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11 October 2024,05:49
Daily Market Analysis
11 October 2024, 05:49
* Oil extended its gain as geopolitical tension in the Middle East is worsening.
* The U.S. dollar strengthened last night on the back of an upbeat U.S. CPI reading.
* Keep an eye on today’s UK GDP as it may be a pivotal factor in the pound sterling.
Market Summary
Oil experienced heightened volatility in yesterday’s session, with prices surging more than 3% as geopolitical risks escalated. The market reacted to reports that Israel plans to attack Iranian oil facilities, while the Houthis, a military rebel group, allegedly attacked an oil tanker in the Red Sea, raising concerns over potential disruptions to global oil supply.
In the precious metals market, gold prices rose by nearly 1%, driven by safe-haven demand amid escalating tensions in the Middle East.
Meanwhile, in the forex market, the highly anticipated U.S. CPI reading exceeded market expectations, leading to predictions of a more hawkish approach from the Federal Reserve. The dollar strengthened as a result, and traders in bond and swap markets are now expecting a 25 bps rate cut next month, rather than a larger cut.
For the Pound Sterling, traders are focused on the upcoming UK GDP report, which is expected to provide insights into the currency’s near-term performance.
In the crypto market, Bitcoin (BTC) fell below the $60,000 mark for the first time in October, as risk sentiment deteriorated following the stronger-than-expected U.S. inflation data, further pressuring risky assets.
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
TThe Dollar Index showed volatile movements yesterday after a stronger-than-expected U.S. inflation report. The index initially climbed as Treasury yields rose following the Consumer Price Index (CPI) report, which showed an increase of 0.20% for September, exceeding the anticipated 0.10%. This data, coupled with robust September employment numbers, led investors to reconsider the likelihood of a 50-basis-point rate cut in November. However, the gains were capped by the higher-than-expected Initial Jobless Claims figure of 258K, leading investors to lock in profits and adopt a wait-and-see stance.
The Dollar Index is trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated increasing bearish momentum, while RSI is at 72, suggesting the index might enter overbought territory.
Resistance level: 103.25, 104.05
Support level: 102.55, 101.80
Gold prices initially fell after the inflation report but soon rebounded as bargain buying and intensified Middle East tensions shifted sentiment towards safe-haven assets. Despite the hotter-than-expected inflation, the market’s focus quickly turned to escalating geopolitical concerns, particularly the recent Israeli airstrikes in Beirut. These events bolstered gold’s appeal as a hedge against global uncertainty. Nonetheless, the mixed economic data suggests that gold may experience further volatility as markets assess the impact on the Federal Reserve’s future policy.
Gold prices are trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 68, suggesting the commodity might extend its gains since the RSI stays above the midline.
Resistance level: 2650.00, 2670.00
Support level: 2630.00, 2605.00
The Pound Sterling has broken below its key resistance level at 1.3065 following the release of stronger-than-expected U.S. CPI data, which strengthened the U.S. dollar. Despite this bearish breakout, technical indicators suggest that the downward momentum may be easing. Attention now shifts to the upcoming UK GDP report, which is expected to play a crucial role in determining the future direction of Sterling. Traders are advised to closely monitor this economic indicator, as it could be pivotal in influencing the pair’s next move.
GBP/USD failed to define above the 1.3065 mark, suggesting a bearish signal for the pair. A break above this level may serve as a trend-reversal signal. The RSI remains close to the oversold zone, but the MACD continues to edge higher, suggesting the bearish momentum is easing.
Resistance level: 1.3140, 1.3220
Support level: 1.2985, 1.2910
The EUR/USD pair continued its decline in the last session as the U.S. dollar strengthened further, bolstered by the stronger-than-expected U.S. CPI report. The euro remains under pressure, with traders cautious ahead of the upcoming ECB interest rate decision. Market expectations lean toward a potential rate reduction by the ECB as the central bank aims to support the eurozone’s weakening labour market and sustain economic growth. Should the ECB confirm a rate cut, it may further weigh on the euro, exacerbating its recent downtrend against the dollar.
EUR/USD has been trading with extremely strong bearish momentum. The pair declined by nearly 2% in October. The RSI remains below the 50 level, while the MACD hovers at the bottom, suggesting the pair remains trading with bearish momentum.
Resistance level: 1.1020, 1.1080
Support level: 1.0890, 1.0805
The Australian Dollar (AUD) gained ground on Friday, though its upside may be limited by the reduced odds of aggressive rate cuts from the Federal Reserve. With no major economic data releases from Australia, the AUD/USD pair is expected to be influenced primarily by U.S. dollar dynamics. Traders will closely watch the upcoming U.S. Producer Price Index (PPI) data for further insights into inflation and the Fed’s potential rate cut trajectory.
AUD/USD is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 42, suggesting the pair might extend its gains since the RSI rebounded sharply from oversold territory.
Resistance level: 0.6160, 0.6235
Support level: 0.6080, 0.5990
The USD/JPY pair has surged over 4% in October, reflecting strong bullish momentum. The Japanese yen continues to weaken, pressured by expectations that the Bank of Japan (BoJ) may delay its next rate hike following the inauguration of Japan’s new Prime Minister. This political transition, coupled with heightened uncertainty in the Middle East, has led to caution from the BoJ, deterring any aggressive moves in terms of monetary policy. In contrast, the U.S. dollar has gained strength, further fueling the upward trajectory of the USD/JPY pair. The combination of Japan’s dovish stance and global uncertainty has left the yen vulnerable to further declines.
The pair is currently hovering at its highest level since August, awaiting a fresh catalyst to break through its next resistance level. The RSI has dropped out from the overbought zone, while the MACD has edged lower, suggesting that bullish momentum is easing.
Resistance level: 150.85, 152.25
Support level: 147.30, 145.85
The tech-heavy Nasdaq index recently reached its highest level since July, driven by a fresh rally in technology stocks. However, the index faced resistance following a higher-than-expected U.S. CPI reading, which prompted market speculation of a more hawkish stance from the Federal Reserve. This development has dampened sentiment in the equity market, as expectations of tighter monetary policy are typically unfavourable for risk assets like tech stocks. Despite this setback, the Nasdaq continues to trade with strong bullish momentum. If the index manages to break above the 20325 resistance level, it would signal a potential continuation of the bullish trend.
Nasdaq has been trading in a higher-high price pattern, suggesting a bullish bias for the index. The RSI is close to the overbought zone, while the MACD is hovering above the zero line, suggesting the index is trading with bullish momentum.
Resistance level: 21070.00, 22040.00
Support level: 19700.00, 19120.00
Oil prices surged, driven by a combination of escalating Middle East tensions and increased demand ahead of Hurricane Milton’s landfall in Florida. Supply chain disruptions and widespread power outages are anticipated, fueling concerns over energy supply. Additionally, fears that Israel may strike Iranian oil facilities amid the ongoing conflict contributed to the rally. Optimism surrounding economic prospects in the U.S. and China also supported energy demand, reinforcing the positive sentiment for oil.
Oil prices are trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 59, suggesting the commodity might extend its gains since the RSI stays above the midline.
Resistance level: 77.00, 80.05
Support level: 74.85, 72.65
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