US Dollar Index

The US Dollar Index fell 0.28% on Tuesday, closing at 101.70. The decline was driven by a pullback in oil prices and longer-term US Treasury yields, as traders weighed the implications of escalating tensions between Iran and the US—amid the broader context of conflict involving Iran—as well as the sustainability of the massive capital inflows into US artificial intelligence (AI) stocks. Oil prices retreated after hitting a five-month high; market participants kept a close watch on developments such as the meeting between the Iranian president and Pakistan’s Chief of Army Staff, alongside reports of ongoing Houthi attacks on Saudi infrastructure and vessels in the Gulf. Rising oil prices have fueled concerns that inflation may remain elevated for longer. While the US dollar saw a brief surge last week following an acceleration in September consumer price inflation, that momentum was quickly overshadowed by anxieties surrounding the AI ​​sector. Data revealed a counterintuitive trend: despite a slight pullback in equity markets from record highs and heightened tension in the bond market—conditions that would typically trigger a flight to safety into the US dollar—both the dollar and the Japanese yen actually declined. Traders appear to be locking in profits rather than flocking to reserve currencies.

Reports suggesting that both Washington and Tehran had given preliminary approval to a compromise proposal—brokered by Qatar and Pakistan—pushed the US Dollar Index to its lowest level since October 1. Following the initial report, the index slipped from around 101.75 to approximately 101.65; after Israel’s Channel 12 provided additional details on the terms, the index fell further, hovering just above 101.50. It later recovered to near 101.70 after a diplomat involved in the negotiations stated that reports of an imminent agreement were inaccurate. At its low point, the US Dollar Index had retraced roughly one-third of the gains it had accumulated between September 9—when it hit a low near 98.60—and October 14, when it reached a high just under 101.94. The low for this period is also below the pullback level of nearly 101.60 seen on Friday, while the 50-day exponential moving average (EMA) sits just below 101.00—approximately 0.75 points lower. On the upside, resistance levels to watch include the 102.00 psychological mark, the 9-day moving average at 102.08, and subsequently the 102.71 level (the upper Bollinger Band).

For today, one might consider shorting the US Dollar Index at 101.80, with a stop-loss at 101.90 and targets at 101.50 and 101.40.

AUD/USD

The AUD/USD pair has maintained a positive bias for the fourth consecutive trading session. During Wednesday’s Asian session, it held firm above the 0.7000 psychological level, hovering near the monthly high reached the previous day. The Australian dollar continues to draw support from hawkish signals from Reserve Bank of Australia (RBA) officials, keeping expectations for a rate hike alive ahead of the November 3 policy meeting. Notably, RBA Assistant Governor Christopher Kent stated on Monday that there are reasonable signs that both domestic and global neutral interest rates are rising, while Deputy Governor Andrew Hauser warned earlier today that the trimmed-mean inflation figure for the third quarter could come in hotter than anticipated. Furthermore, optimistic third-quarter GDP data from China—showing 4.5% year-on-year growth for the July–September period—has provided a tailwind for the Australian dollar. Meanwhile, the US dollar has extended its recovery from a near three-week low, bolstered by inflation concerns—partly driven by crude oil prices—which reinforce the prospect of further policy tightening by the Federal Reserve. In fact, traders are currently pricing in a greater than 90% probability of a Fed rate hike in December, a factor that is supporting the US dollar and capping gains in the AUD/USD pair.

Having confirmed a breakout from its short-term trading range, the AUD/USD pair is now looking to see if it can push further past the 38.2% Fibonacci retracement level at 0.7024. However, any further upside is likely to encounter resistance near the 100-day simple moving average (SMA) at 0.7034 and the 200-day SMA at 0.7048. Beyond this lies the 50.0% Fibonacci retracement level of the current range at 0.7064. This keeps the short-term bias bearish and suggests that, within the broader corrective structure, the spot price may struggle to reclaim the pivot zone. The Relative Strength Index (RSI, 14) is hovering below the 50 level, while the Average Directional Index (ADX, 14) remains relatively high at around 39—indicating that the downtrend is still in play, though the selling momentum is moderate rather than aggressive. On the downside, initial support is found at the 23.6% Fibonacci retracement level of 0.6974, followed by a structural floor near 0.6918 (the lower Bollinger Band), where buyers are expected to defend the broader range.

Consider going long on the AUD at 0.7018 today; stop-loss: 0.7010; targets: 0.7040, 0.7050.

GBP/USD

The British pound climbed to $1.34—a one-month high—after stronger-than-expected UK labor market data fueled expectations that the Bank of England (BoE) will raise interest rates next month. For the three months ending in August, the unemployment rate unexpectedly fell to 4.7%, its lowest level since July 2025, while regular wage growth accelerated to 3.7%—slightly above the 3.6% market forecast. A series of data releases from the previous week also beat expectations, showing that the UK economy grew by 0.1% in August and the trade deficit narrowed unexpectedly, further signaling that economic activity is more resilient than anticipated. Investors now expect the Bank of England to hike the bank rate to 4% at its meeting on November 5. To date, this central bank remains the only major central bank that has yet to initiate a monetary policy tightening cycle. However, Governor Andrew Bailey recently indicated that the longer the war persists, the more difficult it will be for policymakers to refrain from taking action—a hint that interest rate hikes may be on the horizon.

