How Our DE40, EUR/USD & Gold Setups Performed

Dear trader,

The week of May 18–22 was framed from the outset by an unusual conflict: three technically bearish charts colliding head-on with a powerfully USD-negative macro catalyst. Moody’s downgrade of the US sovereign credit rating from Aaa to Aa1 — delivered after Friday’s close on May 16 — entered every setup on our watchlist as a live variable before Monday’s session even began. We warned explicitly that the downgrade created a volatile, choppy week as the primary base case, and that the first 24 hours would be defining. What followed vindicated that framing in full: the week delivered sharp reversals, genuine macro-technical conflicts, and setups that rewarded patience and punished directional assumptions made before the dust settled.

Here is the full accounting of how the week unfolded against our published scenarios for DE40, EUR/USD, and XAU/USD — what played out, what didn’t, and what every outcome teaches us going forward.

1. Germany 40 (DE40) — The Bull Reclaim No One Expected

Verdict: Loss on the Primary — Bearish setups invalidated by a powerful recovery

The Outlook

Our DE40 bias entering the week was firmly bearish. The primary scenario, Idea 1, called for selling bounces into the 23,850–23,900 zone — near the 1h 9 EMA — targeting 23,550, 23,200, and 23,100 on extended momentum. Idea 2 was a breakdown short below 23,680, targeting the same lower levels. Idea 3 was the contrarian: a bullish reversal requiring a 1h close back above 24,100 with EMAs beginning to slope higher, targeting 24,300 and 24,500. We were clear that the EMA ribbon was in full bearish alignment and that the path of least resistance was lower — while flagging FOMC minutes Wednesday and Flash PMI Thursday as the catalysts most capable of disrupting the bearish structure.

What Happened

The week opened with the Moody’s downgrade already priced in sentiment, but not yet in price. Monday’s session saw a gap and early volatility, then something unexpected: rather than offering the clean bounce-and-reject entry our Idea 1 anticipated, the DE40 began a relentless recovery from the 23,700 area. The Moody’s narrative — which we had assigned to EUR/USD and gold as the primary beneficiaries — had a paradoxical effect on the German index: USD weakness translated into EUR strength, and Eurozone equities attracted relative-value flows away from US assets.

By mid-week, the FOMC minutes landed with a modestly dovish tilt — the internal dissents were noted, but the overall language did not deliver the hawkish USD snap-back that Idea 1 required to keep the bearish structure intact. Thursday’s Flash PMI data then provided the decisive catalyst: German Manufacturing PMI outperformed expectations, validating the Eurozone growth narrative. The combination of a weakening dollar, a resilient German economy, and global rotation away from US assets sent the DE40 surging through 24,100 — our Idea 3 trigger — and continuing to the 24,768 area visible on Friday’s close.

The 1-hour chart tells the full story. From the 23,700 lows early in the week, the index printed a powerful sequence of higher lows and higher highs. Both EMAs completed a bullish crossover mid-week and are now sloping upward with price comfortably above the ribbon at 24,768. The MA ribbon that was our bearish anchor has flipped entirely. The current print is approximately 1,050 points above the week’s starting point — an almost 4.5% intraweek move.

Trade Performance

Idea 1 (sell the bounce at 23,850–23,900) did not trigger cleanly. The index blew through the 23,900 level without the bearish rejection candle confirmation our framework required. Disciplined traders following the entry criteria avoided a short position that would have been immediately stopped out as price marched higher. No confirmed entry, no loss — but also no participation.

Idea 2 (breakdown short below 23,680) never triggered. The 23,680 level was never broken to the downside; price held above it from the outset and reversed higher.

Idea 3 (the bullish reversal) was the winning scenario. A 1h close back above 24,100 confirmed mid-week, with EMAs beginning to slope higher. Traders who had Idea 3 prepared — even as a lower-probability alternative — were positioned for one of the week’s strongest directional moves. Target 1 at 24,300 and Target 2 at 24,500 were both reached and exceeded, with the extended momentum carrying price to 24,768 by Friday.

The DE40 this week is a precise lesson in why we publish three scenarios rather than one. The primary bearish thesis was technically correct at the start of the week — but macro conditions overrode the short-term chart structure in a way that no amount of EMA reading could have predicted. Idea 3, prepared with equal rigour, captured the move. The discipline of the confirmation requirement — waiting for the 24,100 close rather than anticipating the reversal — was what separated a clean long from a bottom-pick into continued selling.

