US Dollar Index

The loss of momentum in the dollar's rise before the weekend does not seem to be the start of a major trend. US yields may adjust lower in response to the recent Treasury sell-off, which is also the main reason for the dollar's slight weakness. In addition, traders are pushing the dollar down after the disappointing durable goods orders data earlier this weekend. But the US dollar index returned to around 104.00 before the close and failed to find support. From the perspective of both US macro and political dynamics, the dollar can continue to find good support this week. Last week, the US dollar and US Treasury yields hit three-month highs, and the US dollar index is currently trading around 104.00. Under Trump's low tax and high tariff policy, market concerns about government debt problems and inflation rebound have increased, and US Treasury yields have continued to climb across the board. Given the election results and geopolitical uncertainties, Trump's trade may continue to be sought after. Although it has entered the overbought area, the US dollar still has room to continue to rise in the short term. On the other hand, the US economy remains strong, with GDP now growing at 3.4% in the third quarter. The strong economic outlook may prompt the Federal Reserve to take a more cautious stance. Meanwhile, investors are confident of two rate cuts before the end of 2024.

From the daily chart, the US dollar index broke through the 200-day simple moving average of 103.82 last week and hit a 3-month high of 104.57. But overextension forced it to fall back. The index is now expected to consolidate, correcting the overbought condition. Despite a rebound before the close of last weekend, the 14-day relative strength index (RSI) and the moving average convergence divergence (MACD) indicator among technical indicators are still dangerously close to signs of easing overbought conditions. Therefore, traders should consider the ultimate loss of the index. The daily momentum remains bullish, and the 9-day (103.87) and 200-day (103.82) formed a bearish engulfing before the close of the weekend, which suggests that there is bullish momentum in the early part of this week. Therefore, the upper resistance can temporarily focus on 104.57 (last week's high), and 104.85 (78.6% Fibonacci rebound level from 106.13 to 100.16). If it breaks, it will challenge 105.00 (market psychological barrier). However, since the 14-day RSI is slightly below 70.00 and close to overbought conditions, it may face headwinds. Ideally, 103.82 (200-day moving average) - 103.85 (61.8% Fibonacci rebound level) is the key support area, which should be able to control limited declines to provide a better level to re-enter the bull market. If it unfortunately falls below the above support area, it is not ruled out that the US dollar index will continue to challenge 103.44 (15-day moving average) and even further see 103.15 (50.0% Fibonacci rebound level).

Consider going long on the dollar index near 104.20 today, stop loss: 104.00, target: 104.50 103.55

WTI crude oil

Before the weekend (October 25), international crude oil prices were higher. Investors are evaluating the ongoing conflict in the Middle East and the progress of ceasefire negotiations, as well as the US election early next month. Based on the most active contract, Brent crude oil rose 4.09% this week, while US WTI crude oil rose 3.97% this week. WTI crude oil futures for December delivery on the New York Mercantile Exchange rose $1.59, or 2.26%, to close at $71.78 per barrel on Friday. WTI crude oil prices continued to consolidate before the weekend as headlines said that US Secretary of State Antony Blinken might bring both Israel and Iran to the negotiating table for ceasefire negotiations. In view of the US presidential election on November 5, the Biden administration is stepping up efforts to facilitate a ceasefire agreement. A breakthrough would be a win for the Biden administration, the Democratic Party, and Kamala Harris' chances of becoming president. Also, as global demand growth continues to weaken due to China's slowing economy and the uptake of electric vehicles, all eyes will be on oil companies such as BP, Shell, Chevron, and ExxonMobil this week. They will report third-quarter earnings.

Crude oil prices have been unable to effectively hold trading above the key levels of $71.99 (18-day moving average) and $72.22 (last week's high) last week. With a return below these two important pivot levels, more downside risks may be on the horizon. If US Secretary of State Antony Blinken can reach a ceasefire agreement, or at least get all parties to the negotiating table, crude oil prices may see more downside. Therefore, traders need to first set their sights on the psychological level of $70.00, and $69.78 (61.8% Fibonacci retracement). A breakout would point to a lower $67.12, a level that supported prices in May and June 2023. Once that level is broken, the 2024-to-date low would be $64.75. On the upside, $71.34-71 42 remains the first level to retake. Next, the important technical level of $72.89 (38.2% Fibonacci retracement)) along with the 100-day moving average (75.02) and several pivot lines could be the next big hurdles ahead.

Today, consider going long on crude oil around 71.35, stop loss: 71.10; target: 72.20; 72.40

Spot gold

Gold prices continued their upward momentum from the October low of $2,603 ​​last week, breaking through $2,750 and hitting another all-time high of $2,758.50/ounce. However, rising US Treasury yields and improved risk sentiment made it difficult for the precious metal to maintain its bullish momentum in the second half of the week. The US economic calendar will include third quarter gross domestic product (GDP) data and October labor market data, which may have a significant impact on gold's valuation this week. Gold started the week higher as the People's Bank of China decided to cut the one-year loan prime rate (LPR) by 25 basis points from 3.35% to 3.10%, easing market concerns about a recession. In addition, escalating geopolitical tensions allowed the precious metal to capture safe-haven demand on Monday as the market reacted to reports that Hezbollah claimed responsibility for the drone attack on the residence of Israeli Prime Minister Benjamin Netanyahu over the weekend. Gold continued to benefit from the weak market sentiment last week in the absence of high-level data releases. After setting another record high of $2,758.50 in the mid-week European trading session, the price of gold reversed direction to a low of $2,708.80. Before the weekend, gold struggled to accumulate rebound momentum and rose back to $2,750 before the close of the week.

