• Silver price remains pressured after easing from the highest level in one year.
• Bearish MACD signals, steady RSI suggests further downside of XAG/USD.
• Convergence of 50-SMA, one-month-old ascending support line challenges Silver sellers.
• XAG/USD buyers can jump back on $25.60 breakout.

Silver price (XAG/USD) remains depressed around $25.30 amid early Monday, after reversing the one-year high and snapping a three-day uptrend on Friday.

The bright metal’s U-turn from a fortnight-old resistance line broke an upward-sloping support line from April 03, now immediate resistance around $25.60.

Apart from that, the bearish MACD signals and the steady RSI, after reversing from overbought territory, also keep the XAG/USD sellers hopeful.

However, a convergence of the 50-SMA and an upward-sloping trend line from the mid-March, around $25.00, appears a tough nut to crack for the Silver sellers to retake control.

Also acting as short-term key support is an area comprising the 100-SMA and early April tops, surrounding $24.25-15.

Meanwhile, the XAG/USD recovery beyond the immediate resistance line, around $25.60, can challenge the aforementioned ascending trend line from early April, around $26.25 by the press time.

Following that, tops marked during April and March of the last year, respectively near $26.25 and $26.95 could gain the market’s attention.

Overall, the Silver price is likely to witness further downside but the bearish trend is still far from sight.

Silver price: Four-hour chart

Trend: Further downside expected

• GBP/USD is expected to display more losses below 1.2400 amid hawkish Fed bets.
• The Fed is not ready to tone down the need for more rate hikes despite a significant fall in inflation.
• The Pound Sterling bulls are at a make or a break level near the edge of the upward-sloping trendline from 1.2191.

The GBP/USD pair has found an intermediate cushion after dropping to near the round-level support of 1.2400 in the early Tokyo session. The Cable is expected to extend its recovery as chances of more rates from the Federal Reserve (Fed) are extremely firm. The absence of recovery signs from the Pound Sterling after a nose dive move cements more downside ahead.

The US Dollar Index (DXY) rebounded sharply after printing a fresh one-year low of 100.78 as the Fed is not ready to tone down the need for more rate hikes despite a significant fall in inflation and related economic indicators and the loosening of labor market conditions. Fed funds rates are displaying more than a 98% probability of a consecutive 25 basis point (bp) rate hike.  United States monthly Retail Sales data released on Friday showed a contraction of 1.0% while the street was anticipating a contraction of 0.4%.

Analysts at CIBC conveyed “The Fed is looking for definitive signs of a cooling in activity and this print is a step in the right direction, but with sales volumes in the control group still 5.8% above their pre-pandemic trend level, this won't prevent a 25bp hike at the May FOMC."

GBP/USD witnessed a steep fall after forming a Double Top chart pattern on a two-hour scale. The Cable failed to surpass it's prior higher after sensing the presence of responsive sellers at elevated levels. The Pound Sterling bulls are at a make or a break level near the edge of the upward-sloping trendline plotted from March 24 low at 1.2191.

The 20-and 50-period Exponential Moving Averages (EMAs) are on the verge of delivering a bear cross at around 1.2410.

Meanwhile, the Relative Strength Index (RSI) (14) has slipped into the bearish range of 20.00-40.00, indicating more weakness ahead.

A slippage below April 14 low around 1.2400 will expose the asset to April 10 low at 1.2345 followed by March 30 low at 1.2294.

On the flip side, a recovery move above April 13 high at 1.2537 will drive the asset towards a fresh 10-month high at 1.2597, which is 08 June 2022 high. A breach of the latter will expose the asset to May 27 high at 1.2667.

GBP/USD two-hour chart

• USD/CAD slips off bear’s radar following its rebound from two-month low.
• US Dollar portrays corrective bounce on mostly upbeat US data, Fed policymakers’ resistance for easy money policy.
• Oil price ease on US Dollar rebound, comments from IEA.
• Preliminary readings of April’s US PMIs, Canadian Inflation, Retail Sales and BoC’s Macklem eyed for clear directions.

