Downside Risks Predominate

Forex

Central Bank

Summary:

The current quote for USDCAD is 1.3877. The Canadian dollar received robust buying support overnight, driving USDCAD to a two-week low; nonetheless, the currency pair remains in a range-bound oscillation pattern.

SELL USDCAD

Close Time

CLOSED

1.38782

Entry Price

1.35400

1.40200

1.38167 +0.00020 +0.01%

110.2

Pips

Profit

1.35400

1.37680

Exit Price

1.38782

Entry Price

1.40200

Fundamentals

USDCAD rebounded significantly from the overnight low in the 1.3815-1.3810 area but showed signs of waning bearish momentum for the fourth consecutive day on Thursday.

Statistics Canada reported on Tuesday that Canada's overall annual inflation rate fell from 2.3% in March to 1.7% in April, primarily due to a 12.7% plunge in overall energy prices following the cancellation of the federal consumer carbon tax. However, two out of the three core inflation indicators closely monitored by the Bank of Canada reached 13-month highs, influenced by underlying price pressures.

The Bank of Canada had forecast last month that the overall inflation data would drop to around 1.5% due to the cancellation of the carbon tax and the decline in crude oil prices. Gasoline prices fell by 18.1% compared to April 2024, and natural gas prices dropped by 14.1% year-over-year. However, consumer spending on groceries increased by 3.8% year-over-year, up from 3.2% in March. Tourism prices rose by 6.7% year-over-year in April.

On a monthly basis, the inflation rate declined by 0.1%, compared to the analysts' prior forecast of a 0.2% drop.

The money market reacted to the inflation data, reducing the probability of an interest rate cut at the June 4 meeting from 65% before the data release to 48%. (CAD-positive)

Technical Analysis

During the day, the trend of USDCAD currently remains biased to the downside. The asset previously broke below the crucial 200-day moving average and subsequently fell through the 1.3900 level, continuing to favor bearish trades. This, in turn, indicates that the path of least resistance for USDCAD remains downward.

The rebound from 1.3749 may complete a pullback to 1.4014. If it re-tests 1.3749, further declines are likely. A break below this level would rekindle the downtrend since 1.4791. For now, as long as the 1.4014 resistance level holds, the risks remain skewed to the downside.

Trading Recommendations

Trading Direction: Sell

Entry Price: 1.3900

Target Price: 1.3540

Stop Loss: 1.4020

Valid Until: June 6, 2025, 23:55:00

Support: 1.3810/1.3752/1.3724

Resistance: 1.3902/1.3978/1.4016

Risk Warnings and Disclaimers

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Warren Takunda

Commodity

Traders' Opinions

Summary:

West Texas Intermediate crude declined to near $61.10 in early Thursday trading, pressured by renewed US-Iran nuclear talks and a surprise build in US crude inventories.

SELL WTI

Close Time

CLOSED

60.600

Entry Price

56.500

63.500

59.450 -0.359 -0.60%

6.9

Pips

Profit

56.500

60.531

Exit Price

60.600

Entry Price

63.500

Oil markets traded on edge Thursday as geopolitical and supply-side pressures combined to nudge West Texas Intermediate (WTI) crude prices slightly lower during the Asian session. The US benchmark fell to around $61.10 per barrel, retracing recent gains and flirting with key technical support levels amid a complicated mix of diplomatic developments and unexpectedly high stockpile data.

The downturn was triggered primarily by news that the United States and Iran are set to resume nuclear talks in Rome on Friday. The diplomatic overtures come at a time of escalating regional tension, with new intelligence suggesting Israel may be preparing strikes against Iranian nuclear facilities. According to CNN, US officials have received information that Israeli military planning is underway, although no final decision has been made by Israeli leadership. If such an attack were to proceed, it could derail the negotiations entirely and ignite broader instability across the Middle East—a region responsible for roughly one-third of global oil production.