From a technical perspective, the 4-hour chart for GBP/USD shows an immediate bullish trend; the resistance line—descending from the late-August highs—has been successfully broken and was retested on Monday. Momentum indicators provide some support, with the Relative Strength Index (14) sitting above 55. Meanwhile, the Moving Average Convergence Divergence (MACD) is hovering near the zero line, suggesting that the uptrend remains fragile. Bullish conviction will likely be tested in the zone between Friday’s high of 1.3370 and the 1.3400 level (near the September 22 high). A confirmed breakout above these levels would bring the 61.8% Fibonacci retracement of the August–October downtrend—at 1.3467—into view, along with the area above 1.3470 that previously served as support (the lows of September 2 and 4). On the downside, the confluence of the aforementioned trendline and the top of the previous range, near 1.3295, is currently holding the bears at bay. A drop below this level would expose the area near the year-to-date low of 1.3140.

For today, consider going long on GBP/USD at 1.3382; stop-loss: 1.3370; targets: 1.3440, 1.3450.

USD/JPY

After a slight decline the previous day, USD/JPY has moved higher, trading near 158.15 during Wednesday’s Asian session. The Japanese Yen faces mounting challenges following the latest merchandise trade balance report from Japan’s Ministry of Finance. Japan’s trade deficit for September widened significantly to 536.6 billion yen, down from the 1.1119 trillion yen deficit recorded in August. This deficit significantly exceeded the market expectation of 181 billion yen and marks the fifth consecutive month of a trade deficit for the country. Regarding policy, Japanese Finance Minister Satsuki Katayama stated on Wednesday that the government is coordinating closely with the Bank of Japan, emphasizing that there are no major disagreements concerning the inflation outlook or monetary policy. She noted that while tax cuts would boost demand and drive up prices, the government remains committed to an active yet responsible fiscal policy aimed at expanding Japan’s supply-side capacity without accelerating inflation. In the United States, the CPI inflation rate accelerated in September. Meanwhile, following recent remarks by Federal Reserve official Kevin Warsh, the market is recalibrating its expectations for the Fed’s future policy path. Warsh indicated that he would not "prejudge" interest rate decisions, though he offered no clear signal as to whether the central bank intends to raise rates or keep them unchanged at the upcoming October policy meeting.

On the daily chart, USD/JPY is trading at 158.15. As the spot price remains above both the 9-day and 50-day exponential moving averages (EMA), the pair retains a short-term bullish bias, supporting the broader uptrend. The 14-day Relative Strength Index (RSI) sits near 53.45, indicating solid momentum without reaching overbought territory—leaving room for buyers to extend the rally—while the FXS Fed Sentiment Index, at 127.51, suggests a supportive policy backdrop. On the downside, initial support is found at the 50-day EMA (157.75), followed by the lower Bollinger Band near 157.17; together, these form a demand zone that reinforces the bullish structure. As long as USD/JPY holds above these moving averages, the technical bias favors further upside. Conversely, a daily close below the 9-day EMA (158.28) would signal weakening momentum, potentially exposing the pair to a deeper correction toward the upper Bollinger Band at 158.87. Next is the 159 level.

For today, one might consider shorting the USD at 158.30, with a stop-loss at 158.45 and targets at 157.50 and 157.60.

EUR/USD

On Wednesday, the pair remained largely flat near 1.1230. WTI crude oil prices climbed to $101.05, reaching their highest level in over a month. Ongoing conflict in the Middle East has significantly boosted the risk premium on oil. Further gains in oil prices threaten to unanchor global inflation expectations, increasing the likelihood that major central banks will tighten policy rates even further. Meanwhile, the USD has underperformed over the past week, a trend linked to fluctuations in optimism surrounding AI. In France, the process of fiscal consolidation has hit a roadblock; rising political uncertainty—which has begun to spill over into other Eurozone nations—has further diminished the appeal of the euro. As major economies within the Eurozone, Italy and Spain see their yield spreads serve as a regional barometer. This contagion effect weakens the euro’s overall attractiveness, leaving it with insufficient internal support when faced with external shocks. Growing fiscal divergence within the Eurozone has prompted a marginal reassessment of regional integration, which in turn affects the euro’s relative performance in the foreign exchange market.

