shed more than 6% since the announcement of reciprocal tariffs on what President Trump called “Liberation Day.” With global supply chains now expected to normalize and import costs poised to ease, economists suggest that US consumer price pressures could begin to decelerate more rapidly than previously forecast.

While the US Dollar stole the spotlight, developments in the UK monetary policy landscape were also noteworthy. Despite the Pound’s weakness versus the Dollar, it remained relatively firm against other major currencies after the Bank of England (BoE) struck a balanced tone in its latest policy meeting.

The BoE trimmed interest rates by 25 basis points to 4.25% last week, in a decision that revealed a deep split among Monetary Policy Committee members. Chief Economist Huw Pill and hawkish member Catherine Mann dissented, favoring unchanged rates, signaling growing divergence within the central bank.

Speaking on Monday, BoE Deputy Governor Clare Lombardelli defended the rate cut as appropriate, citing “gradual disinflation progress and improved trade conditions,” while warning that monetary policy remains restrictive. “We’re not done yet. More cuts could follow,” she hinted.

However, Chief Economist Pill appeared less dovish in follow-up remarks on Friday, stating that longer-term domestic pressures could still ignite inflation again. Notably, he downplayed the direct impact of global trade developments on the UK economy, suggesting that the domestic policy outlook may not be as reactive to global events as in the US.

This week, markets will focus on two pivotal data releases due Tuesday: the UK’s labor market figures and the US Consumer Price Index (CPI) for April.

The UK employment report for the three months to March is expected to show a modest uptick in the jobless rate, alongside slower wage growth—data that could support additional BoE easing. Meanwhile, core US inflation is forecast to have accelerated slightly on a monthly basis, potentially complicating the Fed’s pivot narrative, especially if price pressures prove stickier than anticipated.

Investors are already adjusting positions in anticipation, with US yields ticking up and risk appetite swinging back toward US assets. Should the US CPI surprise to the upside, markets may pare back rate-cut expectations for the summer—a scenario that could further pressure the Pound.

Technical Analysis

From a technical standpoint, the GBP/USD 3-hour chart signals a firm bearish trend. A well-defined Head and Shoulders pattern has emerged, culminating in a decisive break below the neckline support at $1.3202 during the London session.

The pair remains firmly below its 50-period simple moving average, reinforcing the primary bearish trend. Immediate resistance is seen near $1.3260. As long as prices hold below this level, downside momentum is expected to persist, with the next support target at $1.3124—a break of which could open the door to deeper declines toward the 1.3000 region.

TRADE RECOMMENDATION

SELL GBPUSD

ENTRY PRICE: 1.3170

STOP LOSS: 1.3310

TAKE PROFIT: 1.3000

Risk Warnings and Disclaimers

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Alan

Forex

Summary:

The U.S. and China have reached a trade agreement, driving U.S. Treasury yields higher and bolstering the U.S. dollar, further pressuring the euro exchange rate.

SELL EURUSD

Close Time

CLOSED

1.11099

Entry Price

1.07200

1.12500

1.16625 +0.00199 +0.17%

140.1

Pips

Loss

1.07200

1.12500

Exit Price

1.11099

Entry Price

1.12500

Fundamentals

Today, the U.S. and China agreed on a phased trade deal, reducing tariffs on certain goods from 12.5% to normal levels. The agreement alleviates global supply chain pressures and lowers U.S. import-driven inflation risks, reinforcing the Fed’s stance on maintaining higher interest rates (market expectations now price in only 2.6 rate cuts by year-end). The 10-year Treasury yield remains steady at 4.38%, supporting dollar strength.

Meanwhile, as U.S.-China tariff tensions ease, American demand for Chinese goods may partially replace European exports. Additionally, unresolved EU threats of retaliatory tariffs on U.S. goods (e.g., autos, steel) heighten risks of a widening eurozone trade deficit.

Technical Analysis

Head and Shoulders Pattern Forms on Daily Chart, Downtrend Begins_1

On the daily chart, EURUSD has formed a head and shoulders pattern, with the neckline at 1.1280 breached, confirming downside momentum. The first target is a break below 1.0880.