This delicate geopolitical backdrop has reintroduced a layer of volatility in energy markets, but for now, the prospect of successful diplomacy is taking precedence. Any tangible progress in US-Iran negotiations could pave the way for increased Iranian oil exports, particularly if sanctions relief becomes part of the agreement. This possibility is weighing heavily on market sentiment, capping upside momentum in WTI and Brent futures alike.

Meanwhile, the latest data from the US Energy Information Administration (EIA) added further bearish pressure to crude markets. The EIA reported a 1.328 million barrel increase in domestic oil inventories for the week ending May 16. This came as a surprise to many, given that consensus expectations had pointed to a 1.85 million barrel draw. Although smaller than the prior week’s 3.454 million barrel build, the persistent inventory accumulation underscores ongoing demand fragility and ample supply conditions in the US market.

Looking ahead, oil traders are bracing for a fresh round of US economic data later on Thursday. Key releases include the advanced S&P Global Purchasing Managers’ Index (PMI), the Chicago Fed National Activity Index, initial jobless claims, and existing home sales. Any signs of economic cooling could put additional downward pressure on the US dollar, which in turn might offer near-term support to oil prices due to the inverse relationship between the two.

Still, the broader narrative is one of caution. The recent WTI retreat below $61 suggests market participants are pricing in near-term risks from both diplomatic developments and underlying supply dynamics. While a weaker dollar might cushion oil’s fall, the balance of risks appears skewed to the downside unless the geopolitical situation sharply escalates or demand indicators stage a rebound.

Technical Analysis

From a technical standpoint, WTI crude has decisively broken below the $61.20 support level, slipping outside the bounds of a short-term bullish corrective channel. The break coincides with continued bearish pressure driven by its position below the 50-period Exponential Moving Average (EMA), reinforcing the downside bias.

However, the Relative Strength Index (RSI) is beginning to flash early signs of bullish divergence, suggesting the potential for short-term relief or consolidation. While the RSI remains in oversold territory, its initial upward inflection could slow the pace of losses in the immediate sessions.

The next crucial support level lies at $60.13. A confirmed breakdown below this threshold would likely accelerate losses toward $59.69 and potentially $56.50. Conversely, a sustained move back above $61.38 would invalidate the current bearish thesis and suggest a return to near-term bullish momentum.

TRADE RECOMMENDATION

SELL WTI

ENTRY PRICE: 60.60

STOP LOSS: 63.50

TAKE PROFIT: 56.50

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

Gold prices retreated from a two-week high near $3,345 to trade around $3,300 on Thursday, weighed down by a rebound in the U.S. Dollar.

SELL XAUUSD

Close Time

CLOSED

3305.00

Entry Price

3100.00

3350.00

4208.04 +10.13 +0.24%

450.0

Pips

Loss

3100.00

3350.00

Exit Price

3305.00

Entry Price

3350.00

Gold prices edged lower on Thursday during European trade, surrendering early-session gains after touching a two-week high around $3,345. At the time of writing, spot gold (XAU/USD) was seen hovering near the $3,300 mark, pressured by a modest recovery in the U.S. Dollar. While the metal lost ground intraday, its broader outlook remains notably firm, underpinned by renewed U.S. fiscal concerns and escalating geopolitical tension surrounding the ongoing war in Ukraine.

The U.S. Dollar Index, which gauges the greenback against a basket of six major currencies, climbed about 0.15% to trade near 99.85 after bottoming at 99.35 earlier in the week. A firmer dollar tends to exert downward pressure on gold, making it more expensive for foreign buyers. Yet this renewed strength in the dollar appears more of a technical rebound than a reversal in the fundamental narrative that continues to favor gold in the medium term.

Driving the metal’s underlying support is the intensifying spotlight on U.S. fiscal instability. On Wednesday, the House Rules Committee, under Republican control, advanced President Donald Trump’s sweeping tax package for a full vote in the House. The bill is projected by the Congressional Budget Office to increase the federal deficit by $3.8 trillion over the next ten years. It includes extensions of Trump-era tax cuts and adds new breaks on tips, overtime pay, and car loan interest. At a time when the U.S. national debt is already exceeding $36 trillion, market participants are increasingly concerned that such measures may further strain the country’s long-term creditworthiness.

