Market Overview & Key Events

The week of May 25–29 opens in the shadow of a notable deterioration in global risk appetite. The US Dollar suffered a sharp late-week sell-off — collapsing to three-week lows near the 99.00 zone on the DXY — after President Trump reignited trade war fears with renewed tariff threats against EU goods. That single headline reshuffled the deck across all three instruments heading into the new week.

Adding a layer of complexity, US markets are closed on Monday, May 25 for Memorial Day, meaning liquidity will be thin early in the week and that European sessions will carry outsized influence on Tuesday’s open.

Macro backdrop to monitor throughout the week:

The Strait of Hormuz / Iran situation continues to dominate global risk sentiment. Trump has stated the US naval blockade continues until a nuclear agreement is reached, while US military officials are reportedly briefing the president on potential operations against Iran. Any escalation would be immediately gold-bullish and risk-asset bearish. A surprise de-escalation or deal headline would have the opposite effect — sharply bearish for gold and bullish for equities.

Fed rate hike expectations are beginning to be repriced. Rate cut probability for 2026 has collapsed to near 1%, with some desks now factoring in a possible hike in 2027. This dynamic is crucial — it creates a bifurcated environment where the USD weakness is driven by tariff/trade fears rather than monetary policy, making the moves less clean and more prone to sharp reversals.

1. Germany 40 (DE40) — Bullish Breakout Under Pressure

Technical Landscape

The 4-hour chart tells a dramatic story of recovery from the depths of mid-May. After bottoming near the 23,750–23,850 area around May 18, the DE40 staged an aggressive multi-session rally through the MA ribbon. Both the 9 EMA (yellow) and 18 EMA (black) are now rising and positively aligned, with price having pushed all the way to the 25,150–25,200 zone by the end of last week — fresh multi-week highs. The ribbon is in a clean bullish configuration, and the medium-term structure has shifted decisively higher. However, Friday’s late-session candles show price pressing against the upper range of the move at 25,150–25,200, with no clear continuation catalyst at the time of writing.

The 1-hour chart zooms into the more nuanced picture. The explosive move from the 24,750 area into the 25,150–25,200 zone on Friday has left the 9 EMA well above the 18 EMA on the 1-hour, but the last couple of candles show a small pullback and some consolidation. The MA ribbon is beginning to flatten, and price is hovering just beneath the intraday high. There is no bearish cross yet on this timeframe, but the momentum is clearly slowing. Monday’s thin liquidity session will likely give a clearer picture of whether Friday’s highs hold or get faded.

Most Likely Bias: Cautiously Bullish

The medium-term trend has clearly shifted to the upside. The 4h ribbon is constructively bullish, the index has reclaimed all major moving average levels, and the structural base from the 23,750 area has proven to be a strong demand zone. However, the index now trades near short-term resistance at 25,150–25,200, and the Memorial Day-thinned Monday session creates the risk of a pullback or consolidation before the next directional move. The bias is bullish on dips rather than chasing the highs, with the critical question being whether a correction finds support above 24,700 — which would keep the bullish structure intact.

A bearish scenario emerges if FOMC Minutes on Wednesday signal hawkish intent (risk-off) or if the Iran/Hormuz situation escalates, which would hit European equities particularly hard.

Key Levels to Watch

Resistance

25,150–25,200 — the current intraday high zone and immediate overhead supply. A 4h close above this area on strong volume would be a genuine breakout signal, opening the door toward 25,400–25,500.

25,400–25,500 — the next major resistance shelf; uncharted territory on this timeframe.

25,000 (psychological) — will now flip to near-term support if price retraces; a clean hold here on any dip maintains the bullish structure.

Support

24,700–24,800 — the first meaningful demand zone below current price; this is where the 4h 18 EMA is beginning to converge. A pullback here would be a healthy correction within the uptrend.

24,300–24,400 — secondary support; the prior congestion zone from mid-May and where the MA ribbon would sit on a deeper pullback.

23,750–23,850 — the swing low from May 18; the definitive invalidation level for the current bullish thesis. A close below here on the 4h would signal the recovery has failed.

Trade Ideas

Idea 1 — Bullish Pullback Entry (Primary Scenario)

The highest-probability play is to wait for price to pull back into the 4h rising MA ribbon rather than chasing at the highs. Look for a retest of the 24,700–24,850 area with a bullish 1-hour confirmation candle (hammer, bullish engulfing, or a close back above both EMAs after a brief dip below them).

