Oil prices plunged to their lowest level in two months on Wednesday, pressured by a combination of factors. This sell-off comes as the International Energy Agency (IEA) revised down its global oil demand growth forecast for 2023. The IEA now anticipates demand to increase by 1.1 million barrels per day (bpd) this year, a downward revision of 140,000 bpd from its previous estimate.

Adding fuel to the fire, a recent OPEC report revealed that member countries exceeded their production quota by a significant margin in April. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, reportedly pumped 568,000 bpd more than their agreed-upon limit last month. Despite this production overshoot, OPEC remains optimistic about future oil demand, projecting growth of 2.25 million bpd in 2024 and 1.85 million bpd in 2025.

On a brighter note, data from the American Petroleum Institute (API) showed a larger-than-expected decline in US crude oil inventories last week. Stockpiles fell by 3.104 million barrels, exceeding analysts' forecasts of a 1.35 million-barrel decline. However, this positive inventory data wasn't enough to offset the broader bearish sentiment surrounding the oil market.

From a technical analysis perspective, the recent price action suggests a shift in the oil market's momentum. Prices have broken below the psychological support level of $78.00 per barrel, indicating a potential loss of buying power among bulls. This downside breakout also signifies the end of the recent trading range between $79.44 and $76.86.

Looking ahead, a key technical hurdle looms on the horizon. A downtrend line established in mid-2022 is approaching and is likely to act as a significant resistance barrier when prices reach that level. However, if the market manages to re-establish a trading range, it could mitigate the risk of a more significant bearish pattern – a head-and-shoulders top formation. This bearish pattern, if confirmed, could potentially cap any further upside from the December 2022 lows.

Currently, oil prices are retesting the broken support level at $77.50. If this retest results in rejection, a further decline towards $74.00 per barrel is a strong possibility. This level would then become the initial target for short sellers looking to capitalize on the current bearish trend.

SELL WTI

ENTRY PRICE :77.00

STOP LOSS : 79.00

TAKE PROFIT : 74.00

The New Zealand dollar (NZD) flexed its muscles today, climbing to a fresh five-week high above US$0.605. This bullish run coincides with a weakening US dollar in the lead-up to a critical US Consumer Price Index (CPI) report. Market participants are anxiously awaiting this data release, as it could significantly influence the Federal Reserve's monetary policy path.

Earlier this week, data revealed that US producer prices rose more than anticipated in April. However, the silver lining was a downward revision of March's data. Federal Reserve Chair Jerome Powell acknowledged the data as "mixed" rather than "hot," suggesting that inflation might be taking longer than expected to cool down. Despite this, he reiterated that a rate hike is unlikely in the immediate future.

All eyes are now on the key US inflation report scheduled for later today. This data release is expected to be the main driver of market sentiment in the near term. A hotter-than-expected CPI reading could signal a more aggressive tightening stance by the Fed, potentially putting downward pressure on the NZD. Conversely, a cooler inflation print could bolster hopes of a dovish shift by the Fed, potentially paving the way for further appreciation of the NZD.

Domestically, the Reserve Bank of New Zealand (RBNZ) is widely expected to maintain its current interest rate of 5.5% at its upcoming meeting on May 22nd. Policymakers remain cautious about cutting rates prematurely until they have concrete evidence that inflation will settle sustainably around the bank's 2% target. However, recent data showing a decline in New Zealand's Q2 2-year inflation expectations to a near three-year low has sparked speculation that the RBNZ might consider a rate cut later this year.

From a technical analysis perspective, the NZD/USD pair appears poised for further upside. The recent price action suggests a reversal of the downtrend, with a clear break above the consolidation phase around the $0.6000 level. This price movement aligns with the completion of a double bottom pattern, which is often considered a bullish signal. Building on this bullish momentum, the pair has approached the $0.6070 level. A break above this level could open the door for further gains towards the $0.620 target zone.