USD/CAD begins the trading week on a defensive mode around 1.3365-70, after posting the first daily gains in five the previous day. In doing so, the Loonie pair struggles to justify hawkish comments from Bank of Canada (BoC) Governor Tiff Macklem as the US Dollar bears take a breather while the Oil price retreats.

That said, Bank of Canada (BoC) Governor, Tiff Macklem mentioned on Friday, that the governing council discussed raising interest rates on Wednesday when they decided to leave them on hold at 4.50%, as expected, per Reuters. The policymaker also added that interest rates may need to stay at higher levels for a longer period of time to get inflation back to the target. 

Additionally, WTI crude oil also bears the burden of comments from the International Energy Agency (IEA), as well as the latest rebound in the US Dollar, while easing to $82.40 after posting four-day uptrend in the last. IEA’s latest monthly Oil market report said, “Output cuts announced by OPEC+ producers risk exacerbating an oil supply deficit expected in the second half of the year and could hurt consumers and global economic recovery.”

On the other hand, the US Dollar Index (DXY) snapped a three-day south run and bounced off the lowest level in a year after the latest round of the US data and comments from the Federal Reserve (Fed) officials push back dovish bias about the US central bank.

On Friday, US Retail Sales dropped by 1.0% for March versus -0.4% expected and -0.2% prior. On the contrary, Industrial Production grew by 0.4% during the stated month compared to 0.2% market forecasts and prior reading. Additionally positive was the preliminary reading of the University of Michigan's (UoM) Consumer Confidence Index for April which improved to 63.5 versus 62.0 analysts’ expectations and previous readings. Furthermore, Year-ahead inflation expectations rose from 3.6% in March to 4.6% in April while its Five-year counterpart reprinted 2.9% for the said month.

“The recent developments are consistent with one more rate hike,” said Atlanta Federal Reserve (Fed) President, Raphael Bostic in an interview with Reuters this Friday. On the same, Fed Governor Christopher Waller mentioned that the recent data show that the Fed hasn't made much progress on its inflation goal and added that rates need to rise further, per Reuters.

However, Federal Reserve Bank of Chicago President Austan Goolsbee said in an interview with CNBC on Friday that he still wants to see the data. The policymaker also added, “But let's be mindful we've raised a lot; some of the lag is coming through possibly in today's retail sales number."

Amid these plays, Wall Street closed with mild losses and the bond yields managed to recover.

Looking forward, a light calendar may allow the USD/CAD pair to consolidate latest losses but the preliminary readings of the US PMIs for April and the Canadian Inflation and Retail Sales for March and February respectively will be important to watch. Also important is a speech from BoC’s Macklem to confirm his latest hawkish comments despite offering no change in the rates.

Technical analysis

USD/CAD pair’s U-turn from a five-month-old ascending support line, around 1.3300 by the press time, needs validation from a downward-sloping trend line resistance from late March, close to 1.3420 at the latest. That said, the RSI and MACD do support further recovery in the Loonie prices.

• Gold price remains pressured after retreating from multi-month high.
• US Dollar rebound prods XAU/USD bulls ahead of Purchasing Managers Indexes for April.
• Hawkish Federal Reserve talks, resilient United States data underpin US Dollar’s corrective bounce.
• Challenges to US Dollar, upbeat catalysts from China keep Gold buyers hopeful.

Gold price (XAU/USD) stays defensive around $2,000, following the previous day’s heavy losses, the first in four day, which called for a weekly negative closing amid a corrective bounce in the United States Treasury bond yields and the US Dollar. That said, Friday’s mostly upbeat US data and hawkish Federal Reserve (Fed) talks prods the market’s interest in the XAU/USD amid receding dovish bets on the US central bank’s next move. However, this week’s preliminary readings of April’s Purchasing Managers Indexes (PMIs) from the key economies should be watched carefully for clear directions.

Gold price eases as US Dollar, yields recover

Gold price slips from the buyer’s radars after the United States Treasury bond yields and the US Dollar managed to witness a positive close to the week after multiple days of downturn.