That anxiety was validated by Moody’s, which downgraded the U.S. sovereign credit rating from Aaa to Aa1 last week. In its statement, the ratings agency cited ongoing legislative dysfunction and a failure by both Congress and successive administrations to implement meaningful deficit reduction strategies. As investors digest the implications of spiraling debt and widening deficits, many are reallocating toward traditional safe-haven assets like gold.

Adding to the bullish undertone is the gloomy domestic macroeconomic narrative. Fears of stagflation—where inflation persists alongside stagnating growth—are mounting among both investors and policymakers. JPMorgan Chase CEO Jamie Dimon added his voice to the chorus this week, expressing support for the Federal Reserve’s decision to hold interest rates steady while cautioning that the U.S. economy remains far from stable. In an interview with Bloomberg, Dimon said he does not believe the current environment is a “sweet spot,” highlighting risks posed by inflation, geopolitical shocks, and the rising cost of capital. These factors, combined with a fragile labor market, suggest the Fed may remain in a holding pattern, which could cap gains in the dollar while supporting non-yielding assets like gold.

Geopolitically, tensions are again flaring over the war in Ukraine. According to reports from the Wall Street Journal, President Trump told European leaders in a private call that Russian President Vladimir Putin sees no incentive to agree to a ceasefire, believing he is winning the war. This latest stance contradicts Trump’s own public messaging earlier this week on Truth Social, where he claimed that both sides had agreed to initiate truce talks in the Vatican. The mixed messaging has only added to investor uncertainty, which has historically buoyed gold demand in times of global unease.

Technical Analysis

While the macro and geopolitical backdrop remains broadly supportive, gold’s immediate technical setup paints a more cautious picture. On the four-hour chart, gold continues to trade within a descending channel that has been in place for several sessions. The price is currently near the upper boundary of this channel around $3,355, which is acting as a resistance level. If this level holds and sellers step back in, the metal could reverse lower, with a potential move toward $3,200 or even $3,100 if the lower boundary of the channel is respected.

TRADE RECOMMENDATION

SELL GOLD

ENTRY PRICE: 3305

STOP LOSS: 3350

TAKE PROFIT: 3100

Risk Warnings and Disclaimers

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Eva Chen

Economic

Forex

Summary:

The EURNZD pair has recently been consolidating above 1.9107, with the market focusing on the potential interest rate cuts by the European Central Bank (ECB) and the ongoing economic weakness in New Zealand. In the short term, EURNZD is expected to maintain an overall upward bias within a range. If it breaks through key resistance levels, it could continue to rise.

BUY EURNZD

Close Time

CLOSED

1.91468

Entry Price

1.95500

1.89100

2.01295 -0.00256 -0.13%

236.8

Pips

Loss

1.89100

1.89094

Exit Price

1.91468

Entry Price

1.95500

Fundamentals

On the Euro front, as inflationary pressures gradually ease, the ECB has hinted at the possibility of initiating an interest rate cut cycle in June. However, overall monetary policy remains relatively cautious. Although economic growth remains sluggish, recent data show a slight recovery in service sector activity, which provides some short-term support for the Euro.

ECB Governing Council member Klaas Knot said on Tuesday that the possibility of an interest rate cut in June still exists, but it is far from certain.

He told reporters, "I cannot rule out that we will decide to cut rates again in June, but I also cannot confirm it." He emphasized that the ECB must continue to focus on medium- and long-term inflation risks rather than short-term fluctuations.

Knot noted that the new staff projections for next month will incorporate scenarios reflecting the impact of recent U.S. trade policies and potential countermeasures by the EU.

While the outlook may show a decline in inflation rates in 2025 and 2026, the greater concern is the long-term impact of tariff-related distortions beyond that period. "What is more interesting is to observe what happens after that period," he pointed out.