2. EUR/USD — The Macro-Technical Battle Resolves Bearish

Verdict: Partial — Idea 1 partially played out; no clean directional trade for the full week

The Outlook

Our EUR/USD bias entering the week was bearish below 1.1740, with a significant caveat: the Moody’s downgrade created a fundamental wildcard capable of triggering a sharp early-week bounce before the broader bearish structure reasserted itself. Idea 1 called for selling bounces to the 1.1640–1.1660 zone on bearish 1h rejection, targeting 1.1580 and 1.1500. Idea 2 was the bullish breakout: a 4h close above 1.1740 would signal a sentiment-driven recovery toward 1.1820 and 1.1900. Idea 3 was the pre-FOMC range fade between 1.1580 and 1.1660, with strict size limits and no directional exposure within 60 minutes of the minutes release.

What Happened

The week opened exactly as our Idea 1 framing anticipated: a volatile, Moody’s-driven bounce into the early sessions. Price pushed from the 1.1600 area back toward the 1.1630–1.1660 resistance band during Monday and into Tuesday, testing the precise zone where our short entry was located. For a brief window mid-week — around the FOMC minutes release — the pair attempted to push toward 1.1740, raising the question of whether Idea 2’s breakout was imminent.

The FOMC minutes, however, did not deliver the clean dovish catalyst needed to sustain the Idea 2 scenario. The dissent language was acknowledged, but the broader tone was sufficiently ambiguous to disappoint EUR/USD bulls. From the 1.1630–1.1640 area, the pair began a renewed slide through Thursday and into Friday, ultimately closing the week near 1.1602 — essentially flat relative to where it entered, but with significant intraweek volatility. The end-of-week chart shows a pair that attempted a recovery, failed to sustain it above the EMA ribbon, and settled back into the same structural range it occupied at the open.

The 1-hour chart reflects the week’s indecisive character: a series of bounces and rejections in the 1.1580–1.1650 corridor, with both EMAs flattening after their prior bearish slope but failing to produce a convincing bullish crossover. The ribbon provided overhead resistance for every rally attempt. The dotted horizontal support near 1.1600 held throughout the week — the pair never tested the 1.1500 second target from Idea 1.

Trade Performance

Idea 1 (sell the bounce near 1.1640–1.1660) partially played out. The zone was tested and price rejected from the upper end, offering a valid short entry for observant traders. Target 1 at 1.1580 was reached briefly on multiple occasions. Target 2 at 1.1500 was not reached — the structural support near 1.1580–1.1600 absorbed selling pressure each time. A partial trade: one target hit, one not.

Idea 2 (the bullish breakout above 1.1740) never triggered. Despite the Moody’s tailwind, the pair never produced a confirmed 4h close above 1.1740. The attempt mid-week stalled well short of the trigger. No entry, no loss.

Idea 3 (the pre-FOMC range fade) was viable in the hours preceding Wednesday’s release, as the pair oscillated between 1.1600 and 1.1640 in a tight band. Traders who faded the extremes with strict size limits and honoured the 60-minute blackout window around the release managed small gains. The FOMC reaction was initially sharp but faded quickly, validating the discipline of not holding through the release.

EUR/USD this week was the week’s most frustrating instrument for directional traders — not because the analysis was wrong, but because the range compression made full target achievement difficult. The caveat we attached to the bearish thesis proved entirely accurate: the Moody’s wildcard prevented a clean trend trade and turned the week into a chop-and-fade environment. Recognising that some weeks are range weeks — and trading them as such — is as important as identifying directional setups.

3. XAU/USD (Gold) — The Dip Was Bought, The Structure Held

Verdict: Win — Idea 1 delivered; structural support held and the recovery is underway

The Outlook

Gold entered the week as the most compelling opportunity on the watchlist, with the highest internal tension between the bearish short-term chart structure and the bullish macro backdrop. Idea 1 — the primary scenario — called for buying the dip at the 4,480–4,510 structural support zone on confirmed 1h bullish reversal, targeting 4,570, 4,650, and 4,720 extended. Idea 2 was a counter-trend fade of any Moody’s-driven gap higher toward 4,630–4,660, targeting 4,570 and then 4,510. Idea 3 was a breakout confirmation long above a 4h close at 4,650, targeting 4,720 and 4,800. We identified Idea 1 as the highest-conviction trade of the week and were explicit that 4,480–4,510 was where both the technical and fundamental thesis converged.

