Wall Street Rallies on Dovish Fed’s Policy

• Wall Street rallied after the market digested the dovish pivot of the Fed monetary policy.
• The U.S. dollar was hammered to a near recent low level as the dollar is weighing on the Fed rate cut event.
• Gold prices are poised at an all-time high, awaiting a fresh catalyst to break a new high. 

Market Summary

Wall Street surged with strong bullish momentum after digesting the FOMC interest rate decision on Wednesday. All three major U.S. equity indexes saw significant gains, with the Nasdaq leading the charge, closing up by more than 2.5%. This tech-heavy index, sensitive to interest rate changes, is expected to catch up to the Dow Jones and S&P 500, which have already reached all-time highs.

On the currency front, the U.S. dollar faced pressure due to the Fed's dovish stance, but was supported by an upbeat Initial Jobless Claims report, which hit its lowest reading since May, signalling continued strength in the U.S. labour market. Meanwhile, Pound Sterling rallied, boosted by the BoE's decision to keep interest rates unchanged, pushing the Pound Sterling index (BXY) to its highest level since 2022.

Looking ahead, all eyes are on the BoJ monetary policy statement after Japan's CPI matched market expectations at 2.8%. A hawkish tone could potentially strengthen the Yen, which has traded softly this week.

In the commodity market, both gold and oil benefited from the Fed's dovish moves. Gold is hovering near its all-time highs, while oil prices are edging higher on expectations of lower U.S. interest rates, which could spur demand.

Current rate hike bets on 7th November Fed interest rate decision: 

Source: CME Fedwatch Tool

-50 bps (32%) VS -25 bps (68%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index, which tracks the performance of the dollar against a basket of six major currencies, continued to decline as investors absorbed the Federal Reserve’s 50 basis points rate cut and further dovish signals. According to the CME FedWatch Tool, market participants now assign a 65% probability of another 50 basis points cut in the upcoming meeting, despite earlier consensus leaning towards a 25 basis points reduction. The extent of the dollar's losses, however, was tempered by stronger-than-expected US economic data. The US Department of Labor reported Initial Jobless Claims at 219K, surpassing expectations of 230K, while the Philadelphia Fed Manufacturing Index registered a reading of 1.70, significantly outperforming the forecast of -0.80. 

The Dollar Index is trading lower while currently testing the support level. MACD has illustrated diminishing bullish momentum, whale RSI is at 44, suggesting the index might extend its losses after breakout since the RSI stays below the midline. 

Resistance level: 101.80, 102.35

Support level: 100.55, 99.70

XAU/USD, H4

Gold prices saw a rebound, driven by the depreciation of the US Dollar and the anticipation of further rate cuts by the Federal Reserve. Market participants now expect the Fed to implement a 50 basis points cut at its upcoming meeting, significantly above prior projections. The possibility of deeper rate cuts, combined with escalating tensions in the Middle East, has bolstered demand for gold as a safe-haven asset. 

Gold prices are trading higher while currently testing the resistance level. However, MACD has illustrated increasing bearish momentum, while RSI is at 60, suggesting the commodity might experience technical correction since the RSI retreated sharply from overbought territory. 

Resistance level: 2590.00, 2605.00

Support level: 2575.00, 2550.00

GBP/USD，H4

The Pound Sterling received a significant boost following the BoE's interest rate decision announced yesterday, which aligned with market expectations of holding interest rates steady. The BoE, being one of the few major central banks yet to shift away from its monetary tightening policy, is helping to strengthen the Sterling. The currency pair has gained upward momentum and is expected to continue trading higher, especially after breaking above the 1.3300 level. Traders are likely to keep an eye on further developments, as the Pound remains supported by this policy stance.

GBP/USD has broken above its recent high level, suggesting a bullish bias for the pair. The RSI is on the brink of breaking into the overbought zone, while the MACD had a bullish cross and edged higher, suggesting the pair's bullish momentum remains strong. 

