DXY

The U.S. dollar remained steady as U.S. stock markets turned positive. Gold markets saw volatility as China reopened after the holiday break. The Dollar Index hovered above 102.00, seeking direction but with slight downside movement. Early in the week, the dollar fluctuated amid rising U.S. Treasury yields, with investors continuing to digest Friday’s Non-Farm Payroll data. While the Dollar Index initially strengthened this week, it has stabilized above the 102.00 mark. Key U.S. inflation data, the CPI, is set for release this week, along with speeches from Fed officials Bostic, Mester, Kugler, and Collins. The dollar remains near a seven-week high, extending gains from Friday’s strong employment data and heightened geopolitical tensions in the Middle East. Some factors that previously pressured the dollar have reversed, with recession concerns easing and dovish policy expectations gradually diminishing since the summer. With limited scope for substantial rate cuts from the Fed and persistent geopolitical uncertainty, the dollar’s support appears solid in the near term.

The Dollar Index has continued to consolidate, reaching levels around 102.62 this week. This level is close to last Friday’s seven-week high of 102.69, reflecting the dollar’s notable recovery over recent days. Year-to-date, the Dollar Index has increased by over 2%, marking one of the largest weekly gains in two years. Notably, the index has repeatedly tested and failed to break below the 100.00 level, echoing its July 2023 trend when it dipped to 100.00 and then rebounded strongly, rising 7.8% over the next three months. Should the index climb further, the next target could be 102.95 (ascending wedge upper resistance line on the daily chart), with a break above potentially leading to 103.15 (89-day moving average). On the downside, the Dollar Index might retrace towards the 102.00 psychological level, with further support at 101.75 (50-day moving average).

Today’s recommendation is to go short on the Dollar Index around 102.60, with a stop loss at 102.70 and targets at 102.20 and 102.15.

AUD/USD

AUD/USD continues its decline, approaching the critical 0.6700 support area, as global markets remain in a risk-off mood. Early in the week, AUD/USD weakness intensified selling pressure, retesting the 0.6700 level and reaching a three-week low. Despite a lackluster performance by the U.S. dollar on Monday, AUD follows a downward trajectory similar to other risk currencies, with market participants still digesting Friday’s stronger-than-expected U.S. Non-Farm Payrolls report. Additionally, escalating geopolitical tensions in the Middle East are lending support to the dollar. While there is skepticism regarding China’s recently announced stimulus measures, particularly those targeting the housing sector, last Friday’s rise in iron ore prices has done little to counter the bearish outlook on AUD. On the monetary policy front, the Reserve Bank of Australia (RBA) held the cash rate steady at 4.10% during its September meeting. Although the Fed's rate cuts have been priced in by the market, AUD/USD may still find upward momentum in 2024. However, uncertainties surrounding China’s economic outlook and the implementation of its stimulus measures persist.

The daily chart reveals that, as markets continue to process Friday’s robust U.S. employment data and ongoing Middle Eastern tensions, AUD/USD's 14-day Relative Strength Index (RSI) has sharply dropped from a recent high of 66.50 to a low of 44.50. This may contribute to further declines in AUD/USD, with potential retests of the 55-day and 100-day simple moving averages at 0.6707 and 0.6689, respectively, before the pair challenges the September low of 0.6622 (September 11), supported by the critical 200-day moving average at 0.6627. On the upside, initial resistance sits at 0.6800 (psychological level) ahead of the 0.6843 (14-day moving average).

Today’s recommendation is to go long on AUD around 0.6732, with a stop loss at 0.6720 and targets at 0.6785 and 0.6795.

