US Dollar Index

The US dollar index, fell slightly over the weekend as profit-taking set in after a strong rally earlier this month. But overall, the dollar index continued to move higher, posting a strong uptrend for the third week in a row, having so far rebounded more than 61.8% to 103.85 from a larger decline that began at a high of 106.13 on June 26 to a low of 100.16 in late September. The dollar's pullback comes ahead of a series of speeches by Federal Reserve officials on Friday that could shed more light on the central bank's monetary policy stance. Three Fed members, Raphael Bostic, Neel Kashkari and Christopher Waller, are scheduled to speak. Investors will be looking for clues on the Fed's evolving monetary policy, although markets generally expect two 25 basis point rate cuts in November and December. Swap futures suggest that markets will see two more rate cuts from the Fed in the rest of 2024. The US 10-year benchmark rate is steady around 4.10%. Additionally, U.S. housing data released Friday morning showed a decline in building permits and housing starts, suggesting a possible slowdown in the housing market. Despite a period of deceleration, the economy has shown signs of strength, and the Fed said its monetary policy will be guided by evolving economic data.

The dollar continued to rise against a basket of major currencies last week, with the U.S. dollar index posting a strong uptrend for the third consecutive week, having so far rebounded more than 61.8% to 103.85 from the larger decline from the June 26 high of 106.13 to the late September low of 100.16. This week's breakout of key barriers consisting of 103.14 (50.0% Fibonacci rebound from 106.13 to 100.16); 103.15 (9-day moving average); and 103.19 (100-day moving average) generated a strong bullish signal. The bull market is approaching the next key psychological level of 104.00, which is also the 300-day moving average. If it breaks, it will challenge 104.72 (76.4% Fibonacci rebound level). However, as the 14-day relative strength index (RSI) on the daily chart is at 67.00, close to overbought conditions, it may face headwinds. Ideally, the 103.00 - 103.19 area should control limited declines to provide a better level to re-enter the bull market. If it unfortunately falls below the above support area, it is not ruled out that the US dollar index will continue to challenge 102.44 (38.2% Fibonacci rebound level) downwards, or even further to 102.00 (market psychological level).

Consider shorting the US dollar index near 103.60 today, stop loss: 103.70, target: 103.25 102.20

WTI crude oil

WTI crude oil prices fell to a near 3-week low of below $69.00 before the end of last week, with a low of $68.82. According to Bloomberg, US crude oil production is as high as 13.5 million barrels per day. The US dollar index retreated before breaking the 104.00 mark this week. Last week, OPEC and the International Energy Agency lowered their oil demand forecasts again. OPEC now expects an increase of 1.9 million barrels per day this year and 1.7 million barrels per day next year. This is 100,000 barrels per day less than the previous forecast. However, OPEC is still much more optimistic than the International Energy Agency. The downward revision this year is due to China, where OPEC expects demand to increase by 580,000 barrels per day, while the International Energy Agency expects only 150,000 barrels per day. The IEA also expects China's demand to grow only slightly next year, by 220,000 barrels per day. The market sees the IEA's lower forecast as more realistic, based on China's crude oil import and processing data released last week. In September, crude oil imports were lower than a year ago for the fifth consecutive month, while crude oil processing was lower than the same period last year for the sixth consecutive month. According to OPEC's demand forecast, the oil market will be severely undersupplied this year and next, even if OPEC+'s voluntary production cuts are gradually withdrawn as planned from December. In contrast, the oil market will face a severe oversupply next year, according to the IEA's forecast.

Crude oil prices struggled to hold the $70.00 mark last week, but it does not seem to be an easy task. First, WTI crude oil seems to be moving downward after breaking the support levels of $71.41 (20-day moving average) and $71.34 (50.0% Fibonacci retracement). It fell below $70.00 (market psychological mark) to a near 3-week low of $68.82. The 14-day relative strength index (RSI) has fallen below 50 and is currently close to 42.20, which means that the market sentiment is bearish. For the current bearish outlook to continue, a clear breakout of the $70.00 (market psychological level) and the $68.90 and $68.82 (double bottoms last Thursday/Friday) support levels is needed, and the next possible target for the bears is the support line of 68.05 (lower line of the daily horizontal channel). The next eye is on the lower level, which is $66.65 (lower line of the downward channel). In addition, for the upside, the previously mentioned key level of $71.34-71.47 has now become resistance. The next rebound target can focus on $73.50 (the central axis of the daily horizontal channel), followed by $75.20 (100-day moving average).