From the daily chart, the 14-day relative strength index (RSI) indicator of the technical indicator rose to a high of around 75 earlier this week and then retreated to the area slightly below 70, but it is still at a high level. It shows that after gold corrected the overbought situation, the bullish bias is still intact. In addition, gold/dollar is still in the rising regression channel since June. If the gold price adjusts downward again, the first support level is $2,726 (7-day moving average), and 2,721.90 (23.6% Fibonacci retracement level of 2603.50 to 2758.50), followed by $2,700 (market average psychological level) and $2,681 (50.0% Fibonacci retracement level). On the other hand, a break above the static resistance of $2,747 (Friday's closing price) will be key to the resumption of a sustained rise in gold prices. An intermediate resistance seems to be formed at $2,758.50 (the latest historical high) before $2,768 (the central axis of the ascending channel) and $2,800 (round level).

Today, consider going long on gold before 2,745.00, stop loss: 2,740.00; target: 2,765.00; 2,770.00

AUD/USD

During the US trading session at the end of last week, the AUD/USD pair fell above the psychological support of 0.6000. The US dollar stabilized after the correction in the middle of last week. The US dollar index, which measures the value of the US dollar against six major currencies, hovered near the top of 104.00. The decline of the US dollar seems to be limited as investors increasingly expect that the Fed's easing policy will be more gradual than previously expected for the remaining year, and former US President Donald Trump will win the national election on November 5. The Fed began a policy easing cycle in September with a 50 basis point larger-than-usual move, lowering interest rates to 4.75%-5.00%. On the political front, investors expect higher tariffs and lower taxes if Trump returns to the White House, which would force the Fed to keep interest rates higher. Meanwhile, the Australian dollar has underperformed against major currencies this month, despite investors expecting the Reserve Bank of Australia to keep its official cash rate (OCR) at current levels until the end of the year. The latest upbeat jobs data reinforced investors' expectations that the Reserve Bank of Australia will not cut interest rates for the rest of the year.

From a technical perspective, follow-through selling on last week's break below the 0.6620-0.6615 area would confirm a break below the very important 200-day moving average at 0.6629. Given that the 14-day relative strength index (RSI) on the daily chart is deeply in negative territory around 34.50, coupled with the formation of a bearish "death cross" pattern between the 10-day (0.6672) and 100-day (0.6695) moving averages of AUD/USD since late last week, this may accelerate the decline towards the 0.6600 psychological level, and the support level near the 0.6574 (61.8% Fibonacci retracement level of 0.6348 to 0.6942) area, and then fall to the 0.6500 market psychological level. On the other hand, the continued effective stay above the 200-day moving average of 0.6628 seems to be a short-term obstacle before the 0.6700 round number. This coincides with a breakout of the 100-day moving average support, above which a short-covering move could lift AUD/USD to the 0.6723 (last week’s high) area or 0.6778 (1 50.0% Fibonacci retracement from 0.6942 to 0.6614). If the above hurdles can be overcome convincingly, the near-term bias could shift to the bulls.

Consider shorting AUD before 0.6620 today, stop loss: 0.6635; target: 0.6580; 0.6570.

GBP/USD

After falling to a near 2.5-month low of 1.2907 in the middle of last week, GBP/USD has recovered somewhat over the weekend and is trading just below the 3-day high of 1.30, but is still unable to break the key psychological round number of 1.3000. A slight improvement in sentiment is a headwind for the dollar, which is nonetheless set to maintain weekly gains of more than 0.70%. Safe-haven demand for the dollar dominated this week for a variety of reasons, including heightened uncertainty ahead of the November 5 U.S. presidential election, heightened geopolitical tensions in the Middle East, and the global earnings season. At the same time, markets are pricing in the possibility of a win by former U.S. President Donald Trump, the Republican nominee, in the presidential race. Trump’s trade and expansionary fiscal policies are seen as inflationary, calling for higher interest rates and the dollar. Continued bets that the Federal Reserve may adopt a less aggressive easing policy also bode well for the dollar. This risk-averse market environment has exacerbated the pain for the British pound, which was already hit a week ago by weaker-than-expected inflation in the UK in September and increased bets on a rate cut by the Bank of England next month.