EUR/USD

EUR/USD remains on the defensive, unable to sustain an early bullish extension past the psychological 1.1000 level, retreating to the 1.0970 area ahead of Wednesday’s FOMC meeting minutes. Early in the week, the pair fluctuated near 1.1000, failing to stage a significant rebound after breaking key support levels last week. Although European retail sales data slightly disappointed, it didn't lead to further declines. The outlook for EUR/USD largely hinges on rate cut expectations, with strong U.S. labor data pushing market sentiment against a November Fed rate cut. Most European economic data has been lackluster, leaving traders to watch and wait for the FOMC minutes release. The critical U.S. event this week will be Thursday’s CPI inflation report. Last week's strong NFP figures nearly eradicated any hopes for a November double rate cut, with traders now estimating a 20% chance of no change on November 7.

The daily chart shows EUR/USD ending a six-day losing streak early in the week, yet falling short of a decisive recovery back above the major 1.1100 level. The pair has fallen near the consolidation range below the 50-day moving average at 1.1052 but remains above the 200-day moving average at 1.0874. The 14-day RSI continues to lean bullish short-term, although there are few obstacles preventing safe-haven flows into the dollar. On the upside, potential resistance levels include 1.1052 (50-day moving average) and 1.1100 (psychological level). Key downside supports are at 1.0931 (100-day moving average) and 1.0943 (61.8% Fibonacci retracement of 1.0777 to 1.1213). A break below these could lead to further declines towards 1.0879 (76.4% Fibonacci retracement) and 1.0874 (200-day moving average).

Today’s recommendation is to go long on EUR around 1.0965, with a stop loss at 1.0950 and targets at 1.1020 and 1.1030.

GBP/USD

After Monday's decline, GBP/USD is trading within a narrow range around 1.3100. The risk-off sentiment has restricted the pair from gathering recovery momentum as investors await comments from Fed policymakers. Early in the week, GBP/USD dropped again, reaching a four-week low of 1.3060 and closing below the 1.3100 level for the first time since mid-September. The stronger-than-expected U.S. labor market data has curtailed market expectations of Fed rate cuts, while geopolitical tensions have also weighed on risk sentiment. The reduced hopes for aggressive rate cuts contributed to the dip in risk appetite on Monday. Fed officials have hinted that only further deterioration in the U.S. economy, especially the labor market, would open the door to more extreme rate moves. In the UK, markets are waiting for Friday’s GDP release, while USD speculators will closely watch Thursday’s U.S. CPI inflation report.

GBP/USD has now been in a five-day losing streak due to sustained USD buying driven by risk concerns. The pair fell back below the 40-day moving average (1.3165) and closed under 1.3100 on the daily chart for the first time since mid-September. Despite setting multi-year highs last month, GBP/USD is down by 2.8%. The 14-day RSI is above 40, suggesting buyers are hesitant to commit to a technical reversal. Should GBP/USD rise above the 1.3100 level and establish it as support, resistance may be encountered at 1.3165 (40-day moving average) and 1.3200 (psychological level). On the downside, the initial support is at 1.3027 (70-day moving average), followed by 1.3000 (psychological level), and 1.2934 (100-day moving average).

Today’s recommendation is to go long on GBP around 1.3088, with a stop loss at 1.3075 and targets at 1.3140 and 1.3150.

USD/JPY

After narrowing intraday losses, USD/JPY rebounded above 148.00 on a firm dollar, with investors now focusing on September U.S. inflation data. A decline in Japanese household spending has reduced expectations for further rate hikes by the Bank of Japan. On Tuesday, JPY strengthened for the second consecutive day, pushing USD/JPY down from Monday's high, the strongest level since August 16. Overnight comments from Japanese officials reignited concerns about intervention, providing key support for JPY. In addition, escalating geopolitical tensions in the Middle East have prompted safe-haven flows into JPY. However, the reduced likelihood of another BOJ rate hike in 2024 may limit aggressive bets on JPY. Meanwhile, strong U.S. employment data last Friday has tempered expectations for a significant Fed rate cut in November, keeping USD near seven-week highs. This could continue to support USD/JPY and potentially prevent further declines.

