US Dollar Index
The dollar weakened after the start of the US trading session on Tuesday. Both the September Consumer Confidence Index and the September Richmond Federal Manufacturing Index were below expectations, which are the main drivers of the recession. Despite the weak Purchasing Managers Index (PMI) data, the dollar remained strong at the beginning of the week. And it is considered a "recalibration" to keep the economy on track. The eurozone, Japan, Switzerland and the United Kingdom are struggling with increasing deflationary pressures, and economic activity seems to be on an unstable path. For this reason, the possible actions of central banks remain cautious. Although ECB policymakers have not confirmed further rate cuts, the market expects two more rate cuts before the end of the year. In addition, the forecasts of the Federal Reserve Committee indicate that interest rates may fall further before the end of the year. Policymakers now expect inflation to fall faster than previously expected and unemployment to rise higher than previously expected.
If there is no shock to the global economy and financial markets, the market believes that by 2025, the US dollar index will resume depreciation and enter the lower range of 95-100. Previously, the US dollar index had been consolidating in the 100-107 range for more than 20 months under the Fed's 'high interest rate for a long time' stance. The US dollar index began to show some momentum at the beginning of this week and seemed to be stabilizing at the key support levels of 100.22 (this year's low), and 100.00 (market psychological level). However, technical indicators are still in a bear market. The 14-day relative strength index (RSI) is 35.80, indicating weak upward momentum. The moving average convergence divergence (MACD) shows that the green bars are decreasing, further supporting the bearish trend. The short-term support is located at 100.22 (this year's low), and 100.00 (market psychological level) key support. A break will see 99.74 (July 13, 2023 low), as for the resistance level, it is initially located at 101.00 (round mark), and 101.23 (this week's high) levels.
Consider shorting the US Dollar Index around 100.50 today, stop loss: 100.60, target: 100.10, 100.00
WTI Crude Oil
Crude oil prices rose on Tuesday, with a slew of supportive data coming out after the Chinese government launched a 500 billion yuan stimulus package to restart the economy. This liquidity injection plan should once again boost China's demand for crude oil. Crude oil prices fell as geopolitical heat cooled. Previously, the market was worried that Iran, a heavyweight oil producer in OPEC, could be involved in a more serious conflict. But geopolitical tensions are not the only thing traders are worried about. The weather is also stirring things up, with the possibility of a hurricane hitting the US Gulf Coast later this week. However, the market seems to be keeping an eye on the storm while keeping an eye on the larger economic situation. China's slowing economic growth remains a problem that cannot be ignored. China seems ready to do something, with the People's Bank of China cutting the 14-day reverse repo rate on Monday. In short, the oil market is caught in a whirlwind of geopolitical risks, hurricanes and economic uncertainty, a tricky mix that has prices teetering like a tightrope walker. Buckle up, because the ride is not over yet!
Crude oil is facing resistance from $72.10 {August 5 low}, and $72.08 {67.79 to 87.84 78.6% Fibonacci retracement} on the back of poor European economic data released at the beginning of the week, with bulls looking to break higher. The first level to watch on the upside is 72.08 - 72.10, which will serve as the next level to watch. If the above area is successfully broken, the next resistance will be $73.61 (50-day moving average), and the ultimate short-term target is $75.27 (Jan. 12 high), on the downside, the initial support level remains at $70.00 (market psychological level). Further down, the next level is $69.00 (midline of the downward channel on the weekly chart). If this level faces a second test and falls, $67.97 (low of December 8 last year) will become the target.
Consider going long on crude oil around 71.20 today, stop loss: 71.00; target: 72.20; 72.40
Spot gold
Gold prices have been hitting new all-time highs every day and have now easily exceeded $2,650.00 to $2,664.50. Poor US data has fueled speculation that the Federal Reserve will cut interest rates by another 50 basis points when it meets in November. On Tuesday, gold prices attracted buyers for the fourth consecutive day and hit a new all-time high of around $2,640 during the Asian session. Expectations of more aggressive policy easing by the Federal Reserve after last week's sharp rate cut failed to help the dollar attract any meaningful buyers and act as a tailwind for non-yielding gold. On top of that, Israeli airstrikes on Hezbollah weapons bases in southern and eastern Lebanon on Monday killed nearly 500 people, raising the risk of a wider conflict in the Middle East. This, coupled with uncertainty in U.S. politics and a bleak global economic outlook, suggests that the path of least resistance for the safe-haven precious metal remains to the upside. That said, the unexpected rate cut by the People's Bank of China at the start of the week, as well as a temporary spending bill to fund the U.S. government until December 20, limited gold's gains. However, upside appears limited ahead of speeches by influential Federal Open Market Committee members and the release of the U.S. personal consumption expenditures price index on Friday.