What Happened

Gold opened the week with precisely the Moody’s-driven gap higher that our Idea 2 had anticipated as an alternative scenario. Price pushed toward the 4,570–4,590 resistance zone — the first overhead layer we had identified — in the early Monday session. That initial spike faded through Tuesday and Wednesday, as the FOMC minutes absorbed market attention and initial safe-haven urgency dissipated. From the 4,570 area, gold slid back toward the structural support zone.

The critical moment of the week arrived mid-week: price tested the 4,500–4,510 area — the lower boundary of our Idea 1 entry zone — and the structural demand held. A clear 1h bullish hammer formed at approximately 4,495, followed by a bullish engulfing candle in the subsequent session. This was the Idea 1 trigger: the confirmed reversal candle at the structural support zone our analysis had been pointing toward all week. From that entry, gold recovered steadily through Thursday and into Friday, closing the week near 4,509 — effectively at the upper boundary of the Idea 1 entry zone, suggesting the recovery is in its early stages rather than fully priced.

The 1-hour chart shows the characteristic signature of a corrective leg finding its floor: aggressive red candles giving way to doji and small-bodied consolidation at support, followed by the first tentative green sequence of the recovery. The MA ribbon is beginning to flatten after its prior bearish slope — not yet bullish, but no longer the aggressive downward pressure of the prior week. The structural support at 4,510 has been tested and has held.

Trade Performance

Idea 1 (buy the dip at 4,480–4,510) triggered mid-week on the 1h bullish reversal candle at approximately 4,495. Target 1 at 4,570 was reached during Thursday’s session — a clean 75-pip move from the entry. Target 2 at 4,650 and the extended target at 4,720 have not yet been reached, as the recovery has been measured rather than explosive. The position remains live and structurally constructive heading into next week. This was the week’s cleanest long entry.

Idea 2 (fade the Moody’s spike toward 4,630–4,660) was partially viable on Monday. The initial gap did not reach the full 4,630–4,660 zone, limiting the clean entry. Traders who required the full level were not filled; those who adjusted slightly lower captured a modest short before the consolidation. Not a primary trade this week.

Idea 3 (breakout confirmation above 4,650) has not yet triggered — the pair has not closed above 4,650 on the 4h. This remains a forward-looking setup for next week if the recovery from 4,495 continues with momentum.

Gold rewarded the key discipline we emphasised in the outlook: waiting for structural support before engaging. The temptation mid-week — as price drifted lower through 4,530 and 4,510 — was to either panic out of a long position or wait indefinitely for a deeper test of 4,480. The confirmation framework held: wait for the reversal candle at the zone, then enter. The hammer at 4,495 was that signal. Every week that Idea 1 type of setup appears, it reinforces the same lesson: pre-defined levels combined with candle confirmation remove emotion from the entry decision.

Weekly Summary & Lessons Learned

The week of May 18–22 was defined by the collision of macro and technicals — and the macro won on two of the three instruments, though not always in the direction initially assumed.

DE40 delivered the week’s biggest surprise. A technically bearish setup was completely overridden by Moody’s-driven global rotation into European equities, compounded by strong German PMI data. The primary bearish scenarios never triggered per their confirmation requirements, keeping disciplined traders out of a losing short. Idea 3 — the bullish reversal — was the trade, and the 24,100 confirmation trigger did its job. The index closes the week at 24,768, well above the EMA ribbon, with the short-term structure now bullish.

EUR/USD was the week’s most frustrating instrument and the most accurate preview we issued. The Moody’s wildcard produced exactly the choppy, volatile, range-bound week our caveat described. Idea 1 delivered a partial result — one target reached, one not. The pair closes near 1.1602, having absorbed significant intraweek volatility without producing a sustained directional move. The structure remains ambiguous heading into next week.

XAU/USD produced the week’s most satisfying trade — not for its size, but for its precision. The 4,480–4,510 structural demand zone held exactly as identified. The reversal candle confirmation delivered a clean, low-risk entry. Target 1 was reached. The medium-term bull case for gold is intact, and the recovery from the corrective leg appears to be in its early stages.

The macro lesson that threads through all three instruments this week is the one we flagged on Monday: the Moody’s downgrade is not a one-week story. The structural USD-negative, gold-positive, European equity-positive narrative that it initiated is likely to persist as a backdrop into the weeks ahead — as long as the “Big Beautiful Bill” fiscal concerns continue to attract scrutiny. Next week’s setups will need to account for that regime.

Our full outlook for the week of May 25–29 will be published ahead of Monday’s open.

— The FX Hermes Team

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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