Mid-Term Bearish Outlook, Awaiting End of Rebound

Commodity

Summary:

Yesterday, WTI surged rapidly on news of a U.S.-China trade agreement, but OPEC+'s continued production increase plans keep supply-side pressures elevated.

SELL WTI

Close Time

CLOSED

63.600

Entry Price

55.500

65.500

59.688 -0.121 -0.20%

322.1

Pips

Profit

55.500

60.379

Exit Price

63.600

Entry Price

65.500

Fundamentals

The world's two largest economies announced a temporary agreement to reduce reciprocal tariffs, easing recession fears and triggering a sharp rebound in WTI, which peaked at $63.00.

While short-term sentiment improved after the tariff-cutting agreement, mid-to-long-term supply-demand imbalances and policy constraints dominate. The U.S.-China joint statement suspended 24% tariffs and pledged negotiation mechanisms, but omitted energy sector collaboration. With China's EV penetration rate already at 45%, traditional crude demand growth remains constrained.

Meanwhile, OPEC+ plans a second consecutive monthly output hike in June (+500,000 barrels/day), with actual production exceeding quotas by 30%. Moreover, Russia confirms the long-term target to boost output to 10.8 million barrels/day by 2050, further amplifying supply pressures.

Technical Analysis

Mid-Term Bearish Outlook, Awaiting End of Rebound_1

After getting supported, WTI rebounded and closed with a long upper shadow, signaling growing resistance and increasing downside risks.

The daily chart shows WTI trading within a clear downtrend channel, with moving averages in a bearish alignment, confirming sustained downward momentum.

Now, WTI is likely to rebound and test the 65.00 resistance. If a weakening signal emerges later, WTI will extend the downtrend and test the support at 55.00.

Trading Recommendations

Trading direction: Sell

Entry price: 63.60

Target price: 55.50

Stop loss: 65.50

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

Support: 59.40/55.00

Resistance: 64.69/65.00

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

USD/CAD consolidates near 1.3970 as investors await April’s US CPI data. Market sentiment is buoyed by a major breakthrough in US-China trade talks and rising crude oil prices, offering support to the Canadian Dollar.

BUY USDCAD

Close Time

CLOSED

1.39790

Entry Price

1.42000

1.38800

1.38244 +0.00097 +0.07%

99.0

Pips

Loss

1.38800

Exit Price

1.39790

Entry Price

1.42000

The USD/CAD currency pair remained relatively stable during Tuesday’s European session, hovering close to 1.3970 as global markets braced for a pivotal US inflation report. With the US Consumer Price Index (CPI) for April set to be released later in the North American session, traders are positioning cautiously. Expectations point to a monthly rebound in headline CPI to 0.3% from March’s surprise dip of -0.1%, while the core CPI is also projected to rise to 0.3% from 0.1%. Annualized inflation is forecast to remain unchanged, suggesting that the Federal Reserve may continue to walk a fine line between controlling inflation and preserving economic growth.

Despite a slight pullback in the US Dollar (USD) as traders took some profit off the table ahead of the inflation report, USD/CAD continues to cling to its gains, poised for a potential fifth consecutive daily advance. However, the pair is encountering some resistance amid broader macroeconomic shifts and renewed commodity strength, particularly in oil prices, which tend to bolster the Canadian Dollar (CAD).

One of the most significant developments buoying market sentiment is a surprise breakthrough in US-China trade negotiations. Over the weekend, both nations convened in Switzerland and reached a preliminary deal aimed at easing trade tensions that have long weighed on global growth prospects. Under the agreement, the United States will reduce tariffs on Chinese goods from an elevated 145% to 30%, while China will slash tariffs on US imports from 125% to 10%. This mutual de-escalation marks a rare moment of diplomatic progress and has sparked optimism about a rebound in global trade flows, equity markets, and commodity demand.

Crude oil markets have responded enthusiastically to the trade news. West Texas Intermediate (WTI) crude extended its rally into a fourth consecutive session, trading just under $61.70 per barrel. The resurgence in oil prices is particularly supportive for the Canadian Dollar, given Canada’s role as the largest oil exporter to the United States. A sustained uptick in oil prices typically translates to improved trade balances for Canada and greater demand for CAD-denominated assets.

Yet, despite these supportive undercurrents for the CAD, the USD/CAD pair has shown resilience, largely underpinned by bullish sentiment toward the greenback and the persistence of a correctional uptrend on the short-term charts.