From a technical perspective over the past two months, gold has risen from its early August low of $2,364 to yesterday's high of $2,664, an increase of about $290 (more than 12%), an uptrend rarely seen in recent years. Last week's breakout and acceptance of the $2,600 mark could be seen as a new trigger for bullish traders. That said, the relative strength index (RSI) on the daily chart remains above 75.50, calling for caution. Therefore, it would be prudent to wait for some consolidation or a modest pullback in the near term before positioning for the next leg higher. Meanwhile, any corrective decline could attract new buyers towards the $2,600 mark, below which the price could fall to a critical support level range consisting of $2,588 (upward channel axis); $2,585 (Friday's low); and $2,584 (5-day simple moving average). The next relevant support is near the $2,561.40 (23.6% Fibonacci retracement of 2353.20 to 2625.80) resistance point. A convincing breakout below the latter could shift the short-term bias to bearish trading and pave the way for some meaningful declines. On the other hand, as the path of least resistance for gold prices in the near term slopes upward. The first resistance level for gold prices would be $2,680, followed by the psychological $2,700 level.
Consider going long on gold today before 2,654.00, stop loss: 2,650.00; target: 2,685.00; 2,690.00
AUD/USD
The AUD/USD pair was the best performer this week, hitting a new high for 2024, not far from the 0.6900 mark. Australian inflation data took center stage during the Asian session. On Tuesday, AUD/USD fluctuated higher ahead of the RBA decision. The Reserve Bank of Australia is expected to keep the official cash rate (OCR) at 4.35%, citing strong labor market conditions and persistent inflationary pressures. Market forecasts indicate no rate cuts before December, with the first adjustment likely to come as late as February or even in the second quarter of 2025. The ANZ-Roy Morgan Australian Consumer Confidence Index rose 0.8 points this week to 84.9. Despite the rise in the indicator, the consumer confidence index has been below the 85.0 level for 86 consecutive weeks. Year-on-year, the index is up 8.5 points from 76.4. The US dollar may face challenges as Fed officials predict a further 50 basis point rate cut in 2024 following an aggressive 50 basis point rate cut last week.
The AUD/USD pair traded around 0.6890 on Tuesday. Weekly chart technicals show that AUD/USD broke through the upper resistance line of the horizontal channel at 0.6815 this week, suggesting a bullish bias. In addition, the 14-day relative strength index (RSI) of the technical indicator is above 69.00, confirming the continuation of the bullish trend. AUD/USD currently broke through the high of 0.6871 in December last year and is challenging 0.6889 (180-week moving average), and 0.6899-06895 (double top highs in June and July last year). A breakout points to 0.6900 (market psychological level). The short-term target is towards the 0.70 (market psychological barrier) level.
On the downside, AUD/USD may find support at 0.6800 {market psychological barrier}. The next important support level is the 5-week moving average of 0.6756. A break below this level may push AUD/USD further towards the six-week low of 0.6700.
Consider going long on AUD before 0.6880 today, stop loss: 0.6865; target: 0.6920; 0.6930.
GBP/USD
During yesterday's trading session, GBP/USD rose above the 1.3400 mark. The scarce macroeconomic calendar limited volatility, although the US dollar remained unattractive amid continued speculation of further US rate cuts. This week, GBP/USD hit another 30-month high, and GBP/USD deepened its bull market support supported by the US dollar's overall selling pressure. The Fed’s latest announcement of a double rate cut last week triggered a weak dollar, helping the pound to its highs. There was little data to watch from the UK. For the pound, political threats are looming; UK Prime Minister Keir Starmer has been vocal about the possibility that the UK domestic economy could collide with the “painful” economic reforms needed, especially as UK inflation data proves to be far more severe than other countries. The S&P US Manufacturing Purchasing Managers’ Index (PMI) fell to 47.0 on a monthly basis in September, the lowest level since July 2023, as the outlook for business activity in the US manufacturing sector continues to be bleak.