Head and Shoulders Pattern Forms on Daily Chart, Downtrend Begins_2

On the 4-hour chart, price remains suppressed below the moving average (MA) system, with MAs in a clear bearish alignment, signaling strong short-term downside continuation.

The MACD indicator shows the fast and slow lines maintaining a bearish crossover below the zero line, further validating the downtrend.

Therefore, traders are advised to take short positions at high.

Trading Recommendation

Trading Direction: Sell

Entry Price: 1.1100

Target Price: 1.0720

Stop Loss: 1.1250

Valid Until: May 26, 2025, 23:00:00

Support: 1.0880/1.0732

Resistance: 1.1242/1.1280

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

Gold prices plunged over 3% on Monday as investors fled to riskier assets following a surprise U.S.-China agreement to dramatically slash tariffs for 90 days.

SELL XAUUSD

Close Time

CLOSED

3225.00

Entry Price

3100.00

3300.00

4216.87 +18.96 +0.45%

336.2

Pips

Profit

3100.00

3191.38

Exit Price

3225.00

Entry Price

3300.00

In a dramatic turn of events for the global financial markets, gold (XAU/USD) has suffered a sharp selloff, plunging more than 3% to around $3,210 in early European trading hours on Monday. The decline follows an unexpected thaw in U.S.-China trade tensions, where both countries agreed to drastically reduce tariffs on each other’s goods for a 90-day period—a move that ignited a broad-based risk rally across equities and commodities, while simultaneously triggering an exodus from traditional safe-haven assets.

According to the terms announced late Sunday, China will lower its tariffs on U.S. imports from a steep 125% to just 10%, while the United States will reduce its tariffs on Chinese goods from 145% to 30%, effective immediately for the duration of the 90-day agreement. The announcement, hailed by some as a breakthrough in the protectionist standoff that has rattled markets for over a year, injected optimism into global economic outlooks and reignited appetite for risk.

As a result, gold prices—once the beneficiary of geopolitical uncertainty and recession fears—have rapidly reversed course. Since peaking at an all-time high of $3,500 on April 21, gold has now lost over 8%, as traders rotate into equities, oil, and other growth-sensitive assets.

Investor sentiment has shifted decisively. U.S. Treasury yields spiked, with the 10-year yield rising to 4.43%, the highest level in over a month. The surge in yields reflects not only a rotation out of bonds but also growing expectations that an improvement in trade flows may boost demand and rekindle inflation—factors that are typically bearish for non-yielding assets like gold.

In commodity markets, oil surged more than 2% to $62.50, buoyed by expectations of increased global trade volumes and stronger energy demand. Equity markets joined the party, with Chinese stocks rallying over 1%, while U.S. equity futures gained between 2.5% and 3% ahead of Wall Street’s opening bell. European indices posted more modest gains, constrained by stronger currencies and profit-taking on recent rallies.

Adding fuel to the rally, U.S. President Donald Trump signaled optimism on Friday, stating on his Truth Social platform that investors should “buy stocks now”, suggesting confidence in a positive outcome from the trade talks. His remarks were echoed by U.S. Treasury Secretary Scott Bessent, who downplayed fears of economic “decoupling” and hinted at a broader purchasing agreement, stating that “China must open its markets more to U.S. goods.”

Technical Analysis

From a technical standpoint, gold has entered a precarious phase. Monday’s breakdown marked a clear breach below the $3,250 support zone, which had previously acted as a consolidation floor. The EMA50 on the daily chart has turned lower, with prices now well beneath it, reinforcing bearish momentum.

Additionally, the Relative Strength Index (RSI) has slipped further into negative territory, confirming the presence of continued downside pressure. Traders observed a rejection at the $3,264 level, where gold attempted but failed to reclaim a lower high within a descending trend channel.

Unless bulls are able to swiftly reclaim the $3,264 resistance level and establish sustained momentum above it, the path of least resistance remains downward. Next key support is seen at $3,100, which also serves as a breakout target derived from the most recent failed reversal pattern.

