US Dollar Index

As the US heads to the polls on Tuesday, the US dollar price action is starting to ease. Traders are bracing for volatility as it could take days or weeks to know who the next US president will be if the results are very tight. The US dollar index is trading below 104.00. The dollar slipped and weakened across the board after the opening, hitting a near 3-week low of 103.37. The final poll released by ABC News and Ipsos earlier this week showed Vice President Kamala Harris leading former President Donald Trump with 49% approval rating to 46%. Another factor in the dollar's weakness came from the New York Times, which released data indicating that Harris was ahead in five of the seven swing states that will decide the outcome of the US presidential election. Meanwhile, there is also a very interesting factor to consider on the US economic calendar at the beginning of this week: the third quarter Senior Loan Officer Opinion Survey (SLOOS). The report will shed more light on the US lending to customers and the supply and demand relationship. Loan originations are a good leading indicator that can outline the economic developments in the coming weeks and months.

The US Dollar Index is heading into a tough period of volatility this week, so precautions need to be taken when trading the greenback. Expect large swings, mainly driven by news, possibly even directionless, and rapid in the days after the election. Consider larger levels - such as 102.36 (lower Bollinger Band on the daily chart) on the downside and 105.21 (July 9 high) on the upside - for possible outcomes. The US Dollar Index gave up two key levels at the beginning of the week and needs to first re-control 103.11 (100-day moving average), and 103.00 (market psychological level), and on the upside, consider 103.84 (200-day moving average), and 104.00 (round number), 104.35 (early week high) levels.

Consider shorting the US Dollar Index near 103.56 today, stop loss: 103.70, target: 103.20, 103.10

WTI Crude Oil

Crude oil prices rose slightly for the second consecutive day, while the US market is preparing for the US presidential election. There is also the possibility of supply reduction in the US Gulf region as Tropical Storm Rafael is moving towards oil drilling platforms, which may lead to a 1.7 million barrels of oil production cut per day. Meanwhile, Saudi Aramco, the largest state-owned oil producer in Saudi Arabia, reported a 15% drop in quarterly profits, which increased the possibility that Saudi Arabia will urge OPEC+ to take more action in limiting supply. After rising more than 3% at the beginning of the week, WTI oil prices are currently trading near $71.00, which may be attributed to the Organization of Petroleum Exporting Countries (OPEC+) alliance delaying the planned interest rate hike in December. Regarding the US presidential election, polls show that Trump and Harris are almost tied in support. The final winner may not be known until a few days after Tuesday's vote. The NPC Standing Committee will meet in China from November 4 to 8 and is expected to approve more stimulus measures to support the slowing economy. Any new measures introduced by China could have a positive impact on oil prices as China is the world's largest oil importer.

Starting this week, crude oil prices are rising. While this looks like a very good thing. Whether this is enough to bring the oil market back into balance between supply and demand remains to be seen. On the upside, $72.25 (50.0% Fibonacci retracement of 77.93 to 66.57) remains the first level to bounce back and needs to see a daily close. Next, the important technical level of $73.59 (61.8% Fibonacci retracement) and the 89-day moving average (73.51) are the next support areas. While the 200-day moving average priced at $76.85 could be the next big hurdle going forward, although it could be tested in case tensions in the Middle East escalate again. On the downside, traders need to watch the $70.00 (psychological level), and $69.78 (10-day moving average) support levels, breaking which will re-focus on the lower $68.15 (October 18 low), and $68.08 (last Thursday low) levels.

Consider going long on crude oil around 71.70 today, stop loss: 71.50; target: 72.90; 72.95

Spot gold

Gold attracted dip buyers after hitting a one-week low on Tuesday, but remains below $2,750. The benchmark 10-year Treasury yield remained in positive territory above 4.3% as the market focused on the U.S. election exit polls, limiting the upside for gold prices. At the beginning of the week, gold prices once hit a five-day low around $2,730, lacking a clear direction. Traders remain wary of betting on gold prices again on the U.S. presidential election day. Negative market sentiment has made gold trading lifeless at the beginning of the week. Gold closed at around $2,735 on Friday as investors preferred high-yielding assets. Bets on who will become the 47th US President set the tone. Market participants assess whether the Federal Reserve will be able to continue easing monetary policy or whether the central bank will have to fight against the increasing pressure on gold prices again. In addition to the US election, there will be monetary policy announcements from central banks this week. The Reserve Bank of Australia will announce its decision on Tuesday, while the Bank of England and the Federal Reserve will announce their decisions on Thursday. Entering the US session, the US dollar gradually strengthened amidst the rising risk aversion, but gold remained range-bound.