Technical Analysis

From a technical standpoint, USD/CAD appears to be consolidating within a bullish correctional pattern, with the price experiencing a modest decline intraday as it attempts to correct overbought conditions flagged by the Relative Strength Index (RSI). The RSI has begun to retreat from overextended levels, offering room for the pair to recalibrate and potentially resume its upward momentum. Despite this brief pause, the underlying trend remains positive, supported by continued trading above the 50-day Exponential Moving Average (EMA50), a key technical support level that has consistently underpinned bullish positioning.

The emergence of slight bearish divergence on the RSI could suggest the need for a technical breather, but as long as USD/CAD sustains its posture above 1.3920, the bullish bias remains intact. A clear break above the recent high near 1.3975 could open the door toward 1.4200 and beyond, contingent upon the inflation data validating market expectations.

On the downside, immediate support is seen at 1.3910, followed by stronger demand near 1.3850. A downside breach of those levels would likely require a combination of disappointing CPI data and a stronger-than-expected rally in crude oil to fuel renewed CAD strength.

TRADE RECOMMENDATION

BUY USDCAD

ENTRY PRICE: 1.3980

STOP LOSS: 1.3880

TAKE PROFIT: 1.4200

Risk Warnings and Disclaimers

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Manuel

Economic

Forex

Summary:

This level coincides with a key horizontal support zone and sits near the 200-period moving average on the 12-hour chart, currently positioned at 0.8401.

BUY EURGBP

Close Time

CLOSED

0.84236

Entry Price

0.86200

0.83350

0.87453 +0.00137 +0.16%

31.1

Pips

Loss

0.83350

0.83925

Exit Price

0.84236

Entry Price

0.86200

Germany’s final Harmonized Index of Consumer Prices (HICP) is set to be released on Wednesday, though no significant revisions are expected from the preliminary estimates. The more consequential data for euro traders this week will arrive on Thursday with the release of pan-European Gross Domestic Product (GDP) figures. Both quarter-on-quarter and year-over-year growth rates are anticipated to remain unchanged at 0.4% and 1.2%, respectively, in line with previous readings.

Meanwhile, the European Central Bank (ECB) appears increasingly committed to a continued easing cycle, likely delivering what would be its eighth rate cut in a twelve-month span and its seventh consecutive policy reduction. This reflects growing confidence among market participants that inflation in the eurozone is steadily trending toward the ECB’s 2% target by year-end. However, uncertainty persists, especially due to renewed trade tensions fueled by tariff measures from U.S. President Donald Trump—an external factor adding pressure on the ECB to act more aggressively in support of the region’s fragile economic momentum.

Recent comments from ECB officials further reinforced the dovish tone, with several policymakers openly supporting continued accommodation. They emphasized the risks of underestimating inflation softness and highlighted the need for a proactive rather than reactive stance. With structural challenges lingering and external shocks ongoing, there is now broader market consensus that additional stimulus could be deployed sooner than previously anticipated to ward off potential deflationary forces.

Across the Channel, Bank of England Monetary Policy Committee (MPC) external member Alan Taylor described a growing sense of “caution and concern” among businesses, noting that the tariff shock had proven more severe than expected. Surveys such as the REC and PMI have reflected a steady erosion in UK business sentiment over recent weeks.

In response to mounting global headwinds, the BoE resumed monetary easing at its most recent policy meeting, cutting the benchmark rate by 25 basis points to 4.25%. The decision, aimed at navigating what the bank called “heightened global unpredictability,” was reached by a narrow 5–4 vote. Notably, two members—Swati Dhingra and Alan Taylor—pushed for a deeper 50 basis point cut, while two dissenters preferred to leave rates unchanged.

On inflation, the BoE projected a temporary spike to 3.5% in Q3, largely due to elevated energy prices, before expecting a gradual return toward target later in the year. However, its growth outlook deteriorated, with second-quarter GDP now seen expanding by just 0.1% and downside risks remaining pronounced. Oversold Conditions Point to Possible Bullish Rebound_1

Oversold Conditions Point to Possible Bullish Rebound_1

Technical Analysis

EUR/GBP reached a local high of 0.8739 on April 11 but has since undergone a meaningful correction, falling to a local low of 0.8407 during the previous session. This level coincides with a key horizontal support zone and sits near the 200-period moving average on the 12-hour chart, currently positioned at 0.8401. This confluence of technical factors could set the stage for a potential rebound, particularly as the Relative Strength Index (RSI) has touched oversold territory at the 30 level.