Consider going long on crude oil near 68.55 today, stop loss: 68.30; target: 70.00; 70.20

Spot gold

Before the weekend, expectations of rate cuts from major central banks and an accommodative monetary policy environment saw gold prices climb above the $2,700 mark to $2,721.60, setting another all-time high. In addition, continued geopolitical risks from the ongoing conflict in the Middle East, coupled with uncertainty about the US presidential election, appear to be spurring demand for safe-haven precious metals. These supportive factors have more than offset the recent rise in the US dollar to its highest level since August, with the view that the Federal Reserve will continue to cut interest rates modestly gaining traction. A stronger dollar tends to weigh on demand for dollar-denominated commodities, including gold prices, which are still on track to post strong weekly gains and appear poised to rise further. In addition to this, market sentiment improved as mixed Chinese growth and activity data coupled with a statement from the People's Bank of China rekindled hopes for stimulus. The renewed optimism in the market also weakened the appeal of the US dollar as a safe-haven currency. As a result, gold prices received a double boost, firstly due to the broad correction of the US dollar and secondly due to the expectation of further interest rate cuts in China. Looking ahead, whether gold prices can rise further still needs to pay attention to the speeches of several Fed policymakers and the tensions in the Middle East. The weekend's fund flows may also play a certain role in the volatility of gold prices.

Gold prices tested $2,700 for the first time in late last week and broke through the latter before the weekend, continuing the upward momentum of breaking through the key previous historical high resistance of $2,685.80 to a new historical high of $2,721.60. At present, the 14-week relative strength index (RSI), a technical indicator of the weekly chart, has returned to the overbought area near the upper 80 level, indicating that gold prices still have some room to rise before the correction begins. If gold buyers can hold the psychological round number of $2,700, then the test of the psychological level of $2,750 and $2,790 (upper line of the weekly upward channel) will be inevitable. And $2,800 may be the ultimate target level this month. On the other hand, since the 14-week relative strength index (RSI) on the weekly chart has risen to a 6-month high above 80, it is not ruled out that the gold price will start to consolidate and fall. Now it seems to be able to get suitable support near the previous resistance level of $2,700 (psychological level) and the $2,670 level area. After breaking this level, sellers will face the key weekly upward channel lower line support level of $2,655 and the 7-week moving average of $2,657.40.

Today, you can consider going long on gold before 2,717.00, stop loss: 2,713.00; target: 2,740.00; 2,745.00

AUD/USD

Last week, the Australian government released better-than-expected Australian employment market data for September, which stimulated the AUD/USD to jump from 0.6658, a near one-month low on Wednesday, to above the 0.67 mark before the weekend. Specifically, Australia added 64,100 new jobs in September, significantly higher than the expected 25,000, mainly driven by full-time employment; the unemployment rate remained flat at 4.1%, lower than the expected 4.2%. Despite the further strengthening of the US dollar and the market's continued concerns about China's recent stimulus measures, the Australian dollar remained stable. In addition, the Australian dollar's reversal occurred when copper prices fell significantly and iron ore prices fell slightly, all against the background of the market's continued concerns about the true effect of China's economic stimulus plan. While a potential rate cut from the Federal Reserve could provide some support to AUD/USD later this year, uncertainty over China’s economic outlook and stimulus policies remain a major challenge. On the monetary policy front, the Reserve Bank of Australia kept the cash rate at 4.35% at its September meeting. While acknowledging the risk of inflation, Governor Michelle Bullock signaled that rate hikes will not be on the cards for now.