The daily chart shows that the bullish action of the technical indicator 14-day relative strength index (RSI) has eased and turned slightly lower, but it is still well above the midline, suggesting that bears have limited potential. On the contrary, the risk is still skewed to the upside. Gold prices continue to develop above the bullish moving average, with the 20-day moving average providing support near $2,711.00. The 100 and 200 SMAs are accelerating upwards and are far below the short-term SMAs, reflecting the strength of the buyers. However, if the gold price breaks above $2,746 (23.6% Fibonacci retracement level from $2603.50 to $2790), and $2,7480 (5-day SMA), the breakout will point to $2,762.30 (last Friday's high), and even to the previous high of $2,790, and $2,800 (round mark), levels.

Consider going long on gold before 2,740.00 today, stop loss: 2,735.00; target: 2,755.00; 2,758.00

AUD/USD

AUD/USD added to the positive start of the week and continued its bullish performance, surpassing the 0.6600 mark and testing the key 200-day moving average. The Reserve Bank of Australia kept interest rates unchanged and maintained a hawkish outlook. In the press conference after the meeting, the Governor of the Reserve Bank of Australia, Bullock, reiterated that there are still upside risks to inflation and that interest rate policy needs to remain restrictive at present. This therefore suggests that the path of least resistance for AUD/USD is still to the upside. At the beginning of the week, selling pressure returned to the US dollar. The decline of the US dollar in the absence of clear direction across the US Treasury yield line and the market's steady and cautious attitude before the US election on November 5th caused the AUD/USD to quickly end the correction on Friday and further rebound to stand above the multi-day high of 0.6600, approaching the key 200-day moving average of 0.6628. A clear breakout above this area is expected to turn the outlook of the currency pair to a bullish bias, paving the way for further gains in the short term.

The continued rise in the AUD/USD may continue after the Reserve Bank of Australia announced that it would keep interest rates unchanged while acknowledging the upside risks of inflation. Therefore, it is expected that the cautious approach of the Reserve Bank of Australia will push the AUD/USD back to 0.6700. The key technical factors in the AUD/USD trading are related to the policy outcome. The AUD/USD has rebounded and tested the 200-day simple moving average of 0.6728. The 14-day relative strength index (RSI), a technical indicator, rebounded sharply, but it is still below the 50 level (latest at 40), which makes sellers hopeful. Buyers need to hold above the 200-day moving average at 0.6628 for a sustained recovery. The next overhead barrier will be at 0.6645 (50.0% Fibonacci retracement of 0.6348 to 0.6942), a break of which will directly see the 0.6700 threshold and the 50-day moving average level at 0.6729. On the other hand, if the pair falls again, it may test the two-month low of 0.6537, and the round-number mark level below 0.6500 will provide some respite for buyers. Further down, the low of 0.6472 on August 6 will come into play.

Today, consider going long on AUD before 0.6620, stop loss: 0.6610; target: 0.6660; 0.6670.

GBP/USD

Further optimism surrounding the British pound and the broad risk complex provided additional support to the GBP/USD pair and pushed it to a new multi-day high near 1.3039 as investors continue to closely monitor developments in the US election. GBP/USD was flat near 1.2950 in early Asian trading on Tuesday. Traders will be keeping a close eye on the outcome of the US presidential election. On Thursday, the focus will shift to the monetary policy decisions of the Bank of England and the Federal Reserve. Meanwhile, the dollar index, which tracks the value of the greenback against six major currencies, briefly fell below the 104.00 support level to hit a two-week low near 103.37. The dollar's weakness was linked to a Des Moines Register and Mediacom poll that showed Harris leading Trump by 47-44% in Iowa. In the pound, economists polled by Reuters predict that the Bank of England will cut its benchmark interest rate by 25 basis points to 4.75% in its interest rate decision on Thursday. However, in the longer term, Bank of England Governor Andrew Bailey is unlikely to cut interest rates again before the end of the year.