In New Zealand, inflation remains above the central bank's target, but the slowdown in core inflation has intensified market expectations for policy easing by the Reserve Bank of New Zealand (RBNZ). Moreover, the underwhelming economic recovery in China has weighed on New Zealand's exports, putting downward pressure on the New Zealand dollar. Additionally, fluctuations in commodity prices have added uncertainty to the NZD's trajectory.

Overall, while the Euro faces potential rate cuts, the New Zealand dollar's fundamentals are relatively weaker. As a result, EURNZD is in a favorable position.

Technical Analysis

From the daily chart perspective, EURNZD is currently in a bottom-building and upward trend, having formed a breakout pattern within the 1.8913-1.9107 range. The MACD indicator shows sustained positive momentum, with short-term moving averages in a bullish alignment, indicating a technical bias towards the upside.

If the price breaks through the resistance levels at 1.9265 and 1.9294, it could further open up upside potential and challenge the 50% Fibonacci retracement level of the 2.0011-1.809 range. Further gains could subsequently test the 61.8% and 78.6% Fibonacci retracements. Conversely, if the price falls below the support level at 1.8910, a short-term correction may ensue.

Trading Recommendations

Trading Direction: Long

Entry Price: 1.9107

Target Price: 1.9550

Stop Loss: 1.8910

Valid Until: June 6, 2025, 23:55:00

Support: 1.9107/1.9071/1.9007

Resistance: 1.9154/1.9268/1.9295

Risk Warnings and Disclaimers

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Alan

Commodity

Summary:

Market speculation suggests that OPEC may increase production again in July, potentially exacerbating the global crude oil supply surplus.

SELL WTI

Close Time

CLOSED

60.743

Entry Price

50.500

64.200

59.450 -0.359 -0.60%

238.9

Pips

Loss

50.500

63.132

Exit Price

60.743

Entry Price

64.200

Fundamentals

The U.S. Energy Information Administration's weekly report, released yesterday, indicated a surprise increase in U.S. crude oil inventories of 1.328 million barrels for the week ending May 16. Gasoline and distillate stocks also rose, signaling continued weak demand and exerting downward pressure on oil prices. Meanwhile, global refined product inventories remain elevated, with the IEA reporting that March inventories reached 7.7 billion barrels, exacerbating oversupply concerns. Despite the approaching summer driving season, potential demand upside may be limited, hindering effective inventory absorption in the short term.

Furthermore, bearish news emerged today. Market sources suggest that OPEC+ members are considering another substantial production increase at their June 1 meeting, potentially marking the third consecutive month of additional oil output. Delegates are reportedly discussing an option to raise daily production by 411,000 barrels in July, although no final agreement has been reached. If implemented, this would accelerate supply releases following increases in May and June, likely intensifying the global crude oil supply glut and further depressing oil prices.

Technical Analysis

In the 1D timeframe, WTI's candlestick patterns are trending within a clear downward channel, indicating a prevailing bearish trend. The breach of the 64.00 level has established this as a significant resistance level, as evidenced by the failure of recent rebounds to surpass this point.

Currently, WTI is again approaching the 64.00 resistance, coinciding with the 60-day SMA, creating a confluence of resistance that increases the likelihood of a short-term decline. The formation of an inverted hammer pattern below the 64.00 resistance suggests a high probability of a continuation of the prior downtrend. This could lead to a retest of the 55.00 support level. A break below 55.00 would likely open further downside potential, potentially targeting the 50.00 psychological level.

Trading Recommendations

Trading Direction: Sell

Entry Price: 60.90

Target Price: 50.50

Stop Loss: 64.20

Valid Until: June 5, 2025 23:00:00

Support: 60.06, 55.00

Resistance: 64.01, 65.00

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The Pound Sterling rallies near 1.3470 after UK CPI jumps more than expected in April, while the US Dollar weakens on Moody’s credit downgrade and mounting fiscal concerns.