That said, the US 10-year and two-year Treasury bond yields gained nearly 3.0% on the week while ending Friday’s North American trading session around 3.53%% and 4.10% respectively. Following that, the US Dollar Index (DXY) also snapped a three-day south run and bounced off the lowest level in a year to 101.58 at the latest.

United States data, Federal Reserve talks prod XAU/USD bulls

While tracing the latest rebound in the US Treasury bond yields and the US Dollar, the United States statistics and comments from the Federal Reserve (Fed) officials gain major attention.

On Friday, US Retail Sales dropped by 1.0% for March versus -0.4% expected and -0.2% prior. On the contrary, Industrial Production grew by 0.4% during the stated month compared to 0.2% market forecasts and prior reading. Additionally positive was the preliminary reading of the University of Michigan's (UoM) Consumer Confidence Index for April which improved to 63.5 versus 62.0 analysts’ expectations and previous readings. Furthermore, Year-ahead inflation expectations rose from 3.6% in March to 4.6% in April while its Five-year counterpart reprinted 2.9% for the said month.

“The recent developments are consistent with one more rate hike,” said Atlanta Federal Reserve (Fed) President, Raphael Bostic in an interview with Reuters this Friday. On the same, Fed Governor Christopher Waller mentioned that the recent data show that the Fed hasn't made much progress on its inflation goal and added that rates need to rise further, per Reuters.

However, Federal Reserve Bank of Chicago President Austan Goolsbee said in an interview with CNBC on Friday that he still wants to see the data. The policymaker also added, “But let's be mindful we've raised a lot; some of the lag is coming through possibly in today's retail sales number."

Given the resilient data and the Fed policymakers’ hesitance of being dovish, the market’s bets for the 0.25% Fed rate hike in May increased. That said, the traders also push back the expectations of a rate hike during the current year.

As a result, the Gold price run-up pauses near the multi-month high and challenges the bulls of late.

Challenges for US Dollar, absence of hawkish Fed bias keep Gold buyers hopeful

Despite the recent rebound in the US Dollar and yields, which in turn weighed on the Gold price, there are standing challenges for the greenback in the form of its reserve currency status, as well as surrounding the Fed, which in turn keeps the Gold buyers hopeful. That said, Russia’s liking for the Chinese Yuan and Brazil’s preference for using a separate currency for foreign trade, not to forget China’s push for its currency, check the US Dollar price of late.

Elsewhere, the easing fears of the recession and an absence of fresh banking negatives also weigh on the Gold price and allow the US Dollar to rebound. However, these concerns are ephemeral and are without any confirmation amid the looming threat of an economic slowdown, which in turn tests the USD bulls.

Furthermore, the odds of witnessing a pause in the Federal Reserve’s rate hikes trajectory are still high and weigh on the US Dollar, which in turn hints at the XAU/USD rebound.

Purchasing Managers Indexed eyed

Moving on, the Gold traders may witness a light calendar and can adhere to consolidation in the XAU/USD price. However, the downbeat prints of the preliminary readings of April’s Purchasing Managers Indexes (PMIs) may renew recession woes and can weigh on the US Treasury bond yields and the US Dollar, which in turn can recall the Gold buyers.

Also read: Gold Price Weekly Forecast: XAU/USD could extend correction before next leg higher

Gold price technical analysis

Gold price remains pressured inside a one-month-old ascending trend channel, following its U-turn from the channel’s top line the previous day. In addition to the pullback from the stated channel’s resistance line, bearish signals from the Moving Average Convergence and Divergence (MACD) indicator also tease the XAU/USD sellers.

That said, the 100-bat Simple Moving Average (SMA) prods Gold price’s immediate declines ahead of the aforementioned channel’s bottom line, close to $1,977 at the latest.

Should the XAU/USD drop below $1,977, the odds of its fall towards the early March swing high around $1,860 can’t be ruled out. However, the 200-SMA level of around $1,937 and the $1,900 round figure may check the Gold price on its south run.