Resistance level:  1.3350, 1.3440

Support level:1.3280, 1.3140

EUR/USD，H4

The EUR/USD pair is nearing a breakout above its recent high of 1.1195, but several doji candlestick patterns indicate waning bullish momentum. The dollar has struggled to find strength after the dovish Fed interest rate decision on Wednesday. However, the softness in the dollar is counterbalanced by the weaker-than-expected eurozone CPI reading and the dovish stance of the ECB. Today’s scheduled speech from ECB Chair Christine Lagarde is expected to influence the euro and could trigger price movement in the pair.

EUR/USD seems to have faced strong selling pressure at the near 1.1165 level. A break above this level may be a bullish signal for the pair. The RSI remains above 50, while the MACD hovers above zero, suggesting the pair is training with bullish momentum. 

Resistance level: 1.1223, 1.1360

Support level: 1.1020, 1.0920

S&P 500, H4

Global risk appetite improved as the Federal Reserve cut interest rates by 50 basis points, boosting confidence in the equity markets. The S&P 500 hit a record high, climbing 1.70% and marking its 39th all-time high in 2024. Tech stocks led the charge, with the Nasdaq 100 gaining 2.60%. The Fed’s decisive action in lowering rates has raised hopes of avoiding a recession, with jobless claims data showing the lowest levels since May, indicating a resilient labor market despite slower hiring. Investors are increasingly shifting portfolios toward high-risk equities amid the positive outlook.

S&P 500 is trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 64, suggesting the index might extend its gains since the RSI stays above the midline. 

Resistance level: 5790.00, 5900.00

Support level: 5650.00, 5505.00

USD/JPY, H4

The USD/JPY pair initially surged to a one-week high but later retracted as traders awaited the Japanese CPI reading. The inflation data came in line with expectations at 2.8%, higher than the previous reading, suggesting that the Bank of Japan (BoJ) now has favourable conditions to consider raising interest rates. With the BoJ's monetary policy statement due later today, a hawkish stance could potentially bolster the Yen's strength, leading to further downward pressure on the USD/JPY pair.

Despite the technical retracement in the latest price movement, the pair remains trading within its uptrend channel, suggesting a bullish bias for the pair. The RSI remains at the above 50 level, while the MACD has crossed above the zero line, suggesting the pair is reading with bullish momentum. 

Resistance level: 146.00, 149.20

Support level: 141.40, 138.90 

AUD/USD, H4

The Aussie dollar has traded strongly against the lacklustre U.S. dollar in recent weeks, driven by the dovish Fed expectations. Meanwhile, the hawkish stance from the Reserve Bank of Australia (RBA) has bolstered the Aussie dollar. The latest Australian unemployment rate came in at 4.2%, a figure that could influence the RBA's interest rate decision next week. Should the RBA maintain its hawkish tone, it may further support the Aussie dollar, pushing the AUD/USD pair higher in the near term.

The AUD/USD pair has been hovering at its highest level in 2024, awaiting a further catalyst to trade higher. The RSI has been hovering above 50 for the past week, while the MACD continues to edge higher, suggesting that the bullish momentum remains strong with the pair. 

Resistance level: 0.6850, 0.6920

Support level: 0.6780, 0.6730

CL OIL, H4

Crude oil prices pulled back slightly as profit-taking set in following a sharp recovery from near three-year lows in September, driven by central bank interest rate cuts aimed at boosting global demand. The oil market received additional support from escalating geopolitical tensions in the Middle East, where reports emerged of Israeli actions against Hezbollah, heightening supply risks. Fighting in and around Gaza also persisted. Despite the short-term retracement, the long-term outlook for crude remains constructive, underpinned by potential supply disruptions and expectations of a broader economic recovery following interest rate cuts. 

Oil prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 55, suggesting the commodity might extend its losses since the RSI retreated sharply from overbought territory. 

Resistance level: 71.95, 74.15

Support level: 70.50, 68.60