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4 October 2024,05:48
Daily Market Analysis
4 October 2024, 05:48
* Pound Sterling weighs on BoE’s Bailey dovish note.
* The U.S. dollar continues to strengthen ahead of NFP, which is due today.
* Oil prices surged sharply in the last session on Israel’s retaliation prospect.
Market Summary
The Pound Sterling fell sharply yesterday, with the Pound Sterling Index (BXY) dropping more than 2% following a dovish statement from BoE Governor Andrew Bailey. Bailey indicated that the Bank of England is prepared to implement rate cuts if UK inflation shows signs of easing.
Similarly, the Japanese Yen remained under pressure, as the currency was weighed down by the dovish tone from the new Prime Minister, who suggested that the Bank of Japan (BoJ) should proceed cautiously with monetary tightening.
In contrast, the U.S. dollar strengthened on the prospect of a slower pace of rate cuts, with recent job data pointing to a tight labour market. The Nonfarm Payroll report is due today, and a stronger-than-expected reading could further bolster the dollar’s momentum.
In the commodity market, oil prices surged on reports that Israeli forces are preparing to attack Iranian crude oil facilities, raising concerns over potential short-term supply disruptions. Despite escalating geopolitical tensions, gold prices remained flat, as the strengthening dollar curbed demand for the safe-haven asset.
Meanwhile, both Bitcoin (BTC) and Ethereum (ETH) have shown signs of easing downward pressure, potentially signalling a technical rebound in the near term.
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 (DXY) continued to strengthen, buoyed by several bullish factors. Jerome Powell’s hawkish stance in his recent statement emphasised the need for caution in implementing monetary easing, especially after the U.S. central bank received better-than-expected job data. This reinforced market expectations that the Federal Reserve may hold off on rate cuts for a longer period. Additionally, the rising uncertainty in the Middle East has fueled further demand for the dollar as a safe-haven currency, adding to its upward momentum.
The Dollar Index has broken its previous high at $101.80, suggesting it is currently trading in extreme bullish momentum. The RSI has broken into the overbought zone, while the MACD continues to edge higher, suggesting the bullish momentum is gaining.
Resistance level: 102.4, 103.30
Support level: 101.10, 100.30
Gold prices have formed a lower-high price pattern in recent sessions, indicating that the precious metal is struggling to maintain bullish momentum and may be heading for a technical correction in the near term. The demand for gold as a safe-haven asset is being countered by the strengthening of the U.S. dollar, which has prevented gold from reaching new highs. Despite the current lacklustre performance, any further intensification of the conflict in the Middle East could swiftly change the outlook. A significant escalation in geopolitical tensions may trigger a sharp rebound in gold prices as investors seek refuge in safe-haven assets.
Gold prices lack bullish momentum and are trading with a lower high, which suggests a bearish signal for gold. If gold breaks below the short-term support level at the 2638 mark, it shall serve as a bearish signal for gold. The RSI is hovering near the 50 level, while the MACD is on the brink of breaking below the zero line.
Resistance level: 2670.00, 2689.00
Support level: 2647.00, 2630.50
The GBP/USD pair experienced a sharp decline in yesterday’s session, dropping to a three-week low. This slide came as Pound Sterling was weighed down by a dovish note from BoE Governor Andrew Bailey, who suggested that the British central bank is prepared to implement rate cuts if the country’s inflation rate continues to show signs of easing. In contrast, Fed Chair Jerome Powell emphasised a more cautious approach to monetary easing, advocating for a slower pace of rate cuts. The divergence in tone between the Bank of England and the Federal Reserve led to a significant drop in the GBP/USD pair.
The GBP/USD is currently trading with strong bearish momentum. The RSI dropped into the oversold zone, while the MACD edged lower from below the zero line, suggesting that the bearish momentum is gaining.
Resistance level: 1.3220, 1.3280
Support level: 1.3065, 1.2990
The Euro weakened against the dollar following disappointing inflation data from the Eurozone. The headline Consumer Price Index (CPI) fell to 1.8%, dropping below the European Central Bank’s (ECB) 2.0% target for the first time in over three years. This has fueled speculation that the ECB may take more aggressive measures, including rate cuts, which would further reduce the attractiveness of the Euro for foreign investors.
EUR/USD is trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 34, suggesting the pair might enter oversold territory.
Resistance level: 1.1080, 1.1150
Support level: 1.1020, 1.0950
The Japanese yen continues to face downward pressure after Japan’s new Prime Minister, Shigeru Ishiba, voiced concerns about the economy’s readiness for a rate hike. His dovish comments led to a significant 2% drop in the yen against the dollar earlier this week. The currency pair remains elevated, reflecting persistent weakness in the yen, with limited expectations of any near-term recovery.
USD/JPY is trading flat after successfully breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 64, suggesting the pair might experience technical correction since the RSI retreated sharply from overbought territory.
Resistance level: 149.20, 151.75
Support level: 146.00, 143.45
The U.S. equity market remains largely flat as investors adopt a cautious, wait-and-see approach ahead of the crucial Nonfarm Payrolls report. Risk appetite has been dampened by escalating tensions in the Middle East, with ongoing uncertainties despite U.S. President Joe Biden’s assurance that he does not expect immediate retaliatory strikes from Israel. Additionally, weaker-than-expected corporate earnings reports from major companies like Levi Strauss and Tesla have further weighed on the market, reducing overall appeal for equities.
Dow Jones is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 52, suggesting the index might extend its losses since the RSI retreated sharply from overbought territory.
Resistance level: 42420.00, 43440.00
Support level: 41400.00, 40135.00
The Hang Seng index continues its strong bullish momentum, making it one of the most attractive assets for traders. The positive sentiment surrounding Chinese equities has been fueled by aggressive stimulus measures from the Chinese government, which has renewed optimism about the economic recovery. Traders are advised to monitor Chinese equity performance closely, as the market remains one of the top movers globally.
HK50 is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 86, suggesting the index might enter overbought territory.
Resistance level: 22720.00, 24665.00
Support level: 20645.00, 19340.00
Oil prices extended their gains, reaching their highest level in a month, hovering near the $74 mark, signalling a bullish bias for the commodity. The upward momentum was driven by growing concerns over a potential disruption in oil supply, as reports surfaced that Israel is planning to retaliate against a previous Iranian airstrike by targeting Iranian crude oil facilities. This geopolitical tension has heightened supply fears in the market, further propelling oil prices during yesterday’s session
Oil prices have gained nearly 4% and reached a one-month high near the $74 mark, suggesting a bullish bias for oil. The RSI is on the brink of breaking into the overbought zone, while the MACD is edging higher, suggesting that bullish momentum is gaining.
Resistance level: 74.15. 76.85
Support level: 71.90, 70.30
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30 October 2024, 05:49 Gold Sky-rocket with the U.S. Election Jitters
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