US Dollar Index

The dollar rose despite the Fed's Kashkari confirming further rate cuts. The market was surprised by China's comments that the bond stimulus package could reach 6 trillion yuan. The dollar index broke through 103.00 and is testing a solid resistance level upwards. Yesterday, due to Columbus Day in the United States, although the stock market was open, the bond market was closed. But this may still lead to thin liquidity. The most important event this week may be the ECB interest rate decision on Thursday. The dollar is still slightly higher at the beginning of this week after a strong rebound last week, with interest rate differentials becoming the main driver. The question this week will be whether the rise in US Treasury rates is a bit too much. The US Consumer Price Index (CPI) in September rose only slightly compared to the previous month. This contradicts what several Fed officials said this week that US interest rates will fall as the Fed cuts further. The economic calendar faces the last piece of the puzzle last week. Like the US CPI released on Thursday, the US Producer Price Index (PPI) released in September was already an optimistic surprise.

The rapid rise in the US Dollar Index from the low of 100.16 hit earlier this month to the high of 103.18 last week means that the psychological 103.00 - 103.18 is the first resistance level to be tackled upwards. The first upward push of the US Dollar Index from the September lows may face resistance around the 103 level, so a pullback is not surprising. So, if the index breaks through the above resistance area, and further upwards, the chart identifies the 200-day 103.77 level as the first resistance level of the week. Once above there, the key 104.00 round number level is in play. On the downside, 102.62 (38.2% Fibonacci rebound from 106.61 to 100.16) is the first line of defense, and the area formed by the 102.32 level (9-day moving average) and the key 102.00 (market psychological level) is enough to stop any bearish pressure and trigger a rebound. If this level does not work, I believe the index's fall to the 55-day moving average level of 101.88 can also serve as support.

Today, consider shorting the US dollar index near 103.30, stop loss: 103.40, target: 103.00 102.90

WTI crude oil

Crude oil started the week on a bad note, falling further below $72.00, a drop of more than 4%. Traders believe that OPEC has lowered its growth forecast for the third time. Although the market is worried that further expansion of the Middle East war may disrupt oil transportation in the Middle East, China's disappointing stimulus policy and the plan of OPEC+ producers to restore oil production in the coming months have put the crude oil market at risk of a sharp correction. Due to weak global demand and strong supply growth, there will be a surplus in early 2025, and crude oil prices are likely to be significantly lower than current levels in 2025. The current OPEC+ production cut mechanism is characterized by a serious overproduction by member countries, and extending the mechanism does not seem to be enough to keep the market balanced next year. In the absence of the current war premium, the market will most likely need to see OPEC+ comply with its production quota and further delay its exit from the production cut mechanism to prevent oil prices from falling into the $50-60/bbl range. On the other hand, if the situation in the Middle East continues to deteriorate, oil shortages may soon appear and prices may reach triple digits for a long time.

From the daily chart, oil prices fell after hitting the 200-day moving average of $77.17, and the 14-day relative strength index (RSI) of the technical indicator has also turned lower, and the rise in oil prices is expected to slow down slightly. The current support level is estimated at $71.50 on the 21-day moving average, and the next level reference price can pay attention to $70.00 {market psychological level}. The upper resistance is estimated at $75.56 at the 100-day moving average and $77.17 at the 200-day moving average, with an extended target of $80.00 at the psychological level.

Today, consider going long on crude oil around 71.10, stop loss: 71.00; target: 72.50; 72.70

Spot gold

After rising more than 1% on Friday, gold prices struggled to maintain bullish momentum on Monday. Although escalating geopolitical tensions helped gold prices limit losses, broad-based strength in the U.S. dollar continued to limit upside. Gold prices continued their previous gains in Asia on Monday after a solid rebound over the weekend. Rising geopolitical tensions between Israel and Iran and in the region continue to worry investors, and a rise in the U.S. dollar triggered a pullback in gold prices. However, the downside for gold prices appears to be cushioned by the increased probability of a 25 basis point rate cut by the US Federal Reserve (Fed) at its policy meeting on November 6-7. Market prices currently price in about an 86% probability of such a move next month. The progress of the deflationary trend in the US and recent dovish comments from Fed policymakers continue to suggest that the low interest rate regime is here to stay, keeping gold buyers alive. Looking ahead, broader market sentiment and US dollar dynamics will influence gold price action amid scarce holiday conditions as US traders celebrate Columbus Day. However, thin liquidity may exaggerate gold price action.