TRADE RECOMMENDATION

SELL GOLD

ENTRY PRICE: 3225

STOP LOSS: 3300

TAKE PROFIT: 3100

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The British Pound climbed against the Japanese Yen, buoyed by improved US-China trade relations and a cautiously dovish Bank of England, while the Yen weakened as demand for safe-haven assets ebbed.

BUY GBPJPY

Close Time

CLOSED

194.994

Entry Price

198.500

192.000

206.919 -0.181 -0.09%

60.3

Pips

Loss

192.000

194.391

Exit Price

194.994

Entry Price

198.500

The British Pound extended its rally against the Japanese Yen into a fourth consecutive session on Monday, with the currency pair GBP/JPY trading near 194.90 during European hours. A convergence of geopolitical optimism, diverging monetary policy expectations, and firm technical support continues to bolster the cross. The most notable driver this week is a reduction in safe-haven demand for the Yen after the United States and China issued a rare joint statement reaffirming their economic cooperation—a move that has triggered renewed risk appetite across financial markets.

The gains in GBP/JPY mark a continuation of bullish momentum that began late last week, supported by both fundamental and technical factors. The Japanese Yen, traditionally a magnet for capital in times of uncertainty, weakened after U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier Liu He concluded a high-level trade dialogue in Geneva. The talks resulted in a commitment to a 90-day tariff truce and a striking 115% reciprocal reduction in existing trade levies. While specific enforcement mechanisms remain vague, the tone of the meeting reflected a deliberate pivot away from confrontation and toward mutual economic benefit.

"The path to trade normalization is never linear," Bessent remarked at the close of the summit, "but our respective economies—and the global economy—stand to gain significantly from sustained dialogue and practical de-escalation." U.S. Trade Representative Jamieson Greer echoed this sentiment, though he warned that lingering disputes, such as the fentanyl crisis, are far from resolved.

These developments have reverberated across currency markets, undermining the Japanese Yen's haven appeal. A weakening Yen generally inflates GBP/JPY, and Monday's price action confirmed traders' willingness to pivot into risk-aligned pairs. However, the Yen’s downside may be limited in the near term due to resilient domestic macroeconomic data. Japan’s current account surplus rose to JPY 3.68 trillion in March, up from JPY 3.45 trillion a year earlier. The improvement was underpinned by a modest trade surplus of JPY 516.5 billion, driven by a 1.8% year-over-year rise in exports—evidence that external demand remains a bright spot for the Japanese economy.

Meanwhile, the British Pound has found its own legs after the Bank of England (BoE) reaffirmed its measured approach to monetary easing last Thursday. While the central bank delivered a widely expected 25 basis point rate cut—bringing the benchmark rate to 4.25%—the internal division within the Monetary Policy Committee (MPC) hinted at a cautious outlook rather than an aggressive pivot. Notably, Catherine Mann and Chief Economist Huw Pill dissented, voting to keep rates unchanged. Their skepticism reflects ongoing concerns about domestic inflationary pressures.

Speaking at an economic forum on Friday, Pill elaborated on his position: “While headline inflation has eased, underlying price dynamics suggest more persistence. We must be deliberate. The risks posed by external shocks—like recent tariff announcements—are being absorbed well by the UK economy so far.”

Market participants took these comments as a signal that the BoE remains some distance away from a full-fledged easing cycle. As a result, interest rate differentials between the UK and Japan—where the Bank of Japan remains anchored near zero—have widened further, supporting the Pound against the Yen.

Technical Analysis

From a technical standpoint, GBP/JPY continues to signal upward momentum. The pair opened the week with a bullish price gap, breaking out above the key resistance level of 193.45, a former ceiling that had capped gains through April. Intraday moves saw price action comfortably exceed the 195.00 handle, suggesting bulls are firmly in control.

Indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) remain in bullish territory, while price structure shows a clear series of higher highs and higher lows. Analysts note that if GBP/JPY can sustain its current breakout, the next immediate resistance lies at 196.80, followed by a psychological barrier at 198.50.