The confluence of a weakening US dollar due to US inflation jitters and a potential dovish pivot by the RBNZ paints a bullish picture for the NZD/USD pair in the near term. However, traders should remain cautious and closely monitor the outcome of the US CPI report. A hotter-than-expected print could trigger a reversal in the NZD's upward trajectory. For the time being, the bullish bias holds sway, with a potential target of $0.6200. However, a break below the key $0.6000 support level would signal a potential reversal and invalidate the bullish thesis.

BUY NZDUSD

ENTRY PRICE : 0.6080

STOP LOSS : 0.6000

TAKE PROFIT : 0.6200

Gold was volatile in the Asian and European markets on Tuesday, with the US market rising after the opening of the session on PPI data and closing up 0.9%. Yesterday, both the annual and monthly data of the US PPI for April beat expectations (excluding the flat core PPI YoY), raising expectations for a rate cut. The increase in PPI was mainly driven by the surge in the cost of services, with energy prices being the second most important factor. The latter is more affected by geographical conflicts, and the Fed cannot do anything about it. However, the former has been one of the main factors in the high inflation of the US, which indicates that the process of disinflation still has a long way to go. As a result, concerns about stubborn inflation in the US will rise in the market.

Currently, goods inflation is back to pre-pandemic levels, which was the main driver of the decline in inflation last year. Given the persistence of geopolitical tensions and rising transportation costs, the upside risk to goods inflation is intensifying. This means that if the pace of disinflation in the services sector remains slow, inflation will probably rebound. As services inflation has been firm, the New York Fed's Consumer Inflation Expectations Survey and the University of Michigan's 1-year inflation expectations have also been rising.

Later, Powell spoke at the annual meeting of the Association of Foreign Bankers in Amsterdam, the Netherlands. Judging from the content of the video, the speech was conducted in the form of a conversation with the moderator, and he also had the speech in his hand. This means that the speech yesterday may have been partly an impromptu question and partly a pre-set topic. It can be observed that the wording of these preconceived topics, as well as the content, was well thought out.

In addition, the timing of the speech was delicate as well, just between the release of the PPI and the CPI. Therefore, it is reasonable for us to believe that Powell's speech this time is "guiding the market".

Looking at performance alone, there is no doubt that the PPI data was "bad". However, Powell commented it was "mixed", citing the downward revision of the March PPI, which represented his attitude towards rate cuts.

Comments about the inflation were most impressive. Powell said that he sees the US inflation moving down in 2024, as it did last year, but isn’t completely confident in this forecast. The expression of inflation can be comprehended in two parts. For one thing, he " sees the US inflation moving down". Since these words were made before the release of the CPI data, the CPI will not be bad tonight. For another, he "isn’t completely confident in this forecast", suggesting that one or two numbers may not be enough to decide on cutting rates.

Actually, tenant rents and OER inflation (which accounts for 43% of CPI's weight) will decline surprisingly over the next 9-12 months due to the data lag, as seen in the experimental series of new tenant rents and all tenant rents constructed by researchers from the Fed and the Bureau of Labor Statistics.

In addition, coupled with the hints given by Powell, the CPI is likely to fall this time.

Moreover, Powell stressed again that "The Fed's next move is unlikely to be a hike". Although he said it once earlier this month, what he said yesterday means a lot. With the upcoming release of the US CPI for March, it is not surprising that the market will hype up a rate hike if the data is higher than expected significantly. Powell must have known something that gave him the confidence to commit to "no rate cuts". His comments could reduce unnecessary volatility caused by speculation of interest hikes, which is conducive to the stabilization of market expectations.

Therefore, it is reasonable to speculate that Powell has hinted that "inflation will move down this time". If this is the case, the gold will undoubtedly be bullish, and may even hit the record high this year.

It should be noted that the market may have expected this CPI for a long time. Therefore, we need to be wary of the behavior of " buy the rumor, sell the news". In addition, we should also be cautious about the market's overly optimistic sentiment about the CPI, which will result in a less-than-expected outcome, and a rapid retreatment of the gold after the surge.