• Entry: Buy on 1h confirmation near 24,750–24,850
• Target 1: 25,100 · Target 2: 25,200 · Extended: 25,400 if FOMC Minutes are neutral and PCE is soft
• Stop-Loss: Below 24,500 (below the 4h ribbon)
• Rationale: Buying the ribbon in a confirmed uptrend is the textbook approach. The Memorial Day thinning often produces an initial dip before the US session joins properly on Tuesday — that dip is the entry opportunity. Do not chase Friday’s high.

Idea 2 — Bearish Reversal (Alternative Scenario)

If Wednesday’s FOMC Minutes deliver a hawkish shock — or if Iran tensions escalate with military action — look for a sharp reversal from the 25,150–25,200 zone. Confirmation requires a 1h bearish close back below 24,900, with both EMAs rolling over.

• Entry: Sell on a confirmed 1h close below 24,900 after a rejection from 25,150–25,200
• Target 1: 24,600 · Target 2: 24,300
• Stop-Loss: Above 25,300
• Rationale: The index has run hard from 23,750 to 25,200 in a matter of days. A fundamental shock at this level — when short-term momentum is already slowing — could trigger a meaningful pullback. Position size must be small; fighting a 4h bullish trend requires exceptional discipline.

Idea 3 — Breakout Play (If 25,200 Clears)

A clean 4h close above 25,200 on the back of a risk-on catalyst (soft PCE, neutral FOMC Minutes, Iran de-escalation) sets up a momentum breakout trade targeting 25,400–25,500.

• Entry: Buy on a re-test of 25,150–25,200 as new support, following the 4h breakout close
• Target 1: 25,400 · Target 2: 25,500
• Stop-Loss: Below 24,950
• Rationale: A breakout above the current range highs into fresh weekly highs would attract momentum buyers and could run quickly. Keep position size moderate and move stop to breakeven quickly given the event risk mid-week.

2. EUR/USD — Bearish Medium-Term Trend, Short-Term Bounce in Play

Technical Landscape

The 4-hour chart presents a clear and sustained bearish structure. From the highs near 1.1800 in mid-May, the pair has been grinding lower in a well-defined downtrend, making a series of lower highs and lower lows. The 9 EMA (yellow) is below the 18 EMA (black) for the vast majority of the chart, with both EMAs sloping downward and acting as dynamic resistance on every bounce. Price currently trades around 1.1638–1.1640, having found a tentative base after a sharp sell-off from the 1.1780 area. The most recent 4h candles show some relief buying, but neither EMA has turned higher, and price remains below the ribbon — the overall 4h bias is bearish.

The 1-hour chart tells a slightly different short-term story. After bottoming near 1.1580 on May 22–23, the pair has staged a clear recovery, rallying back above 1.1600 and pushing toward 1.1640–1.1650 by the end of last week. The 9 EMA has crossed above the 18 EMA on the 1-hour — a short-term bullish crossover — and the ribbon is beginning to slope upward. However, this is a counter-trend bounce within a bearish 4h structure. Price is pressing into the first real resistance zone, and the sustainability of this bounce will depend entirely on the week’s macro catalysts.

Most Likely Bias: Bearish with a Near-Term Bounce

The 4h structure is definitively bearish. However, Friday’s USD sell-off driven by Trump’s tariff threats has created a short-term catalyst for EUR/USD strength, and the 1h bullish crossover confirms the bounce has some legs. The most likely scenario for the week is a bounce into resistance (1.1680–1.1720), followed by a resumption of the downtrend — particularly if FOMC Minutes are hawkish or PCE remains sticky.

A genuine reversal of the medium-term bearish trend would require a 4h close above the ribbon (~1.1720+) with both EMAs turning higher — a higher bar that needs a significant fundamental catalyst to clear.

Key Levels to Watch

Resistance

1.1680–1.1700 — the immediate overhead barrier; where the 4h MA ribbon converges and prior intraday swing highs cluster. This is the first real test for the current bounce. A 1h rejection here within the 4h bear structure is the primary short entry zone.

1.1720–1.1740 — stronger structural resistance; mid-May congestion area. A 4h close above this level would materially shift the short-term picture.

1.1780–1.1800 — the major medium-term resistance zone from earlier in May; only relevant if the bullish reversal thesis takes hold.

Support

1.1580–1.1600 — near-term support; the recent swing low. A break below this level on the 4h opens the door to the next structural demand zone.

1.1550 — intermediate support; watch for wick reactions here.

1.1480–1.1500 — a significant support shelf on the broader structure; medium-term target if the downtrend continues and the current bounce fails.

Trade Ideas

Idea 1 — Sell the Bounce (Primary Scenario)

The highest-probability play given the 4h structure is to wait for the current 1h bounce to exhaust itself at the resistance zone. Look for a 1h bearish rejection at 1.1680–1.1700, ideally with a shooting star or bearish engulfing candle as both the 4h EMAs continue to slope lower.

