Fundamental Analysis & Market Sentiment
I wrote on 17th 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 $114.46. 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 US 10-Year Treasury Yield future. This gave a loss of 0.52%.
The overall loss of 0.52% last week averaged a per asset loss of 0.17%.
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A summary of last week’s most important data in the market:
US FOMC Meeting Minutes – marginally more hawkish than expected, so may have given a very slight tailwind for the USD.
UK CPI (inflation) – lower than expected, with the annualized rate falling to 2.8%. This will take some pressure off the Bank of England and may have led the British Pound to a weaker price than it might otherwise have shown.
Canadian CPI (inflation) - lower than expected, with the annualized rate falling to 2.8%. This will take some pressure off the Bank of Canada and may have led the Canadian Dollar to a weaker price than it might otherwise have shown.
UK Flash Services & Manufacturing PMI – these growth indicators outperformed expectations, which may give investors a bit more confidence in the UK.
Australia Unemployment Rate – this rose unexpectedly from 4.3% to 4.5%.
UK Claimant Count Change (Unemployment Claims) – this was broadly in line with expectations.
Last week saw global stock markets edge higher, with the US Dow Jones 30 reaching a new record high, and other major indices close higher near their respective record highs, as did the major Japanese and South Korean stock indices. Markets are being led higher by strong earnings data and continuing bullish sentiment on the AI sector.
Bond yields generally remained elevated on inflation fears, although many yields came off their highs as both UK and Canadian inflation data came in lower than expected.
Crude Oil remained elevated as uncertainty continued over the ongoing standoff between the USA and Iran.
Crypto and Forex markets were relatively quiet. Commodities were mixed.
The Week Ahead: 25th – 29th May
The news is dominated by an emerging confirmation by President Trump that the USA and Iran will shortly sign a memorandum of understanding. It seems that this will provide a 60-day period where the US blockade of Iran will end and the Strait of Hormuz will reopen, but the exact terms beyond that remain unclear.
The effect of this news, assuming the memorandum is shortly signed, will almost certainly be to send stock markets and risk assets higher as soon as markets open this week, while yields and crude oil will fall. In the Forex market, we are likely to see firm rises in the AUD/USD and AUD/JPY currency pair and cross.
Beyond that, the coming week’s most important data points, in order of likely importance, are:
US Core PCE Price Index
US Advance GDP
Australian CPI (inflation)
Reserve Bank of New Zealand Policy Meeting – no change to the Official Cash Rate is expected.
Canadian GDP
Monday is a public holiday in the USA, the UK, Germany, France, and Switzerland.
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 24th May 2026
This week, I made no weekly forecast, as there were no unusual movements in the Forex market last week.
Volatility decreased last week, with only 15% of currency pairs moving by more than 1% in value. Next week’s volatility is likely to be higher as there are several high impact data items due, and the effect of the emerging deal between the USA and Iran.
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 small doji candlestick last week, which is suggestive of indecision or indifference by the market.
We have no long-term trend, and the greenback has been consolidating within its current range for an entire year now.
It is possible that the emerging news of a deal between the USA and Iran might reduce perceived inflationary pressure which could be a dovish influence upon Dollar yields, and this might send the Dollar lower over the coming week. However, several other currencies are facing the same situation as oil shock inflation feeds through everywhere, so as it is all relative, it might now have much influence.
What these factors point to is a Dollar which is likely to range slightly with unpredictable price action. It is not in a directionally tradable condition. Therefore, I think it makes sense to base trades over the coming week on other factors and to just ignore the US Dollar as a factor even if you are trading something priced in Dollars.
US Dollar Index Weekly Price Chart
AUD/USD
The AUD/USD currency pair printed a doji candlestick last week, that was slightly bearish, although the price action is not far from the 3.5-year high price which this currency pair made three weeks ago. The price has been ranging between support and resistance, and this is probably because the world was waiting to see whether the USA and Iran would resume a kinetic war or reach some kind of deal to end the war and the entire standoff.
It now seems very likely that a deal, or at least the beginning of one, has been reached if not fully signed and agreed. I think it is very likely that this will cause a substantial improvement in risk sentiment, and as that happens, this pair will probably open with a gap higher when the Forex market opens for this week. Technical factors will initially be relatively unimportant but could become significant after a few hours if the price becomes over-extended.
This is a pair to keep your eye on if factors move towards progress of this deal. If the price breaks above its recent 3.5 year high, it will be trading in blue sky and could move higher with ease. The AUD/JPY currency cross could do even better in the same direction.
I see this currency pair as likely to advance over the coming week.
AUD/USD Weekly Price Chart
S&P 500 Index
The S&P 500 Index rose firmly last week, closing not far below 7,500 which is near the record high it made just a couple of weeks ago.
It was driven higher by NVIDIA’s surprisingly excellent earnings data, and possibly by increased optimism over a deal between the USA and Iran to end the war.
Developments over this weekend have confirmed that some kind of deal, or at least the start of a deal, is probably extremely close, and if this is borne out, it will only send the market even higher, likely to new record highs where it will trade in blue sky.
The big round number at 7,500 might be acting as resistance, but once that is overcome, the price could go all the way to 8,000 before that happens again.
I think unless something goes awry with the deal, we will see this Index advance over the coming week, so I see this Index as a buy.
S&P 500 Index Weekly Price Chart
NASDAQ 100 Index
Everything I wrote above about the S&P 500 Index applies even more strongly to the NASDAQ 100 Index, which is doing even better as it contains a stronger concentration of booming AI-driven companies. The bullish momentum is a little stronger here, and the NASDAQ 100 has a notably higher average annual return than the S&P 500 Index.
I see this Index as a buy.
NASDAQ 100 Index Weekly Price Chart
Brent Crude Oil Futures
Brent Crude Oil futures fell over the week, mostly due to increasing expectations that the USA and Iran will conclude a deal that would end the blockade of the Strait of Hormuz by both parties.
These expectations seem to be justified now, with President Trump stating that a memorandum of understanding is all but signed, with the first step the reopening of the Strait and a normalization in the Gulf.
This is extremely likely to lead to a significant gap lower when the market opens this week.
Of course, the deal could fall apart. As more details of the deal and related negotiations are revealed, there will likely be more uncertainty, and a stabilization of price movement.
Overall, it looks likely that we will see a decline in the price over the coming week, but this is still a dangerous bet to make over several days.
Day traders might want to look for short trades here on short time frames when there is bearish momentum, especially early in the week.
Brent Crude Oil Futures Weekly Price Chart
Bottom Line
I see the best trades this week as:
Long of the AUD/USD currency pair.
Long of the S&P 500 Index.
Long of the NASDAQ 100 Index.
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