On the 4-hour chart, gold prices are currently blocked at a key resistance level, the Fibonacci Retracement at 1.272. If the gold can hold above this line, the price will be able to hit the year's high of 2431.78. Conversely, gold prices may drop to the top of 2326 around the descending channel.

Indicator: In the Ichimoku Kinko Hyo, the gold price is moving sideways below the baseline, and the conversion line signals an obvious upward trend. Besides, the current price is far away from the baseline and the conversion line, indicating the bullish rally of gold currently and the accumulation of short-term downside risks. In DMI, +DI and -DI are going in opposite directions. Among them, -DI is lower, with the location at 12.92, indicating a retreatment after a slight gain.

Overall, technical indicators have hinted at a pullback risk for gold. Considering that the CPI will be mixed with strong market sentiment, the indicator may be temporarily disabled when the data is released. Traders are advised to wait for the price movement to stabilize before entering the market. Aggressive traders can take short positions at high after the surge of gold and focus on the pullback.

Trading Direction: Short

Entry Price: 2390

Target Price: 2337.52

Stop Loss: 2425.5

Support: 2365.340/2351.400/2335.42

Resistance: 2378.190/2397.540/2431.78

Recent developments indicate a continued slump in oil prices as tensions ease in the Middle East. Despite signs of increased demand from the world's two largest consumers, China and the US, crude oil prices remain volatile within a narrow range at low levels.

Overnight, the crude oil market experienced significant volatility as US April PPI data showed an expanded growth rate. Fed Chairman Powell expressed less confidence in a decline in inflation, suggesting the possibility of maintaining interest rates at current levels for a longer period. Consequently, oil prices swiftly declined. Subsequently, the OPEC monthly report maintained its forecast for oil demand growth unchanged, believing that the economy has the potential for upward momentum. Moreover, an unexpected significant drop in API crude oil inventories led to a V-shaped rebound in oil prices.

As the OPEC+ meeting scheduled for June 1 approaches, many investment banks predict that OPEC+ oil-producing countries will extend the current oil production limitation plan to avoid oversupply and support crude oil prices. However, significant internal disagreements exist within OPEC+. While Saudi Arabia has led by example in production cuts, some oil-producing countries have not effectively adhered to their production cut quotas. Countries like Kazakhstan, Kuwait, Iraq, the United Arab Emirates, and Algeria may be seeking to increase oil production. Last year, Angola set a precedent by withdrawing from the OPEC+ organization due to dissatisfaction with production cuts, further complicating OPEC+'s management of the oil market. Furthermore, since the Russia-Ukraine conflict, OPEC and Russian oil production has decreased, while US crude oil production has surged significantly, leading to a sharp increase in exports to Europe and Asia and weakening OPEC+'s control over oil prices.

In the short term, the lack of progress in the Fed's inflation reduction efforts, along with the Fed's hawkish stance and high interest rates, are exerting downward pressure on oil prices. The upcoming release of CPI data may pose further challenges to oil prices. It is likely that optimism in the oil market may be difficult to come by before the OPEC+ meeting.

Looking at the 4-hour chart, WTI crude oil continues to face pressure from a descending trendline, with its center of gravity steadily declining. In recent days, it has remained in a narrow range near $78, while the RSI indicator shows a bearish bias and significant pressure. There may still be further downward potential in the short term. If it breaks below $77.0, oil prices could continue to decline towards the range of $75.5 to $76.0.

For trading strategy, going short at highs is recommended. Currently, the price is encountering resistance near $78.1, and aggressive traders may consider short positions at this level. Targets could be set near the support level around $76.0, with stop-loss orders placed above $80.0.