In addition, a bullish divergence has formed: while price action has declined steadily, the RSI has dropped more sharply and recently interacted with a well-defined trendline. This suggests the retracement may be nearing exhaustion and a continuation of the broader bullish trend could soon follow.

Should upward momentum resume, initial resistance lies around 0.8619. However, if the pair breaks below current support and prints a lower low, the bullish setup could be invalidated, paving the way for further downside movement and a possible trend reversal.

Trading Recommendations

Trading direction: Buy

Entry price: 0.8421

Target price: 0.8620

Stop loss: 0.8335

Validity: May 23, 2025 15:00:00

Risk Warnings and Disclaimers

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Manuel

Economic

Central Bank

Summary:

The pair reached a local high near 0.6513 before reversing lower, suggesting a potential rejection at that resistance level.

SELL AUDUSD

Close Time

CLOSED

0.63579

Entry Price

0.61950

0.65150

0.66351 -0.00032 -0.05%

141.2

Pips

Loss

0.61950

0.64991

Exit Price

0.63579

Entry Price

0.65150

U.S. President Donald Trump described the recent weekend talks between the United States and China, held in Switzerland, as “very good” and suggested that both sides are working toward a “complete reset” in their trade relationship. Treasury Secretary Scott Bessent, who led the negotiations, stated that “substantial progress” had been made. Market participants are now weighing the impact of potentially new tariffs against the scope of exemptions currently under discussion.

This week, investors will closely monitor inflation data, with the core Consumer Price Index (CPI) expected to rise by 0.3% on a monthly basis—broadly in line with consensus estimates. A similar figure is anticipated for April’s core Producer Price Index (PPI), which would reinforce the view that underlying price pressures persist. While this may translate into ongoing upward pressure on the Federal Reserve’s preferred inflation gauge—core PCE—it is unlikely to trigger an immediate policy shift by the central bank.

Federal Reserve Governor Adriana Kugler noted on Monday that Fed officials are finding it increasingly challenging to assess the underlying strength of the U.S. economy. She pointed to abrupt changes in trade policy and their ripple effects on households and businesses, many of which accelerated imports earlier in the year to front-run potential tariffs.

Meanwhile, the Federal Open Market Committee (FOMC) unanimously agreed to keep the federal funds rate steady at 4.25%–4.50%, a level last established in late 2024 after a full percentage point reduction during the previous autumn. In its latest statement, the Fed acknowledged that economic uncertainty had “further increased,” but it also reaffirmed that the underlying pace of expansion remains “solid,” albeit distorted by volatile trade flows in early 2025.

In Australia, inflation remains above the Reserve Bank of Australia’s (RBA) target band, though it has been gradually decelerating. The labor market continues to show resilience, despite recent data indicating a slight slowdown in job creation. The RBA is widely expected to keep interest rates unchanged in the near term while closely monitoring wage growth and inflation trends. Domestically, these conditions appear neutral for the Australian dollar, making external drivers—such as Federal Reserve decisions and Chinese economic performance—the dominant factors influencing AUD price action. Selling Pressure Could Extend Toward Next Key Support_1

Selling Pressure Could Extend Toward Next Key Support_1

Technical Analysis

AUD/USD has encountered renewed selling pressure after testing the 200-day moving average on the daily chart, which currently sits at 0.6556. The pair reached a local high near 0.6513 before reversing lower, suggesting a potential rejection at that resistance level. With the 100-day moving average located at 0.6287, this could emerge as the next downside target. Below that, the 0.6194 region stands out as a key support zone that may attract interest if bearish momentum continues.

The Relative Strength Index (RSI) recently climbed to 63, approaching overbought territory without actually crossing it. Notably, a bearish divergence has emerged: while price action has moved higher, the RSI has failed to follow suit with similar intensity. This divergence may indicate the potential for continued downside movement. However, should AUD/USD manage to post a new local high, it could instead signal the resumption of bullish momentum.

Trading Recommendations

Trading direction: Sell

Entry price: 0.6358

Target price: 0.6195

Stop loss: 0.6515

Validity: May 23, 2025 15:00:00

Risk Warnings and Disclaimers

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Eva Chen

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

4209.92 +12.01 +0.29%

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

59.688 -0.121 -0.20%

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

1.33226 -0.00086 -0.06%

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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