Gold Hovering Record High

*The dovish tone of several Fed members weighs on the dollar’s strength and supports the U.S. equity market.

*Gold poised at all-time high levels on soften dollar and heighten geopolitical tension in Middle East.

*All eyes are on the RBA’s interest rate decision, which is due today. 

Market Summary

Ahead of the release of key U.S. economic data, including the GDP and PCE readings later this week, the market is anticipating clues on the Fed’s monetary policy direction. Several Fed members expressed dovish sentiments last night, advocating for a larger rate cut, citing concerns that current interest rate levels are still weighing on economic growth. This has kept the U.S. dollar trading flat in the last session, as traders digest the dovish tone.

The sentiment also provided a boost to Wall Street, with major indexes hovering near all-time highs, buoyed by the expectation of further easing from the U.S. central bank. In the commodity market, safe-haven gold capitalized on the soft dollar, remaining above the $2,600 mark. The precious metal also received additional support from rising geopolitical tensions in the Middle East, following fresh airstrikes by Israel, which has worsened the regional conflict.

In the forex market, weaker-than-expected PMI readings from both the eurozone and UK weighed on the euro and Pound Sterling. However, the Pound Sterling quickly erased its losses and remained near its recent highs, signalling its status as one of the strongest performing currencies in the market. Meanwhile, attention is turning to the Reserve Bank of Australia (RBA), with expectations of a hawkish rate decision, further supporting the Aussie dollar.

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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

Expectations of a 50-basis point rate cut by the Federal Reserve in November have kept the US Dollar flat. Key upcoming data, including the Core PCE inflation report and employment components of the PMI, will shape future monetary decisions. Investors remain in a wait-and-see mode for additional trading trends. 

The Dollar Index is trading flat while currently testing the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 52, suggesting the index might extend its losses after breakout since the RSI retreated from overbought territory. 

Resistance level: 101.80, 102.35

Support level: 100.55, 99.70

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XAU/USD, H4

The escalation of Israeli airstrikes in Lebanon, resulting in over 492 deaths, triggered risk-off sentiment, prompting a sharp rebound in gold prices. The military conflict between Israel and Hezbollah continues, with thousands of families displaced and Hezbollah launching over 200 rockets into northern Israel.

Gold prices are trading flat while currently testing the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 58, suggesting the commodity might extend its losses since the RSI retreated sharply from overbought territory. 

Resistance level: 2635.00, 2660.00

Support level: 2615.00, 2600.00

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GBP/USD，H4

The Pound Sterling continues to show resilience as one of the strongest currencies in the market, despite weaker-than-expected UK PMI readings. The disappointing data suggested a potential slowdown in the U.K.’s economic growth, which initially caused a slight dip in the GBP/USD pair. However, this decline was short-lived, as the U.S. dollar eased in strength later in the session. This recovery in the Pound’s strength allowed the pair to spike back to recent high levels, reinforcing the bullish sentiment around the currency. 

The GBP/USD pair remains trading with extremely strong bullish momentum and is awaiting a further catalyst to break above its next resistance level at 1.3360. The RSI is hovering close to the overbought zone, while the MACD continues to edge higher, suggesting the pair remains trading with strong bullish momentum. 

Resistance level:  1.3360, 1.3440

Support level:1.3280, 1.3140

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EUR/USD，H4

The EUR/USD pair has eased from its recent bullish run and is now forming a head-and-shoulders price pattern, indicating a potential trend reversal. The euro has been weighed down by poor PMI readings, which came in below the 50 mark, suggesting that the eurozone economy is in contraction. This weakening economic outlook is negatively impacting the euro’s strength. Additionally, the continuous release of weak economic indicators from the eurozone, coupled with the dovish stance from the ECB, is likely to further pressure the pair, potentially driving it lower in the near term. 

EUR/USD is forming a head-and-shoulders price pattern, and a lower-high price pattern suggests a trend reversal signal for the pair. The RSI is declining toward the oversold zone, while the MACD is edging lower, suggesting the bullish momentum is vanishing. 

Resistance level: 1.1130, 1.1223

Support level: 1.1020, 1.0920

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S&P 500, H4

Despite Fed rate cuts, the US equity market remains resilient, with the S&P 500 hitting record highs. However, risks linger ahead of crucial economic reports and further Fed statements. The Fed’s 50 basis point cut last week could mark the start of an easing cycle that may lower rates by up to 125 bps by year-end, though the overall gains in equity markets have been tempered by the Fed’s cautious medium- to long-term outlook.

S&P 500 is trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 68, suggesting the index might experience technical correction since the RSI retreated sharply from overbought territory. 

Resistance level: 5790.00, 5900.00

Support level: 5650.00, 5505.00

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AUD/USD, H4

The AUD/USD pair is holding firm above the previous fair-value gap and is attempting to break above its highest level in 2024, which was recorded in January, signalling a bullish outlook for the pair. Traders are closely monitoring the upcoming RBA interest rate decision, with expectations that the Reserve Bank of Australia will keep rates unchanged, a move that could further bolster the Aussie dollar. Meanwhile, the dovish tone from Fed members continues to weigh on the U.S. dollar, providing additional upward momentum for the pair as it trades near its yearly highs. 

The pair is attempting to break above its next resistance level, suggesting a bullish bias. The RSI has been hovering at the above 50 level for weeks, and the MACD continues to edge higher, suggesting the pair remains trading with bullish momentum. 

Resistance level: 0.6920, 0.6990

Support level: 0.6780, 0.6730

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EUR/JPY, H4

The EUR/JPY pair declined by over 1% in the last session, driven by weak eurozone economic data that weighed on the euro’s strength. Additionally, the Japanese yen gained momentum, adding further downward pressure on the pair. If the pair fails to hold support at the 159.45 level, it could signal a potential bearish outlook for the pair, with further downside expected if market sentiment continues to favour the yen over the euro.

The pair has dropped drastically by more than 1% in the last session. However, the pair is yet to form a lower-low, suggesting the pair remain trading within its uptrend trajectory. The RSI has dropped out from the overbought zone while the MACD has a deadly cross on the above, suggesting the bullish momentum has eased. 

Resistance level: 161.00, 162.95

Support level: 157.60, 155.00

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CL OIL, H4

Rising tensions in the Middle East contributed to higher oil prices. In the US, oil producers evacuated staff from Gulf of Mexico platforms as a second major hurricane approached. However, gains were limited by a weak economic outlook, including poor eurozone business activity and concerns over Chinese fuel demand.

Oil prices are trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 50, suggesting the commodity might extend its gains since the RSI rebounded sharply from oversold territory. 

Resistance level: 71.95, 74.15

Support level: 70.40, 68.60

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