Trading Direction: Short

Entry Price: 78.1

Target Price: 76.0

Stop Loss: 80.5

Support: 77.0/76.0

Resistance: 79.5/80.0

During the Asian session on Wednesday (May 15), spot gold fluctuated in a narrow range and is currently trading around 2358. 

Yesterday, gold prices fluctuated to the upside again, recovering 2352 and turning to a phased bullishness. On 1 May, Fed Chair Jerome Powell sent a dovish signal at his press conference following the 1 May decision, saying that the next move of the FOMC was unlikely to be a rate hike. Subsequently, the price of gold rose by more than $30. Yesterday, Jerome Powell stressed the delay in the Fed's rate hike again, and gold prices fluctuated to the upside. However, the volatility was limited, which is due to the PPI released last night rising more than expected, showing stubborn inflation. In addition, as the critical data, the US CPI in April,  will be released tonight, the market will get more clues to judge the timing of the Fed's rate cuts. As a result, traders have become more cautious.

The data was bearish yesterday, but the market was mainly bullish, as the market ignored Powell's words, which said that interest rates are likely to remain at current levels for some time. For traders, you should try to take short positions at the rebound in the short-term trading during the day. On the general trend, you can maintain a low-buy trading strategy with a method of going short in the short term and going long in the long term.

Data: According to the US PPI data released by the US Bureau of Labor Statistics for April, the adjusted US PPI data for April rose 0.5% MoM, up from the revised -0.1% in March and also beat expectations of 0.3%.

Official's Remarks: Powell said the Fed needs to be patient and wait for more evidence that higher interest rates are tame inflation and needs to keep interest rates high for longer. Moreover, he expressed that first-quarter inflation data has dampened his confidence in lower inflation, which also makes it impossible for the Fed to be sure about the timing to cut rates. However, he also stressed that the Fed's next policy move is unlikely to be an interest rate increase, and rates will remain where they are, at current levels.

Today, traders need to focus on the US CPI data. More attention should be paid to US retail sales data and the ECB's interest rate decision during the week.

Against the backdrop of the released bearish data, gold prices bucked the trend again yesterday. Such a market is common, indicating a resurgence of the current bullish sentiment. At the moment, the market is trading on the left side to bet that the pullback in CPI will larger than expected tonight. Technically, gold prices regained their foothold at 2352, and inclined to the bulls again in the short term, which indicates a bullish trend in the market. Currently, traders should not guess the peak blindly, and it will be more risky to chase the market. Therefore, it will be rational to wait patiently and to trade following the trend after the release of data in the American session.

In the face of inflation, gold price yesterday changed the weakness of the day before yesterday and stood above 2352 again. The bulls regained their losses but did not dominate the market. Compared to the previous days, the volatility yesterday has slipped to only $25. Given the recent incoherent trend in gold, traders are not advised to chase the market during the day but to wait patiently for trading opportunities after the coming data tonight.

Judging from the 1-hour chart, the MACD line crosses above the signal line, but the opening cannot be widened, showing a lack of momentum. After the release of bullish momentum yesterday, the bulls may be exhausted in the Asian market today. With gold standing above 2352, the market became bullish in the short term. The support is at 2352 again and the resistance is at 2365. For further resistance, we could look at 2378. If the data is more positive than expected, the resistance will test the 2400 mark. Judging from the 4-hour timeframe, the MACD line crosses above the signal line and shows a golden cross initially. As the MACD line and the signal line are sticky, the pattern can provide little information for the market. However, as the current indicators gradually showing overbought signs, traders are not recommended to continue chasing the market. From the daily chart, the MACD line crosses above the signal line and shows a golden cross initially. Therefore, the gold will probably have a chance to the upside in the long term, but it will remain oscillating in the short term. Before the opening widened, gold prices still lacked the momentum to chase the market. In addition, coupled with the obvious bearish divergence signal currently, the room for gold prices above is limited. In this stage, the support can be seen at 2332, while resistance can look at 2378. We must be clear that technical indicators, like any indicator, are only suitable for reference in ordinary periods, and will be distorted in extreme market conditions. During the day, aggressive traders can buy low and sell high in the range of 2332-2378.