Meanwhile, the 61.8% Fibonacci Expansion (FE) level of the Gold price moves between March 09 and 21 joins the previously mentioned channel’s top line to highlight the $2,048 as the key upside hurdle for the XAU/USD bulls to cross to retake control.

Following that, the previous yearly high of $2,070 and the all-time peak of the Gold price, near $2,075, will precede the 78.6% FE level of around $2,080 to act as additional upside filters for the XAU/USD bulls to watch.

Overall, the Gold price runs out of steam for further upside but the bears need validation from $1,977 to retake control.

Gold price: Four-hour chart

Trend: Limited downside expected

• EUR/USD is facing resistance in extending its recovery above 1.1000 amid hawkish Fed bets.
• The USD Index rebounded after a fresh annual low despite Retail Sales contracting more than anticipated.
• ECB policymakers are divided over interest rate guidance for the May meeting.

The EUR/USD pair is struggling to extend its recovery above the psychological resistance of 1.1000 in the early Asian session. The major currency pair is facing hurdles in stretching its recovery above 1.1000 as chances for one more rate hike from the Federal Reserve (Fed) remain firm despite a decline in retail demand by households.

Monthly Retail Sales data (Mar) released on Friday showed a contraction of 1.0%, higher than the expectations of a 0.4% decline and the former contraction of 0.2%. The demand for automobiles remained weak as higher inflation and tight labor conditions for households are weighing the burden on them.

S&P500 futures settled Friday’s session with some losses as investors remained cautious that one more rate hike from the Fed and tight credit conditions by United States commercial banks would squeeze out liquidity significantly. The CME Fedwatch tool is indicating more than 98% of investors are in favor of one more 25 basis points (bps) rate hike from the Fed.

The odds for further policy tightening by the Fed heightened after hawkish commentary from Fed Governor Christopher Waller. Fed Waller said on Friday that despite a year of aggressive rate increases, U.S. central bankers "haven't made much progress" in returning inflation to their 2% target and need to move rates higher still. He further added “The job on inflation was still “not done,” as inflation remains “far too high.”

The US Dollar Index (DXY) showed a recovery move after printing a fresh one-year low of 100.79 as Fed’s rate-hiking show is far from over.

On the Eurozone front, mixed views from European Central Bank (ECB) policymakers have shifted investors to the sidelines. ECB policymaker Pierre Wunsch said on Friday, “The policy decision in May is between 25-and 50-basis-point rate hikes,” although “size depends in large part on April core inflation.”

However, ECB Governing Council member Mario Centeno advocated a pause or a slowing in the interest rate hike spell, as reported by Bloomberg.

Christine Lagarde, president of the European Central Bank, said she has “huge confidence” the US will not allow the country to default on its own debt during an interview on CBS’ “Face the Nation” Sunday.

“I just cannot believe that they would let such a major, major disaster happen,” Lagarde said, adding if a debt default did happen, it would have a “very, very negative impact” both in the US and around the world.

“(The US is) a major leader in economic growth around the world. It cannot let that happen,” Lagarde said.

EUR/USD update

EUR/USD fell 0.48% to 1.0993 on Friday after earlier hitting 1.10755, its highest in around a year.

• NZD/USD is holding near the 0.6200 psychological area.
• Fed sentiment remained the main driving force.

NZD/USD dropped sharply on Friday as the US Dollar resurged as a hawkish narrative surrounding the Federal Reserve resurfaced. NZD/USD dropped to a low of 0.6195 from a high of 0.6314 and is stabilizing around 0.62 the figure currently. 

On Friday, Federal Reserve´s Governor Christopher Waller said that despite a year of aggressive rate increases, US central bankers "haven't made much progress" in returning inflation to their 2% target and need to move rates higher still. However, other Fed officials crossed the wires with Atlanta Fed President Raphael Bostic saying one more quarter-percentage-point interest rate hike can allow the Fed to end its tightening cycle while Chicago Fed President Austan Goolsbee said that a US recession is certainly feasible. Consequently, Fed funds futures traders are pricing in an 81% probability that the Fed will hike by an additional 25 basis points at its May 2-3 meeting.

