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2 October 2024,06:16
Daily Market Analysis
2 October 2024, 06:16
* Middle East conflicts spur commodity prices.
* Wall Street retraced on heightened geopolitical tensions.
* The dollar extended its gain as a safe-haven currency amid uncertainty.
Market Summary
Middle East tensions took centre stage in the global financial markets during the last session as Iran fired missiles at Israel, with further retaliation expected, heightening geopolitical risks. This event fueled demand for safe-haven assets, leading gold to surge by over 1%, approaching its peak. Similarly, oil prices spiked by more than 3%, with geopolitical conflicts often stimulating demand for crude oil, commonly referred to as “black gold.”
In contrast, Wall Street faced losses as risk assets were negatively impacted by the increasing uncertainty. The narrowing interest rate differential between Japan and other major economies is also expected to gradually unwind concerns surrounding the yen carry trade, potentially affecting Wall Street further.
In the forex market, the U.S. dollar strengthened due to its safe-haven status amid the geopolitical instability, and it received an additional boost from stronger-than-expected JOLTs job openings data, reinforcing the dollar’s upward momentum. On the other hand, the euro struggled due to poor CPI readings, which raised expectations of further ECB rate cuts, hammering the currency lower.
In the crypto market, Bitcoin (BTC) experienced its biggest daily loss in weeks as investors retreated to safer assets during this period of uncertainty.
Current rate hike bets on 7th November Fed interest rate decision:
Source: CME Fedwatch Tool
-50 bps (32%) VS -25 bps (68%)
Market Movements
DOLLAR_INDX, H4
The Dollar Index is currently consolidating its position on a positive trajectory, supported by a combination of hawkish commentary from Federal Reserve Chair Jerome Powell and escalating tensions in the Middle East. The demand for the safe-haven dollar has increased as investors seek stability amid geopolitical uncertainty. Despite mixed economic data, the overall sentiment remains favorable for the dollar. The ISM Manufacturing PMI and Prices came in lower than expectations at 47.2 and 48.3, respectively, while the S&P Global US Manufacturing PMI and JOLTs Job Openings exceeded forecasts, indicating some resilience in the economic landscape.
The Dollar Index is trading higher following breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 67, suggesting the index might extend its gains since the RSI stays above the midline.
Resistance level: 101.80, 102.35
Support level: 100.95, 100.30
The ongoing conflict in the Middle East, particularly the recent missile strikes by Iran on Israel, has significantly heightened geopolitical tensions, driving investors toward gold as a safe-haven asset. With gold traditionally viewed as a hedge against instability, demand has surged as uncertainty in the region escalates.
Gold prices are trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 58, suggesting the commodity might extend its losses since the RSI retreated sharply from overbought territory.
Resistance level: 2665.00, 2700.00
Support level: 2640.00, 2620.00
The GBP/USD pair experienced a sharp decline in the last session, driven primarily by the strengthening of the U.S. dollar. The pair fell below its previous low, indicating a potential bearish bias moving forward. The dollar’s strength was bolstered by the escalating geopolitical tensions in the Middle East and stronger-than-expected JOLTs job openings data, which outweighed the disappointment from the U.S. PMI readings that failed to meet market expectations.
The GBP/USD recorded the biggest single-day drop in a month and has broken below its previous low, suggesting a trend reversal for the pair. The RSI is close to the oversold zone, while the MACD is breaking below the zero line, suggesting bearish momentum is forming.
Resistance level: 1.3350, 1.3440
Support level: 1.3220, 1.3140
The EUR/USD pair saw a significant slide after breaking below its uptrend channel, aligning with earlier bearish expectations signaled by a MACD bearish divergence pattern. The recent eurozone CPI reading came in below 2%, indicating a slowing economy in the region. This weaker inflation data has fueled market speculation that the ECB may move towards faster interest rate cuts, further weighing on the euro’s strength and contributing to the pair’s decline. The bearish momentum is likely to persist if economic data continues to support easing by the ECB.
The pair has dropped sharply after breaking below from the uptrend channel, suggesting a bearish bias for the pair. The RSI is approaching the oversold zone while the MACD is dropping below the zero line and is diverging, suggesting the bearish momentum is gaining.
Resistance level: 1.1085, 1.1150
Support level: 1.1020, 1.0950
The Aussie dollar continues to be one of the strongest performers in the forex market, supported by Australia’s monetary policy. Despite the recent strengthening of the U.S. dollar, the Australian dollar has managed to hold its ground, trading near its recent peak. The combination of China’s economic stimulus package and the Reserve Bank of Australia’s (RBA) monetary tightening policy has provided robust support for the Aussie dollar, helping it maintain its resilience amid global currency fluctuations. This strength is likely to persist as long as these supportive factors remain in play.
The pair recorded a technical correction but remains trading close to its recent high level and is testing its resistance level at 0.6940. The RSI has declined to near the 50 level, while the MACD is edging lower, suggesting that the bullish momentum is easing.
Resistance level: 0.6920, 0.7000
Support level: 0.6850, 0.6780
The US equity market has faced significant pressure, driven by a decline in aggressive rate cuts expectations and a prevailing risk-off sentiment among investors. As uncertainties surrounding the Middle East conflict rise, market volatility has intensified, leading to a sell-off in high-risk assets, including cryptocurrencies and currencies like the Pound Sterling. The cautious approach from investors has contributed to a downturn in equities, reflecting the broader apprehension regarding potential economic impacts stemming from geopolitical tensions.
Dow Jones is trading flat while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 57, suggesting the index might edge lower since the RSI retreated sharply from overbought territory.
Resistance level: 42990.00, 44000.00
Support level: 41965.00, 40700.00
Oil markets are experiencing volatility as concerns about potential supply disruptions loom. Iran’s involvement in the conflict raises the risk of reduced oil output and export capabilities, particularly if hostilities escalate further. The recent spike in oil prices, exceeding 5%, is a direct reaction to fears surrounding the conflict and potential supply disruption.
Oil prices are trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 65, suggesting the commodity might experience technical correction since the RSI retreated sharply from overbought territory.
Resistance level: 71.90, 74.15
Support level: 70.30, 68.60
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22 November 2024, 05:55 Dollar Strengthen on Robust Job Data
21 November 2024, 05:27 Gold Extends its Gain as Geopolitical Tension Heighten
20 November 2024, 05:29 Gold Gain on Russia-Ukraine Tension
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