The 14-hour relative strength index (RSI) indicator on the 4-hour chart is slightly above 50 and is currently around 51.30, but GBP/USD is struggling to stay above the 100-hour simple moving average of 1.2990, and 1.3000 (market psychological level), reflecting the hesitation of buyers. If the pair breaks above the 1.2990-1.3000 resistance area this week, 1.3049 (50.0% Fibonacci retracement of 1.2665 to 1.3434) may be seen as the next resistance before 1.3070 (October 18 peak). Once GBP/USD falls below the 1.2900 round number, the next support will be seen at 1.2844 (October 31 low). 1.2800 becomes the short-term key support level.

Today, we recommend going long on GBP before 1.3020, stop loss: 1.3005, target: 1.3060, 1.3070

USD/JPY

USD/JPY is oscillating around 152.00 as traders are uncertain about the outcome of the U.S. presidential election. The Federal Reserve is expected to cut interest rates by 25 basis points on Thursday. Investors await the minutes of the Bank of Japan meeting for new clues on when the central bank will raise interest rates again. The yen fell against the dollar during the Asian session on Tuesday, falling from a one-week high hit the previous day. However, the yen's downside appears limited as traders may avoid making aggressive directional bets amid the uncertainty of the U.S. presidential election. In addition, bets that the Bank of Japan may raise interest rates at its next policy meeting in December may also provide some support for the yen. Meanwhile, the unwinding of "Trump trades" and expectations that the Federal Reserve will cut interest rates later this week have led to a further decline in U.S. Treasury yields, resulting in a narrowing of the U.S.-Japan interest rate differential. This puts dollar bulls on the defensive and should boost the yen. In addition, weakening risk appetite will also be positive for the yen, helping to curb the obvious upward trend of USD/JPY.

From a technical perspective, the 152.00 round number seems to have been broken by the bears at present. If there is some follow-up selling, it may drag USD/JPY further below the 151.40 mark (100-day moving average), thus testing 151.00 (market psychological mark), and breaking through this point will test 150.50 (October 22 low) and 150.00 (market psychological mark). It will open up space for further declines. On the other hand, if it breaks through the 34-day moving average near 152.75, it will further extend the rise to near 153.00. The subsequent upward movement may pull USD/JPY to 153.70 (a trend line extending upward from the low of 141.65 on September 30), and the recent high of 153.88. With oscillators on the daily chart remaining in positive territory, USD/JPY could climb to the next relevant level around the 154.60-154.70 area before seeking the 155.00 psychological level.

Today, we recommend shorting the USD until 151.85, stop loss: 152.10; target: 151.00, 150.80

EUR/USD

The EUR/USD pair built on Monday's marginal gains, pushing further above 1.0900 amid a persistent USD selling bias ahead of the FOMC event and the US election results. EUR/USD strengthened modestly to around 1.0900 in early Asian trading on Tuesday. The USD fell as traders prepared for the US presidential election results and a possible rate cut by the Federal Reserve, with uncertainty weighing on the greenback and providing some support to the pair. A clean Republican victory would likely send the dollar higher, but the magnitude would likely be less than a Harris win would. If Trump wins but Democrats gain seats (in the US House of Representatives), the dollar might not rise at all, providing some support to the euro. In addition, the dollar was also dragged lower by rising expectations that the Federal Reserve will cut interest rates at its November meeting. The Fed is widely expected to cut interest rates by 25 basis points on Thursday, as per usual, rather than the larger 50 basis point cut in its last meeting. In the Eurozone, recent economic data from the Eurozone has reduced expectations of a larger rate cut by the ECB in December, which has helped strengthen the euro.

Technically, the EUR/USD pair retains a bearish vibe on the daily chart as the major currency pair holds below the key 200-day moving average. Moreover, the downside momentum is also supported by the 14-day relative strength index (RSI) which is below the mid-line near 47.50, suggesting a path of least resistance to the downside. The psychological 1.0800 level is an initial support level for the EUR/USD pair. Further down, the next level of contention is found at the 1.0770 – 1.0760 area, which is the low of October 24 and also the lower Bollinger Band. A break above the above level could see a drop to 1.0666, the low of June 26. On the upside, the first upside hurdle for the major currency pair is seen near 1.0931, which is the 100-day moving average. Another upside resistance to watch is 1.0951, which is the upper Bollinger Band. The key resistance level is at the psychological level of 1.1000.

Today, it is recommended to go long on the euro before 1.0910, stop loss: 1.0900, target: 1.0960, 1.0970.

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