• Entry: Sell on 1h bearish confirmation near 1.1680–1.1700
• Target 1: 1.1600 · Target 2: 1.1550 · Extended: 1.1500 if macro turns hawkish (hot PCE or hawkish FOMC Minutes)
• Stop-Loss: Above 1.1750 (above the 4h ribbon)
• Rationale: Counter-trend bounces in a clean 4h downtrend are selling opportunities, not reversals. The tariff rhetoric from Trump creates USD-negative noise, but sticky inflation and hawkish FOMC signals are the more durable structural force. Sell the relief rally, let the trend do the work.

Idea 2 — Bullish Breakout (Alternative Scenario)

If FOMC Minutes are unexpectedly dovish (indicating cuts remain on the table), PCE undershoots estimates on Friday, or Durable Goods data on Tuesday disappoints sharply, the USD sell-off could escalate and EUR/USD could break above the 4h ribbon. Confirmation is a 4h close above 1.1740 with both EMAs turning higher.

• Entry: Buy on a re-test of 1.1720 as new support after the 4h breakout candle
• Target 1: 1.1780 · Target 2: 1.1840
• Stop-Loss: Below 1.1660
• Rationale: A dovish macro catalyst would flip the narrative and could send the pair sharply higher as short positions get squeezed. The pair does have structural support from ECB relative hawkishness vs a Fed that faces rising unemployment — if the trade war narrative dominates, this move can develop quickly.

Idea 3 — Range Strategy Ahead of Events

In the Tuesday–Wednesday window before the FOMC Minutes, price is likely to oscillate between 1.1580 and 1.1700. Play the extremes of this range with tight stops (15–20 pips), minimal position size, and avoid any directional conviction before the Minutes are released. Let Wednesday evening/Thursday morning determine the direction for the rest of the week.

3. XAU/USD (Gold) — Corrective Phase, Key Support Being Tested

Technical Landscape

Gold’s 4-hour chart paints a picture of a sustained corrective phase within a broader 2026 bull trend. After peaking near 4,920 in mid-April, the metal underwent a significant multi-week sell-off, finding a base around 4,460–4,480 in mid-May. From there, a recovery was staged toward the 4,720–4,740 range. However, since that recovery peak around May 12, the metal has sold off again — currently trading around 4,540–4,560. The 9 EMA (yellow) has crossed back below the 18 EMA (black) on the 4-hour chart, and both EMAs are once again sloping lower. The ribbon is now in a bearish configuration, with price below the moving averages. The dotted horizontal line near the 4,555 area represents a significant pivot level from earlier in the period.

The 1-hour chart shows the detail of the recent sell-off and tentative stabilisation. After collapsing from around 4,710 to 4,500 over roughly a week, price has been attempting to base and consolidate in the 4,490–4,560 range. The last few 1-hour candles show a push back toward 4,554–4,560, with the 9 EMA beginning to flatten and edge above the 18 EMA on the 1-hour — a very early and fragile short-term bullish signal. The ribbon remains negatively configured on the 4h however, so any 1h strength should be treated with caution as a potential dead-cat bounce unless confirmed on the higher timeframe.

Key macro context: inflation stickiness in the US has shocked markets. Rate cut probability for 2026 has collapsed to near 1%, and traders are now factoring in potential rate hikes by 2027. This is structurally negative for gold (higher opportunity cost of holding a non-yielding asset), but it is offset by persistent geopolitical risk — the Hormuz blockade, Iran tensions, and trade war escalation. This push-pull dynamic is exactly what’s keeping gold range-bound in the 4,480–4,570 zone.

Most Likely Bias: Short-Term Range / Bearish Lean

The 4h ribbon is bearish, momentum is still to the downside on the higher timeframe, and the macro environment — with rate hike risk now being priced — provides a headwind. The most likely scenario for the week is continued consolidation in the 4,500–4,580 zone, with a downside break possible if FOMC Minutes are hawkish or PCE is hot on Friday. The medium-term bull case remains alive (J.P. Morgan targets $5,000+ by Q4 2026), but in the near term, the path of least resistance is lower or sideways.

A sustained move above 4,580–4,600 on the 4h would change the short-term picture meaningfully.

Key Levels to Watch

Resistance

4,570–4,580 — the immediate barrier; where the 4h 9 EMA is converging. A 4h close above here is needed to suggest the corrective phase is losing momentum.

4,620–4,640 — the more significant overhead resistance; prior support turned resistance from the May 15–18 sell-off. A 4h close above this zone would shift the bias back to neutral-to-bullish.

4,700–4,720 — the upper boundary of the recent correction range; only meaningful if a strong risk-off or USD-collapse catalyst emerges.

