Escalating Middle East Conflict Strengthens Gold Prices

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U.S. President Joe Biden, alongside UK Prime Minister Sunak, stepped foot in Israel, leading international efforts to de-escalate the Middle East conflict. The heightened regional tensions propelled commodity prices, with gold and oil surging, while the safe-haven dollar rebounded on strong economic data. In contrast, the Australian dollar dipped on disappointing job figures, adding uncertainty ahead of the RBA's November rate decision. Meanwhile, the Japanese Yen hovers at a level that could trigger intervention, leaving investors bracing for significant swings in the pair.

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Current rate hike bets on 1st November Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (93.0%) VS 25 bps (7%)   

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Market Movements

DOLLAR_INDX

The US Dollar continues to make significant gains, bolstered by heightened expectations of a hawkish stance from the Federal Reserve. This reflects the market's anticipation of upcoming policy actions despite some economists expecting the Fed to maintain rates during the November FOMC meeting. Federal Reserve Bank of New York President John Williams underlined the need for keeping interest rates high for an extended period to achieve the central bank's 2% inflation target. Fed Governor Christopher Waller expressed scepticism about pausing rate hikes, emphasising the importance of closely monitoring the evolving economic conditions across different US regions.

The Dollar Index is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 58, suggesting the index might extend its gains after breakout since the RSI stays above the midline. 

Resistance level: 106.60, 107.15

Support level: 105.65, 104.80

XAU/USD

Gold prices have surged to near one-month highs due to heightened tensions in the Israel-Hamas conflict, which boosted safe-haven demand. Despite this rally, recent concerns about rising US interest rates have cooled demand for the precious metal.

Gold prices are trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 71, suggesting the commodity might enter overbought territory. 

Resistance level: 1970.00, 1995.00

Support level: 1945.00, 1930.00

EUR/USD

Euro remained relatively stable as Eurostat's inflation data aligned closely with market expectations. The Eurozone Consumer Price Index (CPI) showed a decline from 5.20% to 4.30%, in line with market forecasts. However, the overall weakness of the Euro was primarily driven by the strengthening US Dollar.

EUR/USD is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 45, suggesting the pair might extend its losses toward support level since the RSI stays below the midline. 

Resistance level: 1.0610, 1.0795

Support level: 1.0450, 1.0325

AUD/USD

The Dollar gained strength as markets reacted to the latest Middle East developments and upbeat U.S. economic data. This surge overshadowed China's upbeat GDP figures, causing the Aussie dollar to decline. The Australian Dollar faced additional pressure from disappointing job data, raising uncertainties ahead of the RBA's November interest rate decision. 

The AUD/USD pair has plunged sharply and is currently approaching its crucial support level and is forming a triple bottom price pattern with the support level can withhold the bearish sentiment. Both the RSI and MACd flow flat has given a neutral signal for the pair. 

Resistance level: 0.6400, 0.6510

Support level: 0.6290, 0.6200

Dow Jones

Despite foreign leaders' efforts to mediate, the escalating tension in the Middle East dealt a blow to global equity markets. The U.S. equity market, including the Dow Jones, plummeted nearly 1% last night. Upbeat U.S. economic data raised concerns about the Fed potentially continuing its rate hikes before the end of 2023, dampening investor sentiment in the risk-sensitive markets 

The Dow has rebounded strongly from its recent low despite a minor retracement. The index is still trading above its Fibonacci 38.2%, which suggests that the bullish momentum is still intact. The RSI and the MACD have declined, suggesting the bullish momentum has vanished.  

Resistance level: 34350.00, 34900.00

Support level: 33370.00, 32840.00

GBP/USD

The Pound Sterling initially soared on the back of a positive UK inflation report, where the Consumer Price Index (CPI) surpassed expectations at 6.70%. However, GBP/USD subsequently declined due to the Dollar's resurgence, following a hawkish tone from Federal Reserve members. The UK's high inflation rate maintains the possibility of further rate hikes, a factor that investors will closely monitor.

GBP/USD is trading lower while currently near the support level. However, MACD has illustrated diminishing bearish momentum. RSI is at 40, suggesting the pair might extend its losses after breakout since the RSI stays below the midline. 

Resistance level: 1.2220, 1.2295

Support level: 1.2125,  1.2045

USD/JPY

USD/JPY has hovered within liquidity zones, nearing the critical 150 mark that could prompt Japanese authorities' intervention. Investors anticipate heightened volatility around this level, with concerns rising over potential Japanese intervention to bolster the weakening Yen. Market focus intensifies on the upcoming BoJ interest rate decision at month-end, adding to the anticipation in currency markets.

The pair has been traded closely near the 150 mark and has a long wick at the bottom of the candlesticks, suggesting the price has been supported near the liquidity zones. The RSI and the MACD have been flat given a neutral signal for the Pair. 

Resistance level: 150.40, 151,50

Support level: 148.60,  147.50

CL OIL

Crude oil prices have remained relatively steady, treading within a positive consolidation range, primarily buoyed by a bullish inventory report. The Energy Information Administration (EIA) reported a substantial decline in US Crude Oil Inventories by -4.491 million barrels, surpassing market expectations of -0.300 million barrels. This notable drawdown in inventories has provided support to oil prices. However, amidst ongoing geopolitical tensions in the Middle East, investors remain vigilant, keenly observing developments for potential trading signals in this increasingly dynamic and influential market.

Oil prices are trading while currently near the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 58, suggesting the commodity might experience technical correction since the RSI retreated from overbought territory. 

Resistance level: 89.35, 94.00

Support level: 86.40, 82.50