From a technical perspective last week, AUD/USD briefly broke below 0.6696 (100-day moving average), and 0.6700 (market psychological level), and a failure to close above these areas could be seen as a new trigger by bears. In addition, the 14-day relative strength index (RSI) on the daily chart is now around 43, far from oversold territory. This in turn supports the prospect of AUD/USD extending its recent pullback from the 0.6942 high area, the highest level since February 2023 reached last month. Therefore, AUD/USD could see some follow-through declines below the 0.6660-0.6655 area or above the one-month low set on Wednesday and test support levels such as the 200-day simple moving average near the 0.6627 level, and the 0.6622 low of September 11 last year. A break below the aforementioned lows would pave the way for further depreciation. AUD/USD could then fall below the 0.6600 psychological mark and test the next relevant support near the 0.6574 (61.8% Fibonacci retracement of 0.6348 to 0.6942) area. On the other hand, last week's high near the 0.6750 area seems to be an immediate obstacle. Any subsequent gains are likely to attract new sellers and remain capped around the support area formed by 0.6794 (20-day EMA); 0.6800 (market psychological barrier); and 0.6801 (23.6% Fibonacci retracement). That said, a sustained move above the latter could trigger a short-covering rally and push AUD/USD to 0.6852 (Oct. 4 high).

Consider going long AUD before 0.6690 today, stop loss: 0.6680; target: 0.6740; 0.6750.

GBP/USD

GBP/USD fell for the third consecutive week, testing the near 8-week low of 1.2974 below the 1.3000 round-figure mark for the first time since mid-August, before recovering and re-tracing above 1.30 before the weekend. The market's more dovish view on the Bank of England's monetary policy outlook and the confirmation of a smaller rate cut by the Federal Reserve pushed the US dollar higher, while the British pound fell. Falling inflation rates and weak labor market conditions give the Bank of England reason to accelerate the pace of rate cuts. At the same time, demand for the US dollar continues unabated, putting downward pressure on GBP/USD. Despite several dovish speeches from Fed policymakers and strong US retail sales data, market bets on the Fed's 25 basis point rate cut next month remain unabated, allowing the US dollar to continue to rise on the basis of its recovery. The dollar's rise has recently been sponsored by the market's optimism that Trump will win the 2024 US presidential election. Trump's fiscal and trade policies are seen as inflationary and positive for the US dollar. In addition, the rising geopolitical tensions in the Middle East have also contributed to the bullish momentum of the safe-haven dollar.

GBP/USD continued its decline from the previous week and fell below the key 50-day simple moving average, which was then located at 1.3090. The continued decline has tested the 100-day SMA support near 1.2959 and could have further to fall as the 14-day relative strength index (RSI), a technical indicator, remains firmly below the 50 level and is now near 43. Therefore, any recovery attempt by GBP/USD is likely to be sold off unless it recaptures the 50-day SMA support-turned-resistance, now at 1.3132. The next upside hurdle is located at the 21-day EMA at 1.3187. A sustained break above this level could lead to a meaningful upside move, opening the door for a test of the 1.3204 (50.0% Fibonacci rebound from 1.3434 to 1.2974) mark. If the bullish move gains traction, GBP/USD will then target the 1.3300 round number. On the other hand, a daily close below the 100-day SMA at 1.2959 and 1.2974 (last week’s low) could see the 200-day SMA cap at 1.2796. Before then, the June 12 high of 1.2860 and 1.2870 (lower line of the daily chart’s descending channel) could provide a temporary respite for buyers.

Today’s recommendation to go long GBP before 1.3035, stop loss: 1.3020, target: 1.3085, 1.3100

USD/JPY

USD/JPY faced selling pressure last week near the psychological resistance of 150.00 after testing it twice. The asset fell as the three-week rally in the greenback appears to have stalled, but its outlook remains positive. The dollar index, which tracks the value of the greenback against six major currencies, fell from a 10-week high of 103.90 to around 103.50 before the end of last week. Market sentiment appears to be optimistic, with S&P 500 futures rising sharply in early New York trading. The 10-year Treasury yield plunged to 4.086%. The outlook for the dollar remains firm as investors expect the Federal Reserve to take a dovish path of rate cuts. Traders have already ruled out bets on a big rate cut from the Fed in November as a series of upbeat US data pointed to a resilient economy. In Tokyo, Japan's September CPI print was mixed but still argued for the Bank of Japan's cautious tightening cycle, which could further weaken the yen. Headline CPI inflation was in line with consensus, slowing to 2.5% y/y, compared to 3.0% in August, due to cuts in subsidies for electricity and gas bills. Core (excluding fresh food) fell to 2.4% y/y (consensus: 2.3%), down from 2.8% in August but in line with the Bank of Japan's 2024 forecast of 2.5%. Higher inflationary pressures keep the Bank of Japan on track to raise rates further this year.