Support

4,500–4,520 — the near-term demand zone and recent swing low area. This is the critical near-term support. A 4h close below 4,500 would be a bearish signal.

4,460–4,480 — the mid-May structural swing low; the last major support before deeper downside opens up.

4,380–4,400 — deeper structural support; only tested in a major risk-off or hawkish shock scenario.

Trade Ideas

Idea 1 — Short from Resistance (Primary Scenario)

With the 4h ribbon bearish, the strategy is to sell bounces into resistance. Look for a 1h rejection candle at 4,570–4,590, with both 4h EMAs still sloping lower.

• Entry: Sell on 1h rejection near 4,570–4,590, or on a 1h bearish close below 4,540 after a failed re-test
• Target 1: 4,500 · Target 2: 4,460
• Stop-Loss: Above 4,640
• Rationale: The 4h trend is down. Rate hike risk repricing is a sustained headwind for gold. Selling into resistance in a downtrend is the highest-probability play. FOMC Minutes on Wednesday and PCE on Friday are the key binary risks for this trade — a hawkish outcome would accelerate the downside.

Idea 2 — Buy the Key Support (Alternative Scenario / High R:R)

If price sells off to the 4,460–4,480 structural support zone, this represents a high-value medium-term long entry. Look for a daily or 4h bullish reversal candle (hammer, pin bar) at this level with a clear wick rejection of the lows.

• Entry: Limit buy at 4,475 or market buy on a confirmed 4h bullish reversal candle at 4,460–4,480
• Target 1: 4,560 · Target 2: 4,640 · Extended: 4,720 if geopolitical risk re-escalates
• Stop-Loss: Below 4,420
• Rationale: This level served as a major base in mid-May and represents a historically significant demand zone in the 2026 bull trend. The risk/reward at this level is exceptionally favourable. Any Iran escalation headline, military action, or fresh trade war shock would trigger a sharp safe-haven bid from this level.

Idea 3 — Range Fade (Neutral Scenario)

In the absence of a major catalyst early in the week, gold is likely to oscillate between 4,500 and 4,580 through Tuesday and into Wednesday morning. Fade both extremes with minimal size and tight stops (no wider than $25), completely flat ahead of the FOMC Minutes. The PCE on Friday will then determine whether the next leg is up or down.

Risk Considerations

US PCE — Thursday, May 27: The Fed’s preferred inflation gauge. If PCE comes in above expectations, it confirms the hawkish repricing and extends the trends established by the FOMC Minutes. A soft print would rescue the dollar-bears and revive the rate cut narrative — potentially the most market-moving event of the week given current positioning.

Iran / Strait of Hormuz: Trump has confirmed the naval blockade continues. Any escalation — particularly if US military briefings result in action — would immediately reprice gold higher and hit equities hard. Monitor geopolitical headlines throughout the week; position sizing should account for this tail risk.

Trump Trade Tariffs: The renewed threat of EU tariffs was Friday’s primary market mover. Any further escalation — or conversely, any signals of a deal or delay — will directly impact EUR/USD and the DE40. European equities are particularly exposed to transatlantic trade disruption.

Thin Monday Liquidity: US markets closed for Memorial Day. Expect wider spreads, lower volume, and exaggerated moves on the open. Use this session to observe rather than initiate new directional positions with significant size.

Summary Outlook

The week sets up as one of the most event-heavy of the month. The DE40’s bullish momentum is real but stretched at 25,200 — patience on pullbacks is rewarded here; don’t chase. EUR/USD is in a downtrend on the 4h but with a live bounce from USD tariff fears — sell the rally into 1.1680–1.1700 unless the macro data flips dramatically. Gold is the most nuanced — the medium-term bull case remains structurally intact, but the near-term path is lower as rate hike risk gets priced; sell bounces into 4,570–4,590, with a high-conviction long opportunity waiting at 4,460–4,480 if that level is reached.

Enter the week with reduced position sizes. Let Tuesday’s data set the tone, then trade the FOMC Minutes direction with conviction on Wednesday evening. PCE on Friday is the final verdict.

Trade the chart. Respect the ribbon. Manage the risk.

-The FX Hermes Team

If you find the content useful:

Risk Disclaimer

This Weekly Market Outlook is for educational and informational purposes only. It does not constitute financial advice, investment recommendation, or trading signal. All scenarios and probabilities are estimates based on technical analysis and are subject to change. Trading leveraged instruments carries substantial risk of loss. Always use appropriate position sizing, stop losses, and risk management. Consult a licensed financial advisor before making investment decisions. Past performance is not indicative of future results.

Stay disciplined. Trade the chart, not the headline.– The FX Hermes Team