On Friday, gold prices made a strong move above the key 21-day moving average, which is currently located at $2,631.20. Currently, the 10-day {2648.60}, and 55-day {2643} of gold price form a "golden cross" bullish pattern, and the 14-day relative strength index (RSI) of my technical indicator sticks above the midline {latest report 64.70}, indicating that any decline in gold price may be a good buying opportunity in the short term. Therefore, gold price remains at a higher level. That is to say, if buyers regain control of gold price, the next bullish target for gold price is to look at the $2,672-2,673 area, followed by the $2,685-2,686 area or the historical high reached last week. On the downside, the recent support is at the 55-day moving average of $2,643.10, and a break below it will test the three-week market psychological low near $2,600. If the latter is continuously broken, the decline may extend to the low of $2,585 on September 20.

Consider going long on gold today before 2,645.00, stop loss: 2,640.00; target: 2,665.00; 2,670.00

AUD/USD

The continued rise of the US dollar and growing doubts about China's stimulus measures have put pressure on the Australian dollar and caused the AUD/USD pair to fall back to around 0.6700 after a rather negative start to the week. The AUD/USD pair attracted some selling in early Asian trading on Monday, falling to around 0.6730. The stronger US dollar and China's continued deflationary pressure put some selling pressure on the AUD/USD pair. Data released by China's National Bureau of Statistics on Sunday showed that the national consumer price index (CPI) rose by 0.4% month-on-month in September, compared with 0.6% in August. The figure was 0.6% lower than the expected value. Meanwhile, the producer price index (PPI) fell by 2.8% month-on-month in September. On the other hand, the US Producer Price Index data reinforced expectations of a 25 basis point rate cut by the Federal Reserve (Fed) in November, which could cap the upside for the dollar. Escalating geopolitical tensions in the Middle East could boost safe-haven flows, strengthening the dollar.

Daily chart technical analysis shows that the AUD/USD pair is trading around 0.6740 on Monday. The AUD pair is testing the upper line of the descending channel. A clear break above this level would indicate a potential shift in momentum from bearish to bullish. However, the 14-day relative strength index (RSI) of the technical indicator analysis is below the 50 level {latest at 44.44) indicating that the momentum of the bears is still active. On the resistance side, the AUD/USD pair could test the 10-day moving average at 0.6785, followed by the psychological level of 0.6800. On the downside, AUD/USD could drop below 0.6715 (38.2% Fibonacci retracement), and 0.6716 (the second trendline extending upward from the August low of 0.6348), and AUD/USD could continue to fall to 0.6645 (50.0% Fibonacci retracement).

Consider going long AUD before 0.6710 today, stop loss: 0.6700; target: 0.6750; 0.6760.

GBP/USD

GBP/USD fell slightly around 1.3050, struggling to build on Friday's small gains. The continued strength of the US dollar due to global geopolitical risks and economic concerns in China did not allow the currency pair to gain traction. GBP/USD fell modestly to around 1.3060 during the European morning session on Monday. Safe-haven flows on rising geopolitical risks supported the dollar, dragging GBP/USD lower. Investors will be keeping a close eye on UK employment data due on Tuesday, with lower expectations for another 50bps rate cut by the Federal Reserve in November likely to boost USD/GBP. On the pound front, dovish comments from Bank of England Governor Andrew Bailey, who said the BoE could become a bit more aggressive in cutting rates, weighed on the pound. The BoE's Monetary Policy Committee (MPC) will meet on November 7 to announce its interest rate decision. Ahead of key UK events, UK employment data on Tuesday will be closely watched and could provide some hints on labor market conditions and the outlook for UK interest rates.

On the daily chart, GBP/USD remained volatile above the 1.3000 psychological mark yesterday, but there are initial signs on the short-term chart that firmer demand for the pound has emerged on the break below 1.3050, with the spot developing - as of today - a consolidation signal within the 1.3000 - 1.3140 range on the daily chart. GBP/USD's decline may stabilize. The first resistance is at 1.3107 {50-day moving average}, which needs to be broken to signal short-term strength towards 1.3140 (38.2% Fibonacci retracement of 1.2665 to 1.3434). On the downside, as the technical indicator 14-day relative strength index (RSI) is still well below the 50 level, currently around 41.00, there may be more room for downside. If the selling of GBP intensifies, 1.3000 (market psychological level), and 1.3002 (September 11 low) will become the next key support levels for buyers. Further down, the 100-day moving average of $1.2944, and the 1.2958 (61.8% Fibonacci retracement of 1.2665 to 1.3434) area will face a test.

