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Market Analysis
Stay informed with our timely forex analysis
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DXY
On Wednesday, the U.S. dollar posted gains against nearly all G10 currencies, with the dollar index rising above 102.70 and heading toward the 103.00 mark. The dollar’s strength has been bolstered by comments from Fed officials signaling a gradual approach to future rate cuts. Notably, New York Fed President John Williams expressed confidence in a soft landing for the U.S. economy, while Boston Fed President Susan Collins emphasized the importance of maintaining a healthy labor market. Additionally, Fed Governor Jefferson noted that the dual objectives of inflation and employment are currently balanced, supporting the dollar’s bullish sentiment.
While the dollar index has been strong, touching an eight-week high near 102.90, the upward momentum is showing signs of slowing. Should the upcoming inflation data come in hotter than expected, it could reignite discussions around the strength of the U.S. economy and support continued dollar gains. For now, the index is consolidating as markets absorb factors contributing to this month’s 2% rally, and fading bets on a 50-basis point Fed rate cut add to the dollar’s appeal.
Technically, the dollar index is currently running along the upper band of the Bollinger Bands at 102.73, with upside risks towards the psychological resistance at 103.00 and further resistance at 103.35. Downside support is seen at the 65-day moving average near 102.30, followed by the 102.00 level and the 50-day moving average at 101.72.
Today's recommendation is to short the dollar index around 103.00, with a stop loss at 103.10 and targets at 102.60 and 102.55.
AUD/USD
On Wednesday, AUD/USD continued to face downward pressure, declining for the fifth consecutive day as it approached a critical support zone around the 0.6700 mark. In Asian trading, the pair slid to the 0.6730 area, weighed down by a strengthening U.S. dollar and the absence of further economic stimulus from China. The Reserve Bank of Australia's (RBA) September meeting minutes, released on Tuesday, indicated that board members had discussed both easing and tightening scenarios for the future. Deputy Governor Andrew Hauser highlighted the ongoing challenge of bringing inflation down, stating that the RBA's task is far from over.
In addition, comments from China’s National Development and Reform Commission dampened sentiment for the China-proxy AUD, as no major stimulus measures were announced. Market participants now look to the upcoming Federal Reserve minutes and Thursday's U.S. Consumer Price Index (CPI) release. A higher-than-expected CPI reading could lend some support to the Aussie.
From a technical perspective, the 14-day Relative Strength Index (RSI) has dropped sharply from a recent high of 66.50 to 42.30, signaling continued downside risk. A breach of the psychological 0.6700 level could pave the way for further declines toward the 150-day moving average at 0.6644, with critical support at the 200-day moving average around 0.6627 and the September 11 low of 0.6622. On the upside, resistance levels are seen at 0.6781 (the 200-hour simple moving average on the 4-hour chart) and the 0.6800 psychological barrier. A further climb could target the 2024 high of 0.6942 reached on September 30.
Today’s recommendation is to go long on AUD around 0.6700, with a stop loss at 0.6690 and targets at 0.6755 and 0.6765.
EUR/USD
Ahead of Thursday’s U.S. CPI data release, EUR/USD has pulled back near a two-month low of 1.0936 as demand for the dollar remains strong. Mid-week, EUR/USD steadied but was unable to reclaim the 1.1000 level, continuing its pullback from the 1.1200 region. The pair has fallen by 2.8% since reaching a one-year high at the end of September, with the dollar broadly strengthening and EUR/USD trading near 1.0940. European economic data has been relatively tepid, and next week’s ECB meeting is highly anticipated. There is market speculation that the Fed might follow its September rate cut with another in November, given Thursday's upcoming U.S. CPI data release.
The daily chart suggests that EUR/USD remains in a consolidation phase, potentially entering a period of range-bound movement. The pair is trading between the 10-day moving average (1.1051) and the 100-day moving average (1.0933). Despite attempting a rebound from above the 1.1200 level, buyers have struggled to sustain momentum. Sellers are eyeing a test of the 200-day moving average around 1.0874, and further downside could see EUR/USD approaching the August 1 low near 1.0777. The 14-day RSI still leans bullish, though there are few barriers to capital flows favoring the dollar. Key resistance lies at 1.1051 (10-day moving average) and 1.1100 (psychological level).
Today's recommendation is to go long on EUR around 1.0925, with a stop loss at 1.0910 and targets at 1.0975 and 1.0985.
GBP/USD
On Wednesday, GBP/USD approached a multi-week low of 1.3065, falling below the 1.3100 mark, as risk sentiment continued to decline, allowing the dollar to extend recent gains. The results of the U.S. Treasury 10-year bond auction and the release of the FOMC meeting minutes later today may influence the pair's movements. GBP/USD remains stubbornly below the 50-day moving average (1.3090). With the first half of the week offering little in terms of U.K. economic data, pound traders remain on the sidelines ahead of the Bank of England's monetary policy report hearing scheduled for Thursday. Additionally, U.K. GDP data will be released on Friday. Strong U.S. labor data last week has firmed expectations against rate cuts, with the CME FedWatch Tool showing that the probability of a further 25 basis point rate cut on November 7, following the September cut, is close to 90%.
In terms of recent trends, GBP/USD, which had seen a strong upward move to a high of 1.3434 this year, is now experiencing a short-term consolidation, reaching as low as 1.0360 earlier this week. Key levels to watch include the 50-day simple moving average at 1.3090 and the 1.3100 psychological level, which currently acts as resistance. Breaking above this region could reinvigorate bullish momentum, with targets set at 1.3171 (40-day moving average), 1.3200 (psychological level), and 1.3201 (34-day moving average). However, bearish signals from the MACD and resistance at the 50-day moving average suggest caution. A drop below the 1.30 psychological support level could see further consolidation near the 89-day moving average at 1.2960.