On the daily chart, GBP/USD is battling with its 100-day simple moving average at 1.2969, extending its decline for the fourth consecutive week. A three-day close below that level could give sterling sellers fresh impetus to sell. At the close of the daily chart last Wednesday, the 21-day moving average (1.3092) crossed below the 50-day moving average (1.3143), forming a "death cross" bullish pattern, adding credibility to the bearish outlook. The next bearish target is the last week's high of 1.2907, below which will challenge 1.2846 (76.4% Fibonacci retracement of 1.2665 to 1.3434). If buyers fail to hold this key support, a new leg down may be seen towards the 200-day simple moving average of 1.2803, and 1.2800 (market psychological level). Conversely, if GBP/USD is to correct higher, it needs to break through the 1.3000 psychological level to the upper side and then accept support at 1.3049 (50.0% Fibonacci retracement). Further up, buyers may focus on the 21-day moving average of 1.3092, and the 1.3100 (round mark) area levels.

Today, it is recommended to short GBP before 1.2975, stop loss: 1.2990, target: 1.2930, 1.2920

USD/JPY

The yen has stalled its overnight recovery from multi-month lows amid uncertainty over the Bank of Japan. Mixed consumer inflation data from Tokyo and a positive risk tone also weakened the safe-haven yen. Bets on a less aggressive Fed easing have revived dollar demand and provided some support for USD/JPY. The Bank of Japan is once again on the back foot. It wants to continue raising interest rates, which are currently stuck at 0.25%, and hopes to use rising inflation to finally move away from its long-standing zero interest rate policy. But timing is always difficult to get right. When it raised rates in the summer, a very weak US jobs report a few days later, combined with the rate hike, triggered sharp moves in the yen and stocks. The timing this week doesn't seem ideal either. So when the Bank of Japan meets this Thursday, it may still be unclear what the government will look like in the next few years and what its fiscal plans are for the near future. In addition, less than a week after the Bank of Japan meeting, there will be another somewhat important election in the US, which may also lead to significant market volatility. Maybe the timing is not so bad after all.

From a technical point of view, weakness below the 151.76 (5-day EMA) - 151.45 (Friday's low) area could drag the USD/JPY pair towards the 151.00 round-figure mark. Any further declines could find decent support near the confluence resistance of the 200-day simple moving average at 151.42 and 150.76 (50.0% Fibonacci rebound from 161.95 to 139.58). The above-mentioned area should be a key pivot point, which, if decisively broken, would indicate that the recent rally since the beginning of the month has lost steam and shift the bias towards bearish traders, and could push the pair towards the 150.00 (market psychological mark) level. Breaks would see 149.30 (mid-axis of the daily horizontal channel), and 149.00 (round-figure mark), respectively. On the other hand, since USD/JPY formed a bullish "golden cross" pattern on the daily chart late last week, if the pair can stay above the 152.00 (round mark); 152.20 (lower line of the daily rising channel); and 152.22 (last weekend's closing price) area this week, it may extend further to the 153.40 (61.8% Fibonacci rebound level) - 153,45 (upper line of the daily horizontal channel) area. Some follow-up buying should allow the USD/JPY pair to recapture the 156.67 (76.4% Fibonacci rebound level), and 156.90 (upper line of the daily rising channel) area levels.

Today, it is recommended to short before 152.50, stop loss: 152.80; target: 151.70, 151.60

EUR/USD

After falling to a near four-month low of 1.0761 last week, the US dollar fell as the demand for high-yield stocks re-heated after the release of encouraging macroeconomic data from the United States. The euro once successfully regained the 1.0800 mark, but driven by the gloomy market sentiment, the US dollar maintained its positive momentum before the weekend, pushing the euro back below $1.08, but then the political situation took its toll. The ongoing geopolitical tensions in the Middle East and the uncertainty of the looming US presidential election can explain the EUR/USD trend this week. At this stage, the focus of market concerns is that once Trump takes office, he will write off all the efforts of the Federal Reserve to curb inflation without triggering a recession. EUR/USD continues to maintain a bearish momentum. But the recent technical outlook suggests that sellers remain on the sidelines for the time being. Improved risk sentiment, coupled with a pullback in US Treasury yields, led to a temporary loss of interest in US dollar buying, pushing EUR/USD higher.

As the week ended, EUR/USD fell for the fourth consecutive week, trading just below 1.08. From a technical perspective, the pair is expected to continue its decline on the weekly chart, although the downward momentum seems to be slowly fading. However, EUR/USD is still holding below the 21 (1.0931) and 50 (1.0880) week simple moving averages, while also struggling below the 100-week simple moving average (1.0829). Meanwhile, while the momentum indicator has flattened within neutral levels, the 14-week relative strength index (RSI) of technical indicators maintains a bearish slope around 42.50, consistent with further declines ahead. Initial support is 1.2761 (last week's low), and 1.0740 (61.8% Fibonacci retracement of 1.0448 to 1.1214). If it breaks, it will fall to the 1.0700 round number level. On the contrary, buying may push the currency pair above the resistance of 1.0871 (last week's high), and 1.0880 (50-week moving average). If it breaks above this resistance, it will face the 1.0921 (38.2% Fibonacci retracement), and 1.0931 (21-week moving average). If it breaks above this resistance area, it will face the psychological level of 1.1000.

Today, it is recommended to short the euro before 1.0810, stop loss: 1.0825, target: 1.0770, 1.0760.

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.