Your weekly outlook of technical patterns and structure.

The FP Markets Research Team scans the financial markets for you, highlighting clear and actionable technical structures.

Forex: EUR/USD Tentatively Tests Support Ahead of ECB Meeting

Daily Timeframe –

Following hotter-than-expected US CPI inflation numbers pulling the EUR/USD southbound yesterday, the currency pair is now testing the mettle of long-standing support ahead of today’s ECB rate decision.

While the central bank is unlikely to cut rates today, there is mounting speculation that we will see a 25bp cut at June’s policy-setting meeting, particularly after the recent euro area inflation release. Therefore, should ECB President Christine Lagarde emphasise a dovish vibe at today’s Press Conference, taking out the current support could be on the cards, a move potentially opening the door to as far south as monthly support coming in at $1.0516.

Commodities: Deeper Correction for XAU/USD?

Spot gold (XAU/USD) recently stalled off all-time highs at $2,365, largely fuelled by yesterday’s dollar rally on the back of US CPI data.

The question is whether this will be enough to encourage further selling/profit-taking. In support of extending the retracement, the weekly timeframe’s Relative Strength Index (RSI) is considerably overbought, hitting levels not seen since late 2020. The same can be seen from the daily chart’s RSI, hovering ahead of indicator resistance coming in from 87.21 and establishing early signs of negative divergence. However, the RSI can remain overbought for prolonged periods in trending markets, meaning we could simply be seeing gold ’taking a breather’ (consolidating).

If further underperformance were to be seen, daily support from $2,280 would call for attention as a possible platform for dip buying in line with the underlying uptrend.

Equities: Bearish Engulfing Pattern and Follow-Through Selling for the S&P 500

Weekly Timeframe –

Following last week’s bearish engulfing candle (textbook engulfing formations focus on the real bodies, not upper and lower shadows), the S&P 500 has explored lower ground this week, down -0.8% (WTD). Aided by the Relative Strength Index (RSI) reacting from indicator resistance at 79.04 (a level not seen since early 2020) and is now on the verge of exiting overbought space, this could imply a deeper correction for the major market index.

Channel resistance-turned-potential support warrants attention were further selling to materialise, an ascending line drawn from the high of 4,607, which happens to share a close connection with the 5,000 level.

Cryptocurrency: ETH/USD Poised to Engulf Resistance

Weekly Timeframe –

The second largest Digital Coin—Ethereum—recently clocked a high of $4,092 against its US counterpart, though failed to find acceptance north of resistance from $3,723. While this did welcome some follow-through downside, it has so far been short-lived; ETH/USD discovered support from $3,283 (some may recognise this level as a Quasimodo resistance-turned-support base) and is now retesting the grip of the $3,723 resistance.

With this market trending higher since bottoming at a low of $900.57 in mid-2022, and considering the correction from $4,092 has thus far been shallow (hampered by $3,283), another break of resistance from $3,723 is likely on the table. Breakout buyers north of current resistance may take aim at resistance from $4,299.

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