Despite the GBP/USD pair hitting a 30-month high at 1.3415 at the beginning of the week, GBP/USD bulls are pushing prices deeper into bull market territory. The GBP/USD pair remains firmly bullish on the daily chart as it climbs above its 10-day moving average near 1.3218. The relative strength index (RSI) indicator on the 4-hour chart rose to 76, reflecting overbought conditions in the GBP/USD pair. On the upside, 1.3450 is the first resistance level. If it breaks through the above area, it will look to 1.35 (round mark). If GBP/USD falls below 1.3300 (the central axis of the ascending channel) and starts to use this level as resistance, it may fall to 1.3268 (last Friday's low) and a long-term correction of 1.3230 (the lower line of the ascending channel).
Today, it is recommended to go long on GBP before 1.3400, stop loss: 1.3385, target: 1.3450, 1.3460
USD/JPY
USD/JPY fell after hitting a two-week high of 144.68. The US dollar is being hit by worse-than-expected US data and falling US Treasury yields. In early Asian trading on Tuesday, USD/JPY fell slightly and was around 144.00. The decline of the US dollar continued to suppress USD/JPY. Atlanta Fed President Bostic said on Monday that the U.S. economy is close to normal inflation and unemployment, and the central bank also needs to "normalize" monetary policy. The dollar continues to be under pressure amid growing expectations that the Federal Reserve will further cut interest rates in the rest of 2024. However, the prospect that the Bank of Japan is in no hurry to raise interest rates may limit the upside of the yen. Most market participants had expected the next rate hike to be in December, but Mr. Ueda's speech prompted some market participants to believe that the rate hike may be postponed until early next year. At the same time, the increase in geopolitical tensions in the Middle East may drive safe-haven flows, boosting the yen.
From a technical perspective, over the past month or so, USD/JPY has shown that a short-term downtrend has been established. In addition, the 14-day relative strength index (RSI), one of the technical indicators on the daily chart, although it has recovered slightly, remains in the negative zone {now at 44 levels}. It shows that USD/JPY has the least resistance to the downside. Therefore, any subsequent upside move may continue to face strong resistance near 144.86 (23.6% Fibonacci rebound from 161.95 to 139.58). This is closely followed by the 145.59 {10-week SMA} level. On the other hand, the 21-day EMA at 143.40 levels currently seems to limit the downside in the near term, ahead of the 142.00 round number and daily swing lows near 141.75. Some follow-through selling has the potential to drag USD/JPY towards the 141.00 mark and, in turn, the 140.00 psychological level.
Today, we recommend shorting before 143.35, stop loss: 143.60; target: 142.50, 142.30
EUR/USD
The euro benefited from broad dollar weakness on Tuesday, paring weekly losses and looking to retest the 1.1200 level. Additional gains were seen on the table amid dismal European data. EUR/USD pared recent bullish momentum, falling 0.5% on Monday. EUR/USD recorded its worst performance in the second half of 2024 after Eurozone PMI data generally missed expectations, while US PMI data was only slightly better than expected. Tuesday's EUR/USD action will be relatively quiet; not much data is expected from either Europe or the US. Despite a broadly weak dollar outlook following the Fed's unexpected double rate cut last week, poor sentiment on the euro side kept EUR/USD subdued. The S&P US Manufacturing Purchasing Managers' Index (PMI) fell to 47.0 on a monthly basis in September, the lowest level since July 2023, as the outlook for US manufacturing business activity continued to be bleak. Chicago Fed President Goolsbee's sobering remarks earlier in the week about the need for the Fed to significantly cut its policy rate hampered the dollar's rebound.
Starting this week, EUR/USD bulls seem to be showing signs of exhaustion as price action has entered the top of the recent momentum at 1.1200. Despite the intraday weakness, EUR/USD continues to remain well bid overall, and the pair has tested the yearly high despite being unable to recapture the key 1.1200 level in the short term. The daily chart shows that EUR/USD may extend its decline. The 14-day relative strength index (RSI) of the technical indicator has risen back to around 61.60. The performance looks to be momentum, but it is not enough to confirm another decline for the time being. Meanwhile, the mildly bullish 50-week SMA provides support around 1.1010. On the downside, the first support is at 1.1051 (200-week SMA), a break of which will point to 1.1010 (50-week SMA), and the psychological level of 1.1000, which will be the main support area. A break below this level will make the bearish situation more serious. As for the upside, the round resistance level of 1.1200 will become the main obstacle for euro bulls. If this level is broken, the asset will fall to the high of July 2023 at 1.1275.
Today, it is recommended to go long before 1.1165, stop loss: 1.1150, target: 1.1230, 1.1240.
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