Despite a bearish short-term outlook, the market maintains a bullish stance for 2027, with a 12-month target of 1.16. Should France’s debt pressures intensify—potentially forcing the European Central Bank to adjust its policy—the downside risks for the euro would expand significantly. Conversely, shifts in U.S. policy (such as those following a midterm election) could serve as a catalyst for an upside move. On the daily chart, EUR/USD is trading at 1.1220, maintaining a short-term bearish tone as the current price remains below the 20-day simple moving average of 1.1259. The currency pair has failed to reclaim this simple moving average (SMA), indicating that the recent rebound remains constrained by selling pressure near the 1.1300 psychological level. Meanwhile, the Relative Strength Index (RSI-14) stands at 39.84; while it has recovered from oversold territory, it remains below the midline, suggesting only a modest improvement in downward momentum rather than a clear shift toward a bullish outlook.
On the upside, immediate resistance lies at the 20-day SMA (1.1259). Bulls must clear this hurdle to alleviate the current downward bias and pave the way for a more sustained corrective phase toward the 1.1300 psychological level. On the downside, the low of October 14 at 1.1200 serves as a key support level, followed by 1.1112 (the lower Bollinger Band).

For today, one might consider going long on the EUR at 1.1220, with a stop-loss at 1.1210 and targets at 1.1260 and 1.1250.

WTI Crude Oil

On Wednesday, crude oil prices climbed back toward $100 per barrel, resuming an upward trend as investors weighed conflicting reports regarding diplomatic progress between the United States and Iran. Oil prices had fallen sharply on Tuesday following a meeting in Tehran between Pakistan’s Chief of Army Staff, General Asim Munir, and senior Iranian diplomatic and military officials, where they discussed bilateral relations and the status of negotiations with Washington. However, a diplomat involved in the talks dismissed reports that an agreement was imminent, while confirming that efforts to resolve the conflict remain ongoing. Oil prices have risen by more than 10% this month, with escalating hostilities—between Saudi Arabia and the Iran-backed Houthi rebels, as well as between Russia and Ukraine—further exacerbating supply risks. Over the past two weeks, at least 18 vessels have been attacked in the Strait of Hormuz. Despite these risks, the volume of oil shipments from the Middle East has largely recovered to approximately 80% of pre-war levels.

On the 4-hour chart, U.S. crude oil is currently in a strong uptrend. Following a rebound from a low of $86.86, the price has climbed steadily, supported by multiple moving averages. Earlier this week, the price reached a high of $101.05. Currently, U.S. crude is trading above the MA20, MA100, and MA200; the short-term moving averages are aligned in a bullish configuration, providing robust support. The first level of resistance is at $101.05 (Tuesday’s high), followed by a key resistance level at $102.47—corresponding to the 78.6% Fibonacci retracement level—with major overhead resistance located at the previous high of $106.72. Regarding technical indicators, the MACD’s DIFF line remains above the DEA line, and the continued presence of red bars suggests that bullish momentum persists; however, the narrowing gap between the DIFF and DEA lines warrants caution, as it may signal a weakening of short-term bullish strength. As the price continues to rise on the 4-hour timeframe without a corresponding, significant expansion in the indicators, there is a slight risk of a "bearish divergence," which implies that the price could be prone to short-term pullbacks during its ascent. Should the price pull back and break below the critical support level of $95.67 (the 9-period moving average), this phase of the rebound will likely conclude, with a high probability of the price retreating toward the $95.00 level. Consider going long on crude oil at 97.30 today; stop-loss: 97.15; targets: 99.00 and 100.00.

Spot Gold

On Wednesday (October 21, Beijing Time), spot gold was trading near $41,400 per ounce. The price remains under pressure as concerns regarding geopolitical risk premiums in the Middle East resurface, and investors weigh the possibility of further interest rate hikes this year ahead of the Federal Reserve’s policy meeting next week. Inflation and the Fed’s interest rate policy are the primary factors currently weighing on gold; U.S. Treasury bonds appear more attractive as a safe-haven asset at the moment. The $4,000 level is a critical threshold to watch closely, and whether gold can hold above it will depend largely on the Federal Reserve’s stance. On the geopolitical front, tensions involving Iran and fluctuations in oil prices remain in the background. Traders are monitoring diplomatic developments between Iran and Pakistan, as well as reports of ongoing attacks by Houthi forces on Saudi infrastructure and vessels in the Gulf region. Oil prices have retreated after hitting a five-month high, which has eased concerns about a near-term re-acceleration of inflation, but has also diminished the premium on gold as a geopolitical safe-haven asset.

From a technical perspective, the area around $4,066 (the low from October 7) and the $4,000 mark (a psychological level) are viewed by the market as key psychological and practical support zones that warrant close attention. Whether gold can maintain the critical $4,000 level will depend significantly on the Federal Reserve’s messaging. If the statement and press conference following next week’s meeting signal a more dovish stance than anticipated, gold could regain upward momentum, with initial targets at $4,200 (a psychological resistance level) and $4,255 (the upper Bollinger Band). Conversely, if Fed officials emphasize inflation risks and the necessity for further monetary tightening, gold could accelerate its decline toward lower price ranges. The current gold price remains significantly below its all-time high, and market sentiment has shifted from extreme optimism at the beginning of the year to a stance of cautious observation—a transition that in itself suggests the potential for increased volatility.

Today, consider going long on gold at 4,136, with a stop-loss at 4,132 and targets at 4,160 and 4,170.