The US equity markets closed slightly lower on Tuesday after a volatile session that saw initial losses of around 1% for the SPX index and more than 2% for the NDX index. The indices recovered a major portion of yesterday’s losses, declining 0.19% and 0.88%, respectively. Tables seemed to have turned again, with markets turning bullish again during the Asian session on Wednesday, with the SPX index trading 0.24% higher and the NDX index trading 0.65% higher.
Tuesday saw increased volatility following the hotter-than-expected CPI report, which came in at 3.8%, above the 3.7% expected, marking the highest inflation reading since May 2023. This led the odds of a 25 bps rate hike by the end of the year to spike to 29.4%, according to the CME FedWatch Tool, up from 21.5% a day ago, reigniting the higher-for-longer interest rate narrative. Despite the intraday decline, the sharp market recovery suggests traders viewed it as an opportunity to continue the strong dip-buying momentum. This goes to show that there is a level of uncertainty, with markets trying to counter fears of high inflation with robust buying momentum. Focus for today may shift to the PPI report, which shows inflation metrics from the producer’s point of view, while Cisco’s earnings may catch some eyes. Additionally, updates from President Trump’s visit to China may be closely scrutinised, especially as he is accompanied by a slew of chief executives, including Nvidia CEO Jensen Huang.
From a technical standpoint, although both the SPX and NDX indices fell and then recovered sharply, they remained comfortably above their key moving averages across the daily, weekly, and monthly timeframes, and remain within a strong bullish market structure. Additionally, both indices printed a relatively bullish candle on the daily chart, with longer lower wicks, suggesting strong momentum. For the SPX index, immediate resistance may still be near the 1.618 Fibonacci retracement level around $7453, while the 9-day EMA could act as near-term support around $7342.
US Dollar Index Â
The US Dollar Index ended the previous session on a positive note, rising around 0.39% to close near the $98.28 mark. In today’s session, the Dollar Index is trading relatively flat near $98.31 at the time of writing, as traders remain cautious ahead of key economic events later in the day.
The US Dollar continues to find support after the latest inflation data reinforced expectations that the Federal Reserve may keep interest rates elevated for a longer period. According to the Bureau of Labour Statistics, the US Consumer Price Index (CPI) rose by 0.6% MoM in April, pushing the annual inflation rate higher to 3.8%, marking its highest level since May 2023. Meanwhile, Core CPI, which excludes volatile food and energy prices, also remained firm with an annual rise of 2.8%. The hotter-than-expected inflation data has strengthened hawkish sentiment among market participants, supporting the Greenback as traders now reduce expectations of near-term Fed rate cuts.
Looking ahead, traders will closely watch the upcoming US PPI inflation data later in the day for more clues on the Federal Reserve’s interest rate outlook. Market participants are also expected to remain cautious ahead of the meeting between US President Donald Trump and Chinese President Xi Jinping, with trade talks likely to remain a key part of the agenda between the two nations.
Technically, the US Dollar Index has turned bullish for intraday traders after successfully breaking out of a symmetrical ascending triangle pattern in the previous session and sustaining above the breakout zone on the 4-hour chart. Immediate resistance is now at the 200-Day SMA around the $98.52 level, followed by the next key resistance at the 50-Day SMA around the $98.97 level. On the downside, immediate support is seen at the 9-Day SMA near $98.20, followed by yesterday’s low around the $97.95 level.
Meanwhile, the EUR/USD pair ended the previous session lower by 0.36%, closing near the 1.1740 mark. In today’s morning session, the pair is trading relatively flat near 1.1735. Immediate support for the pair is seen at the 200-Day SMA near 1.1682, followed by the next support around the 50-Day SMA at 1.1646. On the upside, immediate resistance is placed near 1.1787, which marks yesterday’s high, followed by the next key resistance around the 1.1834 horizontal resistance zone.
Crude Oil
Today Brent decreased by 1% to $109.2 while WTI decreased by 1.2% to $101.50
Oil markets have been mixed due to conflicting factors on supply and demand, and today’s oil price decline seems more like a market positioning shift than a change in market regime.
After surging more than 3% the previous day, the pullback comes as a classic case of buy the rumour, sell the news on the fragile nature of the ceasefire negotiation. The closure of Hormuz is not a marginal event, about one-fifth of the world’s oil and LNG passes through the strait, and analysts estimate the total supply loss to date at over 1 billion barrels, so Brent finds a credible floor at above $80 for the rest of the year, regardless of the progress of negotiations. But Trump’s summit with Xi could be a game-changer. China is the biggest buyer of its sanctioned oil, and any indication that China will increase purchases would be bullish, while signs of Chinese participation in ceasefire talks could temporarily subdue the risk premium.
On a related note, EM credit spreads are at 19-year tight spreads, reflecting a healthy risk appetite in particular, energy-heavy EM credits benefiting hugely from high oil.
Finally, oil is in a high-vol, supply-driven environment; a credible Hormuz reopening headline would cause a violent risk premium compression and is the single biggest possible downside catalyst, while further ceasefire breakdowns or Iranian supply ramp headlines would quickly send both benchmarks soaring again.
On the 4-hour chart, Brent price rejected the upper Bollinger Band near $111.80 and entered a consolidation phase around $109. Near-term price action still favours a rebound toward the $112 resistance area, provided support near 108 holds. A decisive break below $108, however, would weaken the bullish structure and increase downside pressure and could test $106.
WTI also faced rejection near its upper Bollinger Band but has managed to stabilise and recover. As long as prices remain above the mid-band support near $101, the rebound structure stays intact, keeping the door open for another move toward $104. Key downside support is seen around 98.50.
Gold & Silver
Gold remains under pressure after hotter-than-expected US inflation data dampened hopes for Federal Reserve rate cuts and revived expectations of a possible rate hike by the end of 2026. The metal slipped by 0.4% yesterday, briefly falling toward $4,640. Today, the metal is stable near $4,710. Stronger inflation data pushed the dollar higher, weighing on non-yielding assets such as bullion.
The U.S. Consumer Price Index showed inflation rising 3.8% year-over-year in April, above the expected 3.7%. Core inflation was also stronger than forecast. After this data, markets now see about a 30% chance of a Fed rate hike by December 2026, supporting the idea that rates may stay high for longer. Higher oil prices, caused by ongoing tensions near the Strait of Hormuz and less optimism for a US-Iran peace deal, are adding to inflation concerns and keeping gold under pressure.
Investors are now watching the upcoming US Producer Price Index data and the Trump-Xi summit in China for further clues on policy and geopolitical signals. From a technical perspective, gold still looks bearish for the day, with resistance near $4,745 and support at $4,660. A sustained break above $4,745 (50% Fib level) could, however, trigger a bullish move in the metal. Silver is holding steady near $86.70 after reaching multi-week highs. Support lies at yesterday’s low of $83, while resistance could be seen around $90.
