US Dollar Index

The US dollar index, which measures the value of the greenback against a basket of six currencies, fell on Thursday, giving up some of the gains accumulated in a solid week marked by an outperformance. The pullback was attributed to profit-taking following mixed US economic data. The dollar fell despite the US Standard & Poor's Purchasing Managers' Index (PMI) showing strong business activity and will consolidate in the next trading session. Asian markets are gearing up for a defensive start on Thursday as the continued rise in US bond yields and the fading prospects of a sharp interest rate cut by the Federal Reserve cast a shadow on global market sentiment. The dollar moved further higher, retesting the three-month top area, helped by the recovery of the US Treasury yield curve, the continued uncertainty of the US election and the market's more cautious expectations of the Federal Reserve's easing policy. The US dollar index rose to a multi-week high, further extending the recent escape from the 104.00 mark.

So far this week, the US dollar index has surged above the 200-day moving average of 103.81, and 104.00 (round mark), showing a positive trend. The 14-day relative strength index (RSI) of the technical indicator is in the overbought area (latest report is above 72), indicating that a correction may occur. The support levels of 103.81 (200-day moving average) and 103.40 (14-day moving average) below may provide downside protection. As for the US dollar index, once it rises above 104.57 (nearly 3-month high) again, it is not ruled out that the index will continue to challenge the 105.00 (round mark) and 105.01 (July 11 high) area levels.

Today, you can consider shorting the US dollar index near 104.15, stop loss: 104.25, target: 103.80 103.70

WTI crude oil

Crude oil found it difficult to hold gains on Thursday, trying to move away from $70.00 and seek more upside space. Markets are pricing in a new escalation in geopolitical tensions after U.S. Secretary of State Antony Blinken's attempt in the Middle East failed. The U.S. dollar index retreated after a sharp rise earlier this week. WTI crude oil prices recovered recent losses from the previous session and traded around $71.50 per barrel during Asian trading hours on Thursday. Concerns about conflict in the Middle East continue to weigh on investors, heightening concerns about potential supply disruptions in the region, which helped support crude oil prices. Oil prices were under pressure as gasoline inventories unexpectedly rose and U.S. inventories increased more than expected due to increased imports. Meanwhile, the U.S. dollar index, which tracks the value of the dollar against six major currencies, surged to its highest level since late July, reaching 104.57 on Wednesday. This further weakened demand for dollar-denominated oil. Signs of economic recovery and growing inflation concerns have reduced the likelihood of a sharp interest rate cut by the Federal Reserve in November.

Crude oil prices rebounded briefly above $70.00 this week. However, the underlying fundamental driver is the excess supply of oil being released into the market every day. Oil prices will fall back to $70.00 or lower. The next few days for crude oil will be critical. First, the key levels of $72.22, the 22nd high of the month, and $72.30 (65-day moving average), must be recaptured with daily closes above them. Once above the above areas, $73.04 (50.0% Fibonacci rebound from 77.93 to 68.15), plus the 89-day simple moving average of $74.60 could be the first big hurdle ahead. On the downside, traders need to set their sights on lower levels, namely $70.00, which is a key long/short position for oil prices. If this level is broken, the move towards $68.15 (18th low of the month), and $66.18 (October 1 low) levels.

Consider going long on crude oil near 70.00 today, stop loss: 69.80; target: 71.20; 71.40

Spot Gold

After a sharp correction on Wednesday, gold regained traction and traded above $2,735 on Thursday. The benchmark 10-year Treasury yield retreated after climbing for three consecutive days, pushing gold higher. In the middle of the week, gold prices hit another record high, trading as high as $2,758.50, before turning downward. As the dollar maintained bullish momentum across the board, gold prices retreated from such highs and traded around $2,720. Financial markets are in risk-off mode, with global stocks under pressure. Technology stocks led the decline, but speculative sentiment is also focusing on government bond yields, which jumped this week in anticipation of the US presidential election. The world's largest economy will enter the voting stage in a little over two weeks, and there is no clear winner before then. But the gap between the two is almost small. Meanwhile, Treasury yields continued their weekly gains. The 10-year Treasury yield is currently at 4.26%, while the 2-year Treasury yield is at 4.06%, which is the highest level since early July.