Today's recommendation is to go long on GBP around 1.3055, with a stop loss at 1.3045 and targets at 1.3100 and 1.3110.
USD/JPY
In anticipation of the upcoming FOMC meeting minutes and the release of the U.S. September core CPI data, which is expected to grow at a steady rate of 3.2%, USD/JPY is hovering around the 149.00 mark. The yen is also impacted by Japan's September PPI data. Midweek, JPY attracted some intraday sellers, causing USD/JPY to slightly retreat from Tuesday’s peak, the highest level since August. Reports of Japan's August real wages declining and household spending dipping have raised concerns about the resilience of private consumption and economic recovery. Additionally, the new Japanese Prime Minister’s candid comments on monetary policy have clouded the outlook for further rate hikes by the BoJ. On top of this, speculation regarding intervention by Japanese authorities to support the yen has tempered investor enthusiasm, despite news of a potential ceasefire between Hezbollah and Israel. Meanwhile, subdued demand for USD has not sustained USD/JPY’s recovery from 147.30, with the pair remaining range-bound through the Wednesday Asian session.
From a technical perspective, recent dips suggest buying interest since last week’s breakthrough of the 50-day moving average (145.04), favoring bulls. USD/JPY appears to have found temporary support around the 76.4% Fibonacci retracement level of 147.08 (from 149.40 to 139.58). The daily chart's momentum indicators support the bullish bias, indicating that the path of least resistance is upward. However, further gains could face resistance around the 148.70 region, before reaching the 149.00 mark. If USD/JPY surpasses its weekly high (149.15-149.20), follow-through buying could confirm a bullish outlook and target the psychological level of 150.00. On the downside, support is seen around the overnight low of 147.35-147.30, followed by the 147.08-147.00 zone. A break below this level could trigger a drop to the 146.00-145.90 area, converging at the 61.8% Fibonacci retracement level of 145.65.
Today's recommendation is to short USD around 149.35, with a stop loss at 149.50 and targets at 148.40 and 148.20.
XAU/USD
After the release of the September FOMC meeting minutes, gold extended its decline for the sixth consecutive day, remaining around familiar levels just below $2,610. The minutes revealed that an "overwhelming majority" of FOMC members favored a 50 basis point rate cut, but gold remains under pressure as the dollar hovers near a seven-week high. This decline in gold price was triggered by reduced bets on further aggressive rate cuts by the Fed, which is weighing on demand for non-yielding assets like gold. Additionally, potential ceasefire news between Hezbollah and Israel has tempered the drop, halting gold's descent just ahead of the key $2,600 support level. The upcoming U.S. CPI and PPI releases on Thursday and Friday could provide further clues for interest rate outlooks, likely impacting gold's directional trend. Weakness in the dollar may, however, prevent new short positions from building up and could limit the downside in gold prices.
From a technical perspective, gold’s overnight break below the $2,630 support, marking the lower limit of its short-term trading range, could be a bearish trigger for sellers. However, oscillators on the daily chart have yet to confirm a bearish stance, suggesting a cautious approach. It may be prudent to await follow-through selling below the $2,600 level for a more decisive bearish outlook. A break below this key level might extend the decline towards the next support zone near $2,573.20 (34-day MA), followed by the $2,535-$2,530 area and the psychological $2,500 level. On the upside, the broken support around $2,630-$2,635 now acts as immediate resistance. Any further gains could be seen as selling opportunities, facing resistance at $2,657-$2,658. Should prices strengthen beyond that, gold might test the $2,670-$2,672 range. Breaking this could pave the way for an attempt at the September high of $2,685-$2,686, followed closely by the $2,700 mark.
Today's recommendation is to short gold around $2,604, with a stop loss at $2,600, targeting $2,620 and $2,623.
XTI/USD
Oil prices have been unable to find solid support and continue to decline as market participants closely monitor developments in the Middle East. U.S. President Biden is set to speak with Israeli Prime Minister Netanyahu, and the dollar index is hitting fresh highs since September, wiping out weekly losses. On Wednesday, U.S. WTI crude traded just above $72.60. Reports of a possible ceasefire between Hezbollah and Israel have led to some volatility in oil prices, though concerns over potential strikes on Iranian oil infrastructure could limit the downside. As there hasn’t been further escalation in the region, fears about disruptions to Middle Eastern oil supply have somewhat eased, leading to reduced war-risk bets and downward pressure on WTI prices. However, worries remain that Israel might retaliate against Iran’s oil sector in Tehran, potentially supporting oil prices.
After a significant run-up, a pullback in oil was almost inevitable, given the complex geopolitical environment. Monday’s breakout appears to have been negated by Tuesday’s pullback, suggesting that key resistance levels remain relevant. For now, crude prices need to break above $74.82 (23.6% Fibonacci retracement from $64.75 to $77.93) and $75.66 (100-day SMA) to set the stage for a further challenge toward the 200-day SMA at $77.15. On the downside, immediate support is at the $72.00 psychological level, followed by $71.46. Should prices fall further, the $70.00 mark would serve as the next major support.
Today’s recommendation is to go long on crude around $72.60, with a stop loss at $72.40 and targets at $73.90 and $74.20.
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