Analysts at ANZ Bank explained that given consumer resilience, markets are now putting an 85% probability of a 25bp rate rise in May and expectations for June firmed as well. ´´Our baseline view is for two more 25bp rate hikes and we continue to expect that if economic data does not start to weaken soon, the market will need to reprice for no rate cuts in the second half of this year. A solid advance Q1 GDP release now seems likely,´´ the analysts said. 

Meanwhile, on the domestic front, the analysts said that ´´the hurdle for an upward surprise in non-tradable inflation on Thursday is high, but MPR-signalled upward revisions to the RBNZ’s near-term inflation outlook imply that any wins on the starting point may be offset in the RBNZ’s May MPS projections and OCR decision. ´´

The Financial Times reported on Sunday that the Bank of England is considering a major overhaul of its deposit guarantee scheme, including boosting the amount covered for businesses and forcing banks to pre-fund the system to a greater extent to ensure faster access to cash when a lender collapses.

GBP/USD update

GBP/USD edged lower on Friday but remained close to a 10-month high and had been supported by an improving appetite for risk. GBP/USD ended 0.88% lower and fell from a high of 1.2546 to a low of 1.2398. It will be a big week of British data that could provide clues on the outlook for monetary policy.

Bloomberg has put out an article that states a quarter-point increase in interest rates is the most the European Central Bank has to deliver at its next meeting, Governing Council member Mario Centeno said, playing down concerns over the strength of underlying inflation.

EUR/USD update

EUR/USD was down 0.48% to 1.0993 on Friday after earlier hitting 1.10755, its highest in around a year.

• AUD/USD bears test trendline support that guards against a break to test 0.6500 as illustrated above. 
• Fed sentiment and RBA in focus as the driver.

AUD/USD fell from resistance by some 1% on Friday with the US Dollar moving up from a one-year low as measured by the DXY index as traders derisked on inflation concerns. AUD/USD dropped between a high of 0.6805 and a low of 0.6695.  

It's a mixed bag of sentiment out there with US data disappointing yet hawks and US Dollar bulls finding elements from within to support a hawkish narrative surrounding the Federal Reserve. Fed´s Governor Christopher Waller said on Friday that despite a year of aggressive rate increases, US central bankers "haven't made much progress" in returning inflation to their 2% target and need to move rates higher still.

Additionally, March Retail Sales components were not as weak as some economists had feared. Core retail sales, which correspond most closely with the consumer spending component of gross domestic product, slipped 0.3% last month. However, despite March's fall, the gains in January and February put consumer spending firmly on track to accelerate in the first quarter. This led to the greenback bouncing back to life with the DXY adding 0.57% on the day at 101.53, after falling to 100.78, the lowest since last April. 

Other Fed officials also crossed the wires with Atlanta Fed President Raphael Bostic saying one more quarter-percentage-point interest rate hike can allow the Fed to end its tightening cycle while Chicago Fed President Austan Goolsbee said that a US recession is certainly feasible. Consequently, Fed funds futures traders are pricing in an 81% probability that the Fed will hike by an additional 25 basis points at its May 2-3 meeting.

Meanwhile and domestically, traders will look to the Reserve Bank of Australia´s minutes. Analysts at TD Securities noted that in recent speeches, governor Phillip Lowe and deputy governor Michele Bullock made it clear that the RBA wanted to pause to assess the impact of the rapid rate hikes and the economic outlook. ´´Thus, we expect the Minutes to follow closely to their speeches and don't expect any surprises. Again, the Minutes will emphasize the "long and variable lags" of monetary policy and the uncertainty from the mortgage roll-off.´´

Analysts at ANZ Bank explained that resilience and green shoots were the themes of this week’s data prints across the labour market, business conditions and housing. ´´We see risks to inflation as tilted up and, in our CPI preview, forecast trimmed mean, non-tradables and services inflation will all annualise above 6% in Q1. But we don’t think this will be enough for the RBA to move in May.´´

AUD/USD technical analysis

The bears have moved in on trendline support that guards against a break to test 0.6500 as illustrated above.