Trading Direction: Short

Entry Price: 2383

Target Price: 2332

Stop Loss: 2388

Support: 2332.000/2318.000

Resistance: 2365.000/2378.000

During Wednesday's (May 15th) Asian session, EURUSD oscillated downward, and it is now trading at 1.083.

U.S. Inflation data for April, which is the market's focus, will be released tonight. The Fed needs the CPI data to give further guidance on policy. Meanwhile, the U.S. labor market cooled, April nonfarm payrolls weakened marginally, the unemployment rate rose, and the manufacturing PMI as well as the services PMI fell below 50. The negative effect of high interest rates is more obvious, and price indicators such as PPI, PCE, and ECI tend to rebound. Under the stubborn inflation, interest rate cuts will be difficult, and the economy is heading toward stagflation. Tonight, if CPI growth slows, the Fed will be confident to cut interest rates in July or September. Moreover, with weaker economic data, the Fed is likely to cut interest rates even though it is postponed for almost 1 year. But if the CPI continues to rebound, it will be the fourth time that the market expectation has been beaten, and the July rate cut will be canceled. Considering the high degree of CPI and PPI fit since 2022, and last night's April PPI exceeded expectations to the upside (0.5% MoM compared to an expected 0.3%), this CPI may be difficult to cool down.   

For EUR, as the ECB keeps releasing dovish signals, a rate cut in June will be possible. Besides, the U.S. and Europe's monetary policy time lag will suppress the EUR, and EURUSD is difficult to climb above 1.09. Thus, it is better to go short in the long run.

Data: The U.S. Bureau of Labor Statistics suggested that the U.S. PPI data for April rose 0.5% MoM after the seasonally adjusted, higher than the -0.1% in March (seasonally adjusted) and the expected 0.3%.  

Officials' remarks: Powell said the Fed needs to remain patient and wait for more evidence that high interest rates are dampening inflation, so the Fed needs to maintain restrictive monetary policy for a longer period. At the same time, he expected inflation would stay low, but the stubborn inflation data in the first quarter weakened his confidence in low inflation, which led to the Fed's indecision about whether or when it would be able to cut interest rates. But at the same time, he emphasized that the Fed's next move won't be a rate hike but to keep policy rates at current levels.

Today's focus: U.S. CPI data, U.S. retail data, and the ECB's interest rate decision.

EURUSD rose slightly yesterday and closed the daily chart higher. It was the second time that EURUSD rose, and now it stands above 1.08. Furthermore, although the rebounding trend continues, EURUSD is approaching the massive resistance area. Further trends will be determined by the data tonight. If the data supports this, EURUSD will ascend to 1.09. If not, the rising trend will end soon. 

Technically, EURUSD kept rising and closed the daily chart higher with a long-lower-shadow. It proved that the buying positions at lows are strong, and the bulls dominate. In the 1H chart, the MACD line crosses above the signal line and forms a golden cross. But the two lines are getting close without further instructions, and EURUSD will oscillate. New directions will be given after the data in the U.S. session. In the 4H chart, a golden cross that is similar to the one in the 1H chart shows up, and the two lines are getting close without further instruction. Thus, EURUSD will oscillate upward in the Asian session, and the performance in the U.S. session will be more essential. Regarding the daily chart, the bullish candle explains the strong pattern of EURUSD, but it is approaching the massive resistance area of 1.085-1.090. Affecting the significant data, EURUSD will oscillate more, and the technical analysis will be invalid shortly. Today, our trading range will be 1.070-1.090, in which aggressive investors can buy low and sell high with more focus on selling at highs.

Trading direction: Short

Entry price: 1.0830

Target price: 1.0700

Stop loss: 1.0880

Support: 1.0700/1.0650

Resistance: 1.0850/1.0900