TRADE RECOMMENDATION

BUY GBPJPY

ENTRY PRICE: 195.00

STOP LOSS: 192.00

TAKE PROFIT: 198.50

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

If USDJPY manages to break above its current descending trendline, this could pave the way for a bullish extension toward the 151.26 area.

BUY USDJPY

Close Time

CLOSED

145.269

Entry Price

151.250

139.800

155.200 -0.145 -0.09%

328.5

Pips

Profit

139.800

148.554

Exit Price

145.269

Entry Price

151.250

On Thursday, President Donald Trump described what he called a significant breakthrough in trade relations with the United Kingdom and hinted that tariffs on Chinese imports could be eased ahead of the next round of high-level negotiations between Washington and Beijing. Simultaneously, he reignited criticism of Federal Reserve Chair Jerome Powell, once again drawing attention to the ongoing tensions between the White House and the Fed regarding the direction of monetary policy.

Despite sustained political pressure, the Federal Reserve held interest rates steady for a third consecutive meeting on Wednesday. The central bank cited heightened economic uncertainty as the primary reason for maintaining its cautious approach, pushing back against growing calls from the administration for further rate cuts.

During the post-meeting press conference, Fed Chair Powell reaffirmed the Fed’s commitment to a data-driven strategy, emphasizing that the central bank will proceed with care as it evaluates the broader effects of trade developments on inflation, labor markets, and overall economic conditions. “There is no need to move hastily,” Powell noted, pointing to the unpredictable nature of international trade negotiations and their potential ripple effects on the domestic economy.

“We cannot predict how this situation will play out,” Powell admitted, while emphasizing that economic uncertainty remains unusually high. He reassured markets that the Fed stands ready to act if conditions warrant a policy adjustment but reiterated that the current stance remains appropriate given the information currently available.

The Federal Open Market Committee (FOMC) unanimously voted to maintain the federal funds rate within the 4.25% to 4.50% range—a level last seen in late 2024 following a full percentage point reduction implemented in the previous autumn. In its official statement, the central bank acknowledged that uncertainty had “further increased,” but also noted that the underlying pace of economic growth remains “solid,” even if distorted by volatility in trade-related data early in 2025.

Meanwhile, wage data released earlier today in Japan showed a generally disappointing performance for March. Despite wage agreements with unions having exceeded 5% over the past two years, actual income growth continues to lag well behind those figures. Annual wage growth came in at just 2.1%—a figure that, while nearly double pre-pandemic levels, still reflects a continued erosion in real purchasing power due to persistently high inflation. As a result, real wages declined by a further 2.1% year-on-year in March, highlighting the strain on household finances.

Minutes from the Bank of Japan’s March 19 meeting reinforced expectations that the central bank is unlikely to pursue an aggressive tightening path. One board member suggested that after a potential upcoming rate hike, the BoJ might need to shift from its current accommodative policy stance to a more neutral approach.

Since that March meeting, the BoJ has further softened its hawkish tone. At its May 1 meeting, the central bank lowered its growth and inflation projections, signaling a more cautious outlook. The swaps market now reflects expectations of only one additional 25 basis point hike, which would bring the policy rate to 0.75% over the next two years. Bullish Momentum Could Accelerate if Downtrend Line Breaks_1

Bullish Momentum Could Accelerate if Downtrend Line Breaks_1

Technical Analysis

USDJPY recently failed to make a new lower low around the 140.00 area—a level last reached on April 22—indicating a possible loss of bearish momentum. Instead, the pair found renewed buying interest from this zone, which significantly reduces the likelihood of a sustained downtrend in the near term. If USDJPY manages to break above its current descending trendline, this could pave the way for a bullish extension toward the 151.26 area.

The 100-period and 200-period moving averages are currently sitting at 150.46 and 149.56, respectively, aligning closely with a previously tested support zone. These levels may now act as the next upward targets should the pair confirm a breakout. Conversely, another test of recent lows—followed by a break beneath—would invalidate the bullish outlook and potentially trigger further downside pressure.

Trading Recommendations

Trading direction: Buy

Entry price: 145.25

Target price: 151.25

Stop loss: 139.80

Validity: May 21, 2025 15:00:00

Risk Warnings and Disclaimers

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