The US dollar strengthens again, gold faces renewed pressure, is the Nasdaq "too high to sustain"?

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　　Written by: Jerry Chen, Senior Analyst at Gain Capital

　　The U.S. dollar's strong four-day rally has put pressure on gold, while technology stocks continue to march higher.

　　This week, U.S. CPI and PPI data hit multi-year highs, with inflationary pressures from war becoming evident and spreading. The Federal Reserve may face increasing pressure to raise rates, which has helped the U.S. Dollar Index rise for four consecutive days. The bulls’ next target should be the gap left on April 8 at 99.30/50. Overnight, weak demand in U.S. Treasury auctions pushed yields higher, which also indirectly boosted the dollar’s performance.

　　A strong dollar has caused gold to retreat for three consecutive days, and silver plunged 4% overnight. The dollar’s rebound this week is not only due to domestic economic data but also favorable comparisons with its peers.

　　The British Prime Minister faces growing pressure to step down from within the party, with the Labour Party now very close to initiating a party leadership election. The pound fell 0.9% overnight, its fourth consecutive day of decline.

　　News that the Japanese government is considering an additional budget for the fiscal year led to continued selling of Japanese government bonds. Yields, particularly at the long end, surged, dragging down the yen. USD/JPY broke above 158 overnight; without intervention from the central bank or rate hike expectations, 160 becomes the next target, which was also the level that triggered intervention two weeks ago.

　　International crude oil prices were flat overnight, remaining above $100. Iran stated that since Wednesday evening, 30 ships have passed through the Strait of Hormuz, but this is still not enough to make up for the massive supply shortfall, so oil prices may remain elevated.

　　Despite a strong dollar and continued deadlock in the Middle East, tech stocks remain robust, with exuberant market sentiment persisting during the China-U.S. summit. The initial agreements reached include the U.S. allowing Nvidia to export H200 chips, as well as procurement orders for Boeing. Nvidia's stock surged over 4%, pushing its market cap close to $6 trillion. The company will release earnings on May 20. Cisco soared 13% after reporting strong earnings.

　　But will the continued rise in the dollar and U.S. Treasury yields gradually weaken market optimism and upward momentum? Traders need to be alert to the reversal of extreme sentiment and profit-taking trends.

　　XAUUSD Gold Daily Chart

　　This week, the dollar’s rebound has kept gold suppressed below the 50-day moving average, with gold falling for three consecutive days and failing to hold the critical 4650 level, suggesting further weakness may be ahead.

　　As shown by the chart, in the short term, there is notable resistance around 4630, but gold has some support near 4600. If this support breaks, the next key area to watch will be near the trend line around 4530/60. On the upside, the previous support at 4650/80 may now act as resistance.

　　NASDAQ 100 4H

　　Will rising U.S. dollar and Treasury yields gradually erode market optimism and upward momentum? The market’s performance will provide the answer.

　　According to the chart, the trend line and moving average near 29050 have become an important dividing line for the NASDAQ 100 index, likely impacting market sentiment. Breaking below the 28500-28640 area could open up more space for downward adjustment.

Editor: Zhu Henan