USD/JPY briefly broke through the 150 mark last week, hitting its highest level since August, before retreating from its highs to close at 149.50 before the weekend. It has risen 4.6% this month, also the largest monthly gain in a year and a half. From a daily chart perspective, USD/JPY has been trading in a narrow range of 148.00 - 150.00 and moving slowly higher over the past two weeks or so, indicating that the short-term trend remains bullish. Moreover, the 14-day relative strength index (RSI) on the daily chart is currently around 61.60, far from the overbought zone, which suggests that the path of least resistance for the USD/JPY pair is to the upside. Therefore, if the pair reclaims 150.00 (psychological level), and 150.32 (last week's high), the next price target will be 150.70 (50.0% Fibonacci rebound from 161.81 to 139.58), and 150.84 of the 100-day moving average. A decisive breakout would strengthen the short-term positive outlook and pave the way for further gains. The spot price would then aim to reclaim the 200-day moving average near 151.31 and climb further to the next relevant resistance level of 153.32 (61.8% Fibonacci rebound) area. On the downside, once USD/JPY falls below 149.00, the conversion line in the 148.55-148.50 area will become the first line of defense for bulls. It will push USD/JPY below 148.07 (38.2% Fibonacci rebound level), and the 148.00 round number mark area. A break below this level will fall to the previous week's swing low near 147.35-147.30.

Today's recommendation is to short before 149.80, stop loss: 150.00; target: 148.80, 148.70

EUR/USD

In recent weeks, the market's view on the speed and amount of possible interest rate cuts by the Federal Reserve and the European Central Bank has changed significantly. Speculation that the Federal Reserve may take another move of similar size after cutting interest rates by 50 basis points in September was dispelled by a round of data that showed the resilience of the US economy. Instead, there are rumours that the Federal Open Market Committee may only intend to cut interest rates again before the end of the year. In contrast, the market interpreted comments from some ECB officials as indicating that they are now relatively comfortable with the inflation outlook in the eurozone, and instead turned their attention to the need to support growth in the region. As a result, investor speculation has intensified that the ECB could accelerate the pace of easing, or even deploy a more aggressive 50bp rate cut. The resulting downward pressure on EUR/USD has been exacerbated by renewed interest in the dollar-supporting "Trump trade". The market has recently downgraded its forecasts for EUR/USD, and the latest developments support the downside risks for the pair.

EUR/USD is hovering around 1.0850, with technical indicators on the weekly chart suggesting it is on the verge of entering a more sustained bearish trend (latest around 46). EUR/USD is finding sellers around the flattening 9-week SMA (1.0855), while the mildly bullish 100-week SMA offers solid support around 1.0825. Meanwhile, the 200-week SMA (1.1028) is gaining downside traction above the shorter moving averages. Meanwhile, the 14-week relative strength index (RSI) provides a firm bearish downside slope, crossing the midline into negative territory {46.00}, reflecting continued selling interest. Therefore, as for downside support, the first focus is on the 1.0825 (100-day moving average), and 1.0811 (last week's low). Once it falls further below 1.0800 (market psychological level), the next target will be 1.0740 {61.8% Fibonacci retracement level of 1.0448 to 1.1214}, and if it breaks, it will challenge 1.0700 {round number}. As for the upside, although the upward momentum is limited, 1.0900 and 1.0921 (382% Fibonacci retracement level) can provide short-term resistance. A break will re-encounter the market barrier of 1.1000 level.

Today it is recommended to go long on Euro before 1.0850, stop loss: 1.0835, target: 1.0890, 1.0895.

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