Fundamental Analysis & Market Sentiment
I wrote on 10rd May that the best trades for the week would be:
Long of Brent Crude Futures (or a suitable ETF) if we get a daily close above $114.44. This did not set up.
Long of Gasoline Futures (or UGA ETF) following a daily close above $3.7382. This did not set up
Long of the S&P 500 Index. This gave a small win of 0.13%.
Long of the NASDAQ 100 Index. This gave a small loss of 0.21%.
The overall loss of 0.08% last week averaged as a per asset loss of 0.02%.
A summary of last week’s most important data in the market:
US CPI (inflation) – this came in fractionally higher than expected, at 3.8% instead of 3.7%, and represents a meaningful increase as it reached a new 2-year high. This helped firm up the US Dollar.
US Fed Chair Nomination Vote – Kevin Warsh was finally nominated as expected, but the Congressional votes confirming his appointment were the most divided in American history. Coupling this with outgoing Chair Powell’s unprecedented action of staying on as a voting member means the Fed’s independence is going to be increasingly called into question, which could have long-term impacts on US monetary policy.
US PPI (purchasing power index) – this came in much higher than expected, showing a month-on-month increase of 1.4% while 0.5% was seen as the likely figure. This was seen as confirmation of the higher CPI data and helped strengthen the US Dollar.
US Retail Sales – this was exactly as expected.
UK GDP – this was expected to show a small month-on-month decline but came in better than expected at 0.3%. However, this was not sufficient to prevent the Pound from falling quite sharply over the past week.
Last week saw choppy action in stock markets, although major US and South Korean indices broke out to new record highs before falling back earlier in the week. Overall, it was a flat or lower week in most markets. This was mostly due to rising interest rate yields plus a general fear that the situation between the USA and Iran is close to re-escalating as the talks between the nations are clearly going nowhere. President Trump has been dropping increasing hints that a short but sharp renewal of military attacks against Iran could happen soon. These factors have helped to strengthen the US Dollar, with rising yields supported by almost all the high-impact economic data which was released last week. Despite fears of renewed war, crude oil and gasoline have not regained their earlier highs yet.
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Most commodities fared similarly to stocks, although very few were making new highs earlier in the week.
The US 10-year Treasury Yield made a new near-1-year high last week, rising particularly strongly on Friday, which was a decisive day in the market. The 2-Year Treasury Yield reached a fresh 1-year high price.
President Trump’s summit with President Xi of China took place last week but had little effect. However, some of Trump’s comments hinted at strong pessimism over Taiwan’s future outside of the PRC and that might shake the Taiwanese stock when it opens Monday.
The Week Ahead: 18th – 22nd May
It looks likely that the kinetic war between the USA and Iran will not re-erupt until next weekend at the earliest, so markets will be looking to economic data releases and yields in general. If nothing changes, it looks likely to be a week dominated by risk-off sentiment. There is not much data due, so it might be a relatively quiet week.
The coming week’s most important data points, in order of likely importance, are:
US FOMC Meeting Minutes
UK CPI (inflation)
Canadian CPI (inflation)
UK Flash Services & Manufacturing PMI
Australia Unemployment Rate
UK Claimant Count Change (Unemployment Claims)
Monday is a public holiday in Canada.
Monthly Forecast May 2026
Currency Price Changes and Interest Rates
For the month of May, as there is no clear trend in the US Dollar, I made no monthly forecast.
Weekly Forecast 11th May 2026
This week, I made no weekly forecast, as there were no unusual movements in the Forex market last week.
Volatility increased last week, with 30% of currency pairs moving by more than 1% in value. Next week’s volatility is likely to be lower as there are fewer high-impact data items scheduled for release.
You can trade these forecasts in a real or demo Forex brokerage account.
Technical Analysis
Key Support/Resistance Levels for Popular Pairs
Key Support and Resistance Levels
US Dollar Index
The US Dollar printed an unusually large bullish candlestick last week, which closed extremely near to the high of its range. We finally have a confirmed long-term trend by my preferred metric, with the 3-month trend bullish and the 6-month trend also bullish.
Another bullish factor is the higher low which this week’s candlestick has moved away from. It is close to a bullish head and shoulders pattern. So, there are other bullish technical factors present too. However, the price is still located within an area of consolidation.
Fundamental and sentimental factors are also boosting the greenback, with treasury yields rising strongly to long-term highs, as the inflationary effects of the Iran war feed into the global economy. The Fed is now seen as unlikely to change its interest rate before 2028 and could even hike. This is a big change from the situation just a few months ago.
There is also a concern that the USA / Iran war could erupt again, which could give even more of a tailwind to the USD.
I will be most comfortable entering new trades this week that are long of the US Dollar.