Gold is currently staying above the 23.6% Fibonacci technical retracement level of the $2,603.50 to $2,758.50 rally at $2,721.90. The decline seems to be in consolidation, but it may approach the 38.2% Fibonacci technical retracement level of the same rally at $2,699.20, and $2,700. The daily chart shows that the 14-day relative strength index (RSI) of the technical indicator turned to overbought consolidation, with the indicator retreating from the October high of 75 to 66. Both indicators support another lower move, but a break below this week's low of $2,708.80 will help confirm the decline. In addition, it is worth mentioning that the moving averages remain far below the current price, maintaining a strong upward bias and maintaining a long-term bullish trend. Currently, it constitutes an initial dynamic resistance near $2,740.00 (Monday's high). The next step will be to re-enter the $2,750, and 2.758.50 (previous historical high) area levels.

Today, you can consider going long on gold before 2,732.00, stop loss: 2,728.00; target: 2,748.00; 2,752.00

AUD/USD

AUD/USD rose slightly, some distance from the recent lows near 0.6600 on Thursday, which has always benefited from the weakening of the US dollar and the much-needed recovery of the risk complex. AUD/USD fluctuated higher after the release of the Australian Purchasing Managers' Index on Thursday. In addition, AUD/USD rose due to a slight weakening of the US dollar, driven by a slight decline in US Treasury yields. The two-year Treasury yield and the 10-year Treasury yield are at 4.07% and 4.23%, respectively. The current hawkish outlook of the Reserve Bank of Australia may further support the Australian dollar, and positive employment data will also boost the Australian dollar. Earlier this week, Deputy Governor Andrew Hauser of the Reserve Bank pointed out that the labor force participation rate is significantly high, and emphasized that although the RBA policy is data-dependent, it is not superstitious about data. The US dollar is under downward pressure after the release of the Beige Book by the Federal Reserve on Wednesday. The latest report showed that "economic activity in almost all regions was little changed", which is in sharp contrast to the August report, which showed that economic activity in 3 regions increased and 9 regions were flat.

Technical analysis of the daily chart shows that AUD/USD was trading around 0.6640 yesterday. AUD/USD is bearish in the short term, and is blocked by the 10-day moving average of 0.6686, then the 65-day moving average of 0.6708, and 0.6700 (market psychological level). A break above these levels could open the door to resistance at 0.6760 (11th high of this month). Moreover, the 14-day relative strength index (RSI) of the technical indicators is below 40, reinforcing the bearish sentiment. On the support side, the AUD/USD pair could retest the two-month low of 0.6614, which it broke out of on Wednesday. The next key support is seen at the psychological level of 0.6600. A break below the above level could lead to the 0.6564 (August 15 low) area.

Today, consider going long on AUD until 0.6626, stop loss: 0.6610; target: 0.6670; 0.6680.

GBP/USD

On Thursday, GBP/USD continued to climb towards 1.3000 in the US session, supported by a positive shift in market sentiment. Meanwhile, the US dollar remained low despite better-than-expected preliminary October PMI data. GBP/USD fell again mid-week, falling to a new 10-week low and approaching the 1.2900 mark. Investors will focus on speeches by central bank officials from the Bank of England and the Federal Reserve. In the middle of the week, the pound fell sharply and weakened further as the pound market was overwhelmed by the weight of the overall rebound of the US dollar and investors were worried that the UK PMI for October would be weak overall. The median market forecast expects a slight decline in UK economic activity data, with the October services PMI expected to fall from the previous value of 52.4 to 52.2. In the United States, the median market forecast expects that the US PMI data for October will be mixed, with the manufacturing sub-item expected to rise from 47.3 to 47.5, while the services PMI sub-item is expected to fall slightly from 55.2 to 55.0.

GBP/USD continued its bearish momentum and maintained downward pressure before falling to the 1.2900 level. GBP/USD’s break below 100-day moving average at 1.2966, and 1.3000 (key psychological level in the market) suggests that bears are still in control. The next supports to watch are at 1.2900 (round number), and 1.2851 (August 16 low). After that, the 200-day moving average at 1.2802 needs to be watched. A break below this level may indicate a further decline towards the psychological level of 1.2800. However, if GBP/USD can hold 1.2900 and rebound above 1.3000 (psychological level in the market), it may strengthen in the short term to 1.3031 (14-day moving average), and 1.3058 (this week’s high) levels. Traders should remain cautious as the overall trend points to further downside risks unless key support levels can be maintained.

