Dollar Mutes Ahead of Nonfarm Payroll

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 U.S. equity markets exhibited a subdued stance, mirrored by the sideways movement in both the dollar index and gold prices, all eyes turned toward the eagerly anticipated Nonfarm Payroll data set to be released today. Speculation arose following a sharp drop in ADP Nonfarm employment change figures earlier in the week, hinting at a potentially lacklustre Nonfarm Payroll report. Meanwhile, in Japan, rising long-term yields nearing the Bank of Japan's 1% ceiling prompted anticipation of discussions about Yield Curve Control adjustments during their upcoming meeting, possibly strengthening the Japanese Yen. On the energy front, oil prices faced their most substantial weekly drop since March due to a bleak demand outlook. Wednesday's U.S. gasoline inventories report, indicating the largest increase in stockpiles since January 2022, pointed to a significant decline in gasoline demand, adding to market concerns.

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

Source: CME Fedwatch Tool

0 bps (72.0%) VS 25 bps (28%)   ____________________________________________________________________________________________________________________________________________________

Market Movements

DOLLAR_INDX

The US Dollar has extended its decline after breaking below a critical support level, setting the stage for the crucial US jobs report. Investors remain cautious as recent mixed jobs data from the US has clouded the economic outlook. The pullback in US Treasury yields offers some relief to certain currencies like the yen and euro ahead of the release of key US Nonfarm Payrolls (NFP) data.

The Dollar Index is trading higher while currently testing the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 69, which suggests the index might enter overbought territory. 

Resistance level: 106.95, 108.65

Support level: 105.25, 103.15

XAU/USD

Gold prices are holding steady in a consolidation range as investors adopt a wait-and-see approach ahead of the crucial US jobs data. The market remains cautious, assessing the likelihood of gold's next move.

Gold prices are trading lower following the prior breakout below the previous support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 30, suggesting the commodity might enter oversold territory. 

Resistance level: 1835.00, 1860.00

Support level: 1810.00, 1785.00

EUR/USD

The Dollar index treaded water yesterday, bracing for the pivotal Nonfarm Payroll data due today. Market sentiment was influenced by Wednesday's surprising slump in the ADP Nonfarm employment change figures, a trend unseen in 2023. The Euro managed to halt its two-day winning streak, while the Dollar, previously assertive, exhibited signs of easing as anticipation built around the upcoming economic data.

While the EUR/USD pair continues to trade on its long-term downtrend support level, the pair has rebounded strongly for the past 2 sessions. The MACD is on the brink of breaking above the zero line, while the RSI has rebounded and is approaching the overbought zone, suggesting a potential trend reversal for the pair. 

Resistance level: 1.0560, 1.0630

Support level: 1.0470, 1.0400

USD/JPY

The Japanese yen has experienced a roller-coaster ride this week, driven by speculation of currency intervention to support the currency. However, Japan's Finance Minister Shunichi Suzuki has not confirmed any intervention. The overall trend for USD/JPY remains uncertain, prompting caution among investors.

USD/JPY is trading lower while currently near the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 41, suggesting the pair might experience technical correction since the RSI rebounded sharply from oversold territory. 

Resistance level: 149.95, 151.45

Support level: 148.40, 147.50

Dow Jones

The US equity market has edged lower as investors await the monthly jobs report and seek clues about the outlook for interest rates. Caution prevails in the US equity markets due to expectations of rate hikes by the Federal Reserve, potentially diminishing their appeal. However, some dovish statements from San Francisco Fed Bank President Mary Daly suggest that further rate increases may not be necessary given the current restrictive monetary policy and the recent rise in US Treasury yields.

The Dow is trading lower following the prior breakout below the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 34, suggesting the index might experience technical correction since the RSI enters oversold territory. 

Resistance level: 33425.00, 34355.00

Support level: 32745.00, 32015.00

GBP/USD

The Sterling capitalised on a technical rebound, seizing a moment of respite as the robust Dollar temporarily eased its bullish strength. The Pound struggled amid lacklustre economic performance in the UK and a cautious stance from the Bank of England. All eyes are now on the pivotal Nonfarm Payroll data, set to play a defining role in the Pound-Dollar exchange rate. 

The Cable is still trading within the downtrend channel, but the recent rebound pushed the Cable to try to break out of the channel. The MACD has crossed at the bottom and is breaking above the zero line, and the RSI is approaching the overbought zone, suggesting a trend reversal for the Cable. 

Resistance level: 1.2190, 1.2370 

Support level: 1.2040, 1.1940

AUD/USD

Australia's September Retail Sales data met market expectations, reporting a 0.2% increase. The Aussie dollar recovered from recent lows, benefitting from a softened dollar due to subdued risk sentiment in financial markets. Simultaneously, the slowing pace of U.S. Treasury yields contributed to the Aussie's bounce. Investors now eagerly await the Nonfarm Payroll report, a critical factor in shaping the AUD/USD pair's price movement.

The AUD/USD pair is testing the strong resistance level at 0.6370, if the pair is able to sustain above the level, it will be a solid trend reversal signal for the pair. The RSI has rebounded while the MACD has crossed and is approaching the zero line from below, suggesting a bullish momentum is forming. 

Resistance level: 0.6440, 0.6500

Support level: 0.6290, 0.6180

CL OIL

Oil prices have continued to decline as market participants digest the news of supply cuts from Saudi Arabia and Russia. Pessimistic economic outlook and risk-off sentiment ahead of the Nonfarm Payroll results have added further pressure on oil prices.

Oil prices are trading lower following the prior breakout below the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 24, suggesting the commodity might experience technical correction since the RSI enters oversold territory. 

Resistance level: 88.20, 91.50

Support level: 80.15, 74.80