Today, it is recommended to go long on GBP before 1.3045, stop loss: 1.3035, target: 1.3095, 1.3100

USD/JPY

The yen remains on the defensive against the dollar amid uncertainty over the Bank of Japan rate hike. The dollar remains elevated near a two-month high of 150 on bets that the Federal Reserve will adopt a less aggressive easing policy. The divergence in policy expectations between the Bank of Japan and the Federal Reserve could limit any meaningful gains in the USD/JPY pair. The yen remains on the defensive against the dollar in Asian trading on Monday, hovering near its lowest level since early August. Japanese Prime Minister Shigeru Ishiba's speech earlier this month that the Japanese economy is not ready for further rate hikes has raised doubts among investors about the Bank of Japan's rate hike plans. This, coupled with the continued bullish bias around the stock market, has continued to weaken demand for the safe-haven yen. On the other hand, the dollar is trading near a two-month high on expectations of more easing by the Federal Reserve, boosting the USD/JPY pair. However, the Fed is still expected to cut borrowing costs by 25 basis points in November. In contrast, the Bank of Japan is more likely to stick to its rate hike cycle, which could affect the yen against the dollar amid relatively thin trading volumes amid the holiday season in Japan and the United States.

USD/JPY moved higher last week to above 149.00 as US Treasury yields continued to move higher, especially the 10-year Treasury yield which rose nearly 4 basis points to 4.104%. USD/JPY remains neutral, but on the upper side of the trading range, in the 148.00-150.00 area, as traders interpret the next moves of the Federal Reserve and the Bank of Japan. From a momentum perspective, bulls still dominate, but the 14-day relative strength index (RSI) is now around 64 and has not yet reached a new peak, which suggests that the path of least resistance for the USD/JPY pair is to the upside. If USD/JPY breaks above the 149.50, and 149.80 (August-October cluster highs) area, it will immediately test the psychological 150.00 mark. Once this level is broken, the next resistance will be the confluence of the 200-day and 100-day SMAs at 151.22, and 151.14. On the downside, if the pair falls below 148.86 (75-day SMA), a correction to the 148.13 (38.2% Fibonacci rebound from 161.95 to 139.58) area will be in the cards. The next level will point to the October 8 range low of 147.35.

Today's recommendation is to short before 150.00, stop loss: 150.20; target: 149.20, 149.00

EUR/USD

On Monday, further weakness hurt the single currency and the broad risk-related sector, prompting EUR/USD to briefly break the 1.0900 support level and hit a multi-week low ahead of key data releases and the ECB meeting. EUR/USD extended losses to around 1.0920 in early Asian trading on Monday. Risk aversion triggered by escalating geopolitical tensions in the Middle East and regional conflicts has brought some selling pressure to risk currencies such as the euro. After the release of the US Producer Price Index (PPI) on Friday, traders expect the Federal Reserve to cut interest rates by 25 basis points in November. The market is currently pricing in a probability of a 25 basis point rate cut by the Federal Reserve at nearly 86.8%, up from 83.3% before the release of the PPI data. Across the ocean, the eurozone is under some pressure as the European Central Bank is expected to further cut interest rates at the remaining two monetary policy meetings this year. The ECB's dovish stance has been exacerbated by a faster-than-expected decline in inflationary pressures in the eurozone and a "fragile" economic recovery.

From the 4-hour chart, EUR/USD is trading below 1.0920 and below the 34-hour simple moving average (1.0955) and the 55-hour simple moving average (1.0990). The pair even tested the 1.0900 area. EUR/USD is currently consolidating its decline. On the upside, bears are likely to remain active around 1.0945 -55 levels. The first major resistance is likely to be near 1.0990, and 1.1000 {round number} levels. A close above 1.1000 level could set the tone for another up move. The next major resistance could be around 1.1069 (23.6% Fibonacci retracement of 1.0601 to 1.1214) area. On the downside, short-term support is seen near 1.0900 psychological level, which also marks the 10th October low. The next key support is seen at 1.0850 level. Any more losses could take the pair towards 1.0800 (round number) level.

Today it is recommended to go long on Euro before 1.0890, stop loss: 1.0875, target: 1.0950, 1.0960.

Disclaimer:

The information contained herein (1) is proprietary to BCR and/or its content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and, (4) does not constitute advice or a recommendation by BCR or its content providers in respect of the investment in financial instruments. Neither BCR or its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.