Dollar Ease While Gold Records All-time High

• The dollar eases to a weekly low while Wall Street gains ahead of Wednesday’s Fed interest rate decision.
• Gold surged to an all-time high on the weakening dollar’s strength.
• Oil prices ease in strength, hindered by lacklustre Chinese economic indicators.

Market Summary

U.S. Dollar (USD) has been under pressure due to growing speculation that the Fed might implement a larger rate cut in its upcoming policy decision on Wednesday. The CME Fedwatch tool now indicates a 52% probability of a 50 bps rate cut, the highest in the past month. This anticipation has led the dollar index to its lowest level in a week, while Wall Street has been buoyed by the prospect of a dovish Fed stance.

In light of the weakening dollar, gold has surged to a new all-time high near $2,600, driven by both the Fed's potential policy shift and increased demand for safe-haven assets amidst market uncertainty. Conversely, oil prices have moderated from their recent bullish trend. This easing is attributed to expected resumption of U.S. oil production following a short-term disruption caused by Hurricane Francine, and lacklustre economic indicators from China, which have dampened oil demand expectations.

Looking ahead, eurozone and UK CPI readings due on Wednesday are expected to introduce