BUY GBPUSD

Close Time

CLOSED

1.34401

Entry Price

1.35500

1.33800

1.33195 -0.00117 -0.09%

78.5

Pips

Profit

1.33800

1.35186

Exit Price

1.34401

Entry Price

1.35500

The British Pound surged against the US Dollar on Wednesday, closing in on its highest level since mid-2021 as stronger-than-expected UK inflation data ignited fresh policy speculation around the Bank of England’s next move. The move was further bolstered by a deepening sense of vulnerability in the US Dollar, triggered by Moody’s downgrade of the United States' sovereign credit rating and mounting uncertainty around President Donald Trump’s latest fiscal proposals.

Sterling gained ground swiftly during the London and early North American sessions, with the GBP/USD pair peaking around the 1.3470 handle. The rally was primarily driven by data from the Office for National Statistics showing that the UK Consumer Price Index for April rose by a staggering 3.5% year-on-year, up sharply from the 2.6% recorded in March and outpacing market expectations of 3.3%. This marked the highest annual rate of inflation since November 2023, reversing a recent trend of disinflation and complicating the Bank of England’s narrative around monetary easing.

More concerning for policymakers was the core CPI measure, which strips out volatile elements like energy, food, alcohol and tobacco. This metric rose 3.8% annually, up from 3.4% in March and beating forecasts of 3.6%. On a monthly basis, inflation also surged, rising 1.2% compared to the previous month’s 0.3%, signaling that price pressures are not only lingering but intensifying across several sectors of the economy. Notably, services inflation—which the Bank of England tracks closely as a proxy for domestic cost pressures—climbed to 5.4%, a jump from 4.7% in March.

This sharp rise in services inflation is likely to feed into the central bank’s June policy meeting, where markets had previously priced in a potential rate cut. Now, with inflation stubbornly above target, those expectations are beginning to fade. The data suggests that the BoE may be forced to abandon its recent “gradual and cautious” messaging around easing, as inflation proves far stickier than anticipated. Speaking on Tuesday ahead of the inflation print, BoE Chief Economist Huw Pill signaled a hawkish tone, warning of inflationary risks stemming from structural shifts in wage and price-setting behavior that have persisted since the COVID-era inflation spike. Pill noted that these behavioral changes may sustain inflation above target, complicating the path to rate normalization.

The inflation surprise also drew political reaction. Chancellor of the Exchequer Rachel Reeves expressed concern over the figures, stating, “I am disappointed with the inflation figures,” reflecting the growing challenge facing the government as it attempts to balance growth, affordability, and fiscal credibility.

While the Pound gained strength from domestic data, the US Dollar was grappling with its own set of challenges. The greenback weakened notably after Moody’s Investors Service downgraded the United States’ long-term issuer rating from Aaa to Aa1. The move, citing rising fiscal imbalances, growing interest obligations and political dysfunction in Washington, sent a wave of anxiety through the markets. The US Dollar Index (DXY), which measures the dollar against a basket of six major currencies, slumped to 99.45, its lowest level in two weeks.

Moody’s decision reflects a deteriorating fiscal picture, with the US national debt surpassing $36 trillion and expected to rise sharply under President Trump’s newly proposed tax plan. The bill, which aims to expand tax cuts while raising the limit on deductions for state and local tax payments, could increase the federal deficit by an additional $3 trillion to $5 trillion over the next decade. Republican lawmakers have expressed concern about the legislation’s fiscal irresponsibility, with Representative Mike Lawler warning that the bill could face significant opposition due to its potential to widen the deficit.

Democratic leaders have also voiced opposition, arguing that the bill unfairly favors the wealthy and weakens key social programs such as Medicaid. Their pushback stems largely from proposals within the bill that would tighten eligibility and reduce funding for entitlement programs, sparking fears of increased inequality at a time when economic vulnerability remains widespread.

