Oil Prices Bolster by Heighten Geopolitical Tension

* Oil prices surge on heightened tension in the Middle East region.

* The U.S. dollar remained strong on the back of robust job data last Friday.

*Eye on tomorrow’s RBNZ’s interest rate decision with the expectation of a 50 bps rate cut. 

Market Summary

Oil prices surged by nearly 4% in the last session, reaching a near two-month high as the confrontation between Israel and Iran-backed militaries escalated, sparking concerns over potential supply disruptions in the region, which accounts for a significant portion of global crude production.

In contrast, gold prices remained stable, hovering above the $2,640 mark. Despite heightened geopolitical tensions, the strengthening U.S. dollar has dampened demand for the safe-haven asset. The dollar index rose above 102, its highest level since August, supported by strong U.S. job data from last Friday.

In New Zealand, the Reserve Bank of New Zealand (RBNZ) is set to announce its interest rate decision tomorrow, with expectations of a 50 basis point rate cut. This prospect has weighed on the New Zealand dollar (NZD), which fell nearly 3% against the U.S. dollar last week.

Meanwhile, the Reserve Bank of Australia’s (RBA) monetary policy meeting minutes, released during the Sydney session, initially boosted the Australian dollar (AUD) due to a hawkish tone. However, as markets digested the news and concerns grew over the country’s economic outlook, confidence in the Aussie dollar faltered, pushing it to a near one-month low against the U.S. dollar.

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Current rate hike bets on 7th November Fed interest rate decision: 

Source: CME Fedwatch Tool

-50 bps (7%) VS -25 bps (93%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index continues to stay in a positive zone, bolstered by strong U.S. jobs data. A jump in Nonfarm Payrolls, a lower unemployment rate, and solid wage growth have led investors to reduce expectations for aggressive rate cuts. Now, an 85% likelihood is placed on a 25 basis point cut, as opposed to a 50 basis point cut. U.S. Treasury yields are also rising for the first time in two months, reflecting the market’s adjusted outlook on interest rates.

The Dollar Index is trading higher while currently testing the resistance level. However, MACD has illustrated increasing bearish momentum, while RSI is at 67, suggesting the index might enter overbought territory. 

Resistance level: 102.50, 103.30

Support level: 101.80, 100.95

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XAU/USD, H4

Gold prices remain flat, consolidating as mixed fundamentals prompt a cautious investor stance. Middle East tensions have provided a bullish underpinning for gold as a safe-haven asset. However, the stronger Dollar and better-than-expected U.S. jobs report are limiting gains. This week’s U.S. CPI and PPI reports, along with the Fed meeting minutes, could serve as key indicators for gold’s next move.

Gold prices are trading lower while currently testing the support level. However, MACD has illustrated increasing bullish momentum, while RSI is at 47, suggesting the commodity might experience technical correction since the RSI rebounded sharply from oversold territory. 

Resistance level: 2670.00, 2690.00

Support level: 2640.00, 2630.50

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GBP/USD，H4

The Pound Sterling plunged nearly 2% against the U.S. dollar last week, pressured by both lacklustre U.K. economic data and a dovish tone from the Bank of England (BoE). The BoE’s stance has weighed heavily on the Sterling, as market participants speculate that rate cuts may be on the horizon if the country’s inflationary pressures ease further. On the other hand, the U.S. dollar continued to strengthen, bolstered by robust job data released last Friday, which reinforced the idea that the Federal Reserve may delay rate cuts. This divergence between the two central banks has hammered the GBP/USD pair, driving it to its recent low levels.

GBP/USD has eased from its bearish trend and is supported at near 1.3070 levels. The RSI has gotten above the oversold zone, while the MACD has a golden cross below the zero line suggesting the bearish momentum is easing 

Resistance level: 1.3140, 1.3220

Support level: 1.3065, 1.2940

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EUR/USD，H4

The EUR/USD pair has experienced strong downside pressure after breaking below its uptrend channel, but recent consolidation suggests that bearish momentum may be easing. If the pair breaks above the current price consolidation range, it could indicate a potential technical rebound. However, the outlook for the euro remains weak, as recent inflation and job data hint at continued economic sluggishness in the Eurozone. These indicators suggest that the European Central Bank (ECB) may adopt a more dovish stance in its monetary policy, potentially keeping the euro under pressure as the ECB seeks to support economic growth.

EUR/USD has eased from the bearish trend and started consolidating, suggesting a potential technical rebound may occur in the near term. The RSI has risen above from the oversold zone, while the MACD has a golden cross below, suggesting the bearish momentum is easing. 

Resistance level: 1.1020, 1.1080

Support level: 1.1950, 1.0890

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NZD/USD, H4

The Reserve Bank of New Zealand’s (RBNZ) interest rate decision is set for tomorrow, with market expectations pointing to a 50 bps rate cut. This dovish outlook, combined with the strengthening of the U.S. dollar, has weighed heavily on the NZD/USD pair, leading to a five-session losing streak.The pair is currently facing downside pressure and is expected to remain below the fair-value gap near the 0.6180 level. Traders will be closely watching the RBNZ’s decision, as a rate cut could further push the pair lower, particularly if U.S. dollar strength continues.

The pair is currently trading with extremely strong bearish momentum, suggesting a bearish bias for the pair. The RSI remains in the oversold zone, while the MACD continues to edge lower, suggesting that the bearish momentum remains strong. 

Resistance level: 0.6160, 0.6240

Support level: 0.6080, 0.6000

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Dow Jones, H4

U.S. equities have seen a sharp retreat, weighed down by rising Treasury yields. The 10-year yield is back above 4% for the first time since August, as hopes for a significant rate cut diminish following robust employment data. With the third-quarter earnings season about to kick off, major banks like JPMorgan Chase, Wells Fargo, and Bank of New York Mellon are set to release earnings, which may provide insights into the economic outlook.

Dow Jones is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 55, 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

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CL OIL, H4

Oil prices have retreated slightly due to profit-taking and technical correction, despite recent gains amid Middle East conflicts. Escalating tensions between Israel, Hezbollah, and Iran continue to inject volatility into oil markets. In addition, Hurricane Milton’s approach toward the Gulf of Mexico is being closely monitored for its potential impact on U.S. oil production and shipments, as port restrictions in the region may temporarily disrupt oil flows.

Oil prices are trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 55, suggesting the commodity might extend its losses since the RSI retreated sharply from overbought territory. 

Resistance level: 77.55, 79.10

Support level: 73.80, 71.90

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