US Dollar Index Weekly Price Chart
GBP/USD
The GBP/USD currency pair fell quite strongly last week, especially at the end of the week. The British Pound, along with the New Zealand Dollar, was the weakest major currency. The weekly candlestick was a large engulfing bar that closed right on its low – these are signs of bearish momentum which could follow through into next week.
I covered above reasons why the US Dollar has gained. I should also mention here the higher-than-expected PPI and CPI data releases in the USA last week, which helped boost its value.
As for the British Pound, although the UK enjoyed marginally positive GDP growth, which was not expected, the UK is facing serious issues which are starting to weigh on its currency. The main issue is political instability, with wide expectation that the wildly unpopular government will soon see the Prime Minister resign and someone else take over. Recent economic data has also been relatively poor and clearly the country is not happy, is increasingly polarized, and is struggling to make progress on any of its major problems. The Iran war has thrown its declining relationship with the USA into focus, and that relationship has been the lynchpin of British foreign policy for almost a century.
I would not say this was a strong sell, but if the USD continues to strengthen, this might be a good currency to use as a short counterparty.
GBP/USD Weekly Price Chart
S&P 500 Index
The S&P 500 Index came very close to making its first lower weekly close in seven weeks: the tech-based NASDAQ 100 Index actually did.
The price chart below shows that last week’s candlestick was a pin bar, which is suggestive of a further bearish retracement.
The price was advancing very strongly earlier in the week to reach new all-time highs, but dropped sharply on Friday, the day we saw a shift into more clearly risk-off sentiment in the market.
I do not want to go short here and if anyone does so they should be extremely careful. However, I do not want to enter any new long trade until we get a new record high daily close, which would be above 7,505.6.
S&P 500 Index Weekly Price Chart
Brent Crude Oil Futures
Brent Crude Oil futures rose over the week, mostly due to increasing expectations that the USA will soon resume military attacks on Iran, possibly even striking or seizing crude oil facilities. Meanwhile, the blockade of the Strait of Hormuz continues, and Iranian crude oil exports have slowed dramatically, with increasing evidence that the blockade is damaging the country’s oil facilities.
All these factors are working to push the price higher. As soon as news breaks that the USA is bombing Iran again, the price will surely rise strongly to a new long-term high price. US operations against oil facilities will make that an even stronger boost, although their hope will be that it then quickly falls as oil export comes back online. However, that is likely to be a forlorn hope.
Going long here upon a bullish breakout could be a good trade. The issue is that there is a risk of a 10%+ drop overnight if there is a sudden announcement of any kind of deal between the USA and Iran, which President Trump is clearly still hoping for. If you are a trend trader, that is a risk you probably must accept. Volatility is quite high, so trade position size here will be small.
I will enter a long trade here if we get a daily close of Brent Crude futures above $114.46.
Brent will likely be the better vehicle than WTI, as it is more exposed to events in the Strait of Hormuz.
Brent Crude Oil Futures Daily Price Chart
Gasoline Futures
RBOB Gasoline Futures traded higher last week. Everything I wrote above about Crude Oil also refers to Gasoline, as Gasoline is derived from Crude Oil so faces all the same issue. The only difference is that gasoline prices tend to lead the price of Crude Oil, so this could be the better trade, and if war starts against between the USA and Iran, Gasoline will probably break to new highs even before Brent Crude does.
I will take a long trade in Gasoline if the RBOB Gasoline Future makes a daily (New York) close above $3.7382.
Gasoline futures are too large for most retail traders, so using a CFD or an ETF like UGA could be a more accessible way to get exposure.
Gasoline Futures Daily Price Chart
US 10-Year Treasury Yield Futures
Treasury yields are rising everywhere, and last week the USA saw dramatic rises in the yields of its government bonds. Put simply, markets are now expecting higher rates. A few months ago, inflation looked as if it had been effectively beaten in the USA, but now with the crude oil price shock resulting from the Iran war, inflationary pressures have been reimported into every major global economy, and the main weapon again inflation is relatively high interest rates.
Interest rates have historically been great instruments to trend trade, and trend traders will be interested in being long now of the futures instruments, although it is worth noting that futures on rates tend to lead the actual rates themselves by quite a lot.
The price chart below shows last week’s candlestick was very large, closed extremely near the high of its range, and reached a new 1-year high price. These are all bullish signs, and both technical factors and fundamentals agree on a long trade here. The only problem is you might have missed part of the move already if you are not yet long.
US 10-Year Treasury Yield Futures Daily Price Chart
Bottom Line
I see the best trades this week as:
Long of Brent Crude Futures (or a suitable ETF) if we get a daily close above $114.46. This is unlikely to set up, unless there is a surprise resumption of the war.
Long of Gasoline Futures (or UGA ETF) following a daily close above $3.7382.
Long of the US 10-Year Treasury Yield future.
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