Further compounding dollar weakness, some Federal Reserve officials have begun voicing concerns about a potential stagflation scenario—where inflation remains high even as growth stagnates—due to the confluence of aggressive fiscal stimulus and sticky inflation. While the Fed had previously left the door open for potential rate cuts later this year, those plans may now be delayed or abandoned altogether if inflation proves to be more entrenched than anticipated.

Against this macroeconomic backdrop, traders are reassessing currency dynamics. The Pound appears to be benefiting from a reversal in expectations, as the BoE is now seen as more likely to hold rates steady or even hike again, rather than initiate a rate-cutting cycle. In contrast, the Federal Reserve’s credibility is being questioned in the face of conflicting fiscal and monetary signals.

Technical Analysis

Technically, GBP/USD remains in a firm uptrend. The pair is currently testing resistance at 1.3440, having found solid support at 1.3410 in recent sessions. The short-term structure continues to favor the bulls, with the price comfortably trading above its 50-period EMA on the four-hour chart. Momentum indicators such as the Relative Strength Index have reset from overbought levels and are pointing higher again, suggesting further upside potential. A break above the 1.3440 barrier could open the path to a retest of the psychologically important 1.3550 level in the days ahead.

TRADE RECOMMENDATION

BUY GBPUSD

ENTRY PRICE: 1.3440

STOP LOSS: 1.3380

TAKE PROFIT: 1.3550

Risk Warnings and Disclaimers

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Eva Chen

Economic

Forex

Summary:

The technicals favor a long bias. It is recommended to monitor New Zealand economic data and shifts in Eurozone policy guidance closely.

BUY EURNZD

Close Time

CLOSED

1.90340

Entry Price

1.94080

1.88600

2.01295 -0.00256 -0.13%

174.0

Pips

Loss

1.88600

Exit Price

1.90340

Entry Price

1.94080

Fundamentals

The Eurozone's consumer confidence index for May rose to -15.2, surpassing the anticipated -16.0 and exceeding the consensus forecast of -16.6. This increase may be attributed to positive shifts in U.S. trade policies.

New Zealand's services sector continued to exhibit weakness in April, with the BusinessNZ Performance of Services Index declining to 48.5 from 48.9, significantly below the long-term average of 53.0.

Key indicators from the survey underscore persistent weakness, as economic activity/sales stagnated at 47.3. Employment contracted to 48.2. New orders saw a marginal improvement, increasing from 50.8 to 50.9.

MARKET WATCH: The New Zealand services sector presents a more concerning picture than the broader recovery narrative suggests, underperforming relative to its major global peers.

Strong Rebound Momentum Comes with Breakout of Key Resistance_1

Technical Analysis

The EURNZD has exhibited a generally bullish bias recently, with price action repeatedly testing the resistance zone above the 1.9000 level since early May, indicating strengthening buying pressure. The current price is trading above both the 50-day and 200-day SMAs, suggesting a bullish intermediate-term trend, with positive short-term momentum.

Since the mid-April low at 1.8600, the EURNZD has been trending upwards along a rising trendline, with trendline support currently around the 1.8940 range.

The SMA system shows a "golden cross" with the 50-day SMA crossing above the 200-day SMA. The MA50 is currently at approximately 1.8915, and the MA200 is at 1.8870, providing solid support for the price.

Regarding momentum, the Relative Strength Index is currently near 62, remaining below overbought territory but exhibiting an upward trajectory, which supports further short-term gains.

The MACD line and the signal line of the MACD are both positioned above the zero line, with increasing red histogram bars, indicating accumulating bullish momentum.

Conversely, a breakdown below the 1.8940 trendline support in the EURNZD could trigger a short-term retracement towards the 1.8800 range.

Overall, the EURNZD is trading within an ascending channel, with current momentum indicators and structural support favoring the continuation of the bullish trend, targeting 1.9148 in the short term. As long as the price holds above 1.8940, further upside is anticipated, with the potential to breach the 1.9295 resistance level.