From a technical perspective, last week's breakthrough above the 50-day moving average at 145.07, followed by the breach of the 38.2% Fibonacci retracement of the July high at 161.95 to the September low at 139.58 at 148.13, is viewed as a bullish trigger by traders. Additionally, the 14-day RSI remains above 60, indicating sustained bullish momentum. Thus, dips could be seen as buying opportunities, with the 147.00 level providing a key pivot point. A breach below this could target 145.40, aligned with the midline of the ascending channel on the daily chart. On the upside, a sustained move above 148.00 and 148.07 might attract further buying, with potential targets at 148.70 and the psychological 149.00 level. Should a breakout above the weekly highs near 149.10-149.15 occur, follow-through buying could reinforce the bullish outlook, with bulls eyeing the 150.00 mark.

Today’s recommendation is to short USD around 148.45, with a stop loss at 148.65 and targets at 147.50 and 147.40.

XAU/USD

Gold prices have accelerated downward, retreating to around $2,600 per ounce, a level last seen at the end of September. This decline is driven by a repricing of Fed rate cuts, with expectations of a smaller cut in November, and a heightened sense of caution ahead of the FOMC minutes release on Wednesday. On Tuesday (October 8), spot gold briefly dropped sharply from near $2,648 per ounce, reaching as low as $2,605 per ounce before stabilizing around $2,622 per ounce. Should gold decisively break below the $2,622 per ounce level, it may continue its downtrend. The softening in gold is also influenced by a notable rise in U.S. Treasury yields.

On the daily chart, gold is approaching the bottom of a recent wedge but remains within this formation. Gold continues to trade above all its moving averages, with the 20-day simple moving average rising steadily around $2,619.70 per ounce. The 100-day and 200-day moving averages maintain their upward slopes but are positioned around $200 lower than the 20-day moving average. Momentum indicators remain in positive territory, while the 14-day RSI has declined to around 56.20, alleviating overbought conditions but not yet signaling a new downtrend. Gold's short-term outlook is neutral to bearish, with confirmation of further downside only if it breaks below $2,622.60 per ounce. In that case, the next support lies near the recent low at $2,605 per ounce, with the key psychological support at $2,600. A break below $2,600 would target the 34-day moving average around $2,573.20. Conversely, to reignite a bullish stance, gold would need to break above the recent trading range top of $2,675, allowing a potential test of the year-to-date high at $2,685.50 and possibly $2,700.

Today's recommendation is to short gold around $2,625.00, with a stop loss at $2,630.00, and targets at $2,605.00 and $2,600.00.

XTI/USD

On Tuesday, oil prices dropped over 4%, with market sentiment dampened by concerns about China. Despite rising Middle Eastern geopolitical tensions and speculation that Israel might target Iran’s oil infrastructure, the West Texas Intermediate (WTI) oil price fell back near $73.50 per barrel. WTI crude initially surged on speculation about an Israeli response to recent attacks, including rocket fire from Hezbollah toward Israel's third-largest city, Haifa, which stoked fears of a broader regional conflict. The market remains wary of further escalation that could jeopardize Iran’s oil production of 3.4 million barrels per day, which would disrupt supply in the region.

Oil prices had surged and briefly broke above $75.00 per barrel for the first time since late August, fueled by uncertainty stemming from the Biden administration’s lack of a definitive stance on potential Israeli action against Iranian oil fields. WTI crude is now hovering near the 23.6% Fibonacci retracement level of $74.82 from the recent $64.75 to $77.93 range. Should prices breach this level again, the next resistance is the 200-day moving average at $77.15, followed by the psychological barrier of $80.00. On the downside, prior resistance has turned into support at $72.72, marked by the 55-day moving average. Further declines would target the psychological support level at $70.00.

Today’s recommendation is to short oil around $73.75, with a stop loss at $74.00 and targets at $72.50 and $72.30.

Disclaimer:

The information contained herein (1) is proprietary to BCR and/or its content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and, (4) does not constitute advice or a recommendation by BCR or its content providers in respect of the investment in financial instruments. Neither BCR or its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.