Today, we recommend going long on GBP before 1.2955, stop loss: 1.2940, target: 1.3010, 1.3020

USD/JPY

USD/JPY fell on a mild correction in the US dollar. The US S&P Global Purchasing Managers Index (PMI) for October was better than expected. Investors doubt whether the Bank of Japan will raise interest rates again for the rest of the year. Asian markets are preparing for a defensive start on Thursday as US bond yields continue to rise and the prospect of a sharp interest rate cut by the Federal Reserve gradually fades, casting a shadow on global market sentiment. This sets an ominous tone for the opening of Asian stock markets. In the currency market, the focus is on USD/JPY, which is approaching the 153 mark, affected by the political storm in the Pacific and the United States. Political uncertainties have caused the yen to fall sharply, sparking rumors that Japan may intervene to stop the yen's free fall. But realistically, Japanese authorities are unlikely to intervene in the market in the short term before the US election farce unfolds. The yen is caught in a perfect storm, with the combined effects of US election anxiety and Japan's own political uncertainty pushing the yen further into the abyss. The most favorable scenario for the dollar, and the nightmare scenario for the US bond market, is a Trump victory with Republican control of Congress, giving Trump carte blanche to implement fiscal plans.

From a technical perspective, the yen has been particularly hard hit as US bond yields continue to climb. Tuesday's breakout above the 150.65 confluence resistance and subsequent breakout above the very important 200-day moving average (last seen at 151.40) was seen as a new trigger by bulls. Nonetheless, the technical indicator 14-day relative strength index (RSI) is slightly overbought near 66 on the daily chart, which warrants caution. Therefore, it would be prudent to wait for some near-term consolidation or a small pullback before positioning for the next leg up. However, USD/JPY seems poised to climb further, reclaiming the 153.00 round number and testing the next relevant barrier around 153.40 (61.8% Fibonacci rebound from 161.95 to 139.58). A breakout would point to the 154.00 (round number) level. On the other hand, the 152.00 round number currently seems to be protecting the recent downside, and a break below it could extend the corrective decline further to the 200-day moving average, currently around the 151.40 area. Any further move towards the 151.00 round number could be seen as a buying opportunity.

Today, it is recommended to short the US dollar before 152.00, stop loss: 152.20; target: 151.10, 151.00

EUR/USD

Despite business activity in the eurozone remaining subdued and the European Central Bank preparing for further rate cuts, the dollar is under selling pressure again, providing oxygen for EUR/USD to recover above 1.0800. . EUR/USD fell at one point in the week, with the euro collapsing below 1.08, reaching a near 4-month low of 1.0760. ECB officials downplayed concerns about the economy and reiterated the need for caution in weighing future rate cuts. The foreign exchange market reacted quickly, pushing the euro further into the lows, hitting a new low in recent months. At the same time, the US dollar trend remains strong, and the strength of the US dollar comes from the US Treasury yields going to new highs. The US fundamentals are solid and the Fed officials made cautious speeches to boost the dollar. In addition, the uncertainty of the US election on November 5 is also boosting the dollar. In the eurozone, the European Central Bank cut its policy rate by 25 basis points at its meeting on October 17, lowering the deposit facility rate to 3.25%, meeting expectations. Although the recent weak economic data in the Eurozone has caused market concerns about the economic outlook, the ECB still expects a steady economic recovery.

From the daily chart, EUR/USD has continued to fall after breaking below 1.08, preparing to test the support near the recent lows of 1.0736 (July 3 low), and 1.0740 (61.8% Fibonacci retracement of 1.0448 to 1.1214). The next level will point directly to the 1.07000 (psychological barrier) area. As the currency pair fell through the key support level of 1.08, it indicates that market sentiment has turned weak. The 14-day relative strength index (RSI) of the technical indicator has turned negative and is in a trend below 30.00. This shows that the downward momentum is still intact and any attempt to reverse may face strong resistance. Investors should be cautious about oversold conditions. If EUR/USD rebounds from the current price, it may first face direct resistance near 1.0800, so this level is a key level to observe potential shorting opportunities. If it breaks through this level, it will further challenge the 200-day moving average above 1.0870 to release potential reversal signals to 1.0879 (14-day moving average), and 1.0900 (round mark).

Today, it is recommended to go long on the euro before 1.0810, stop loss: 1.0800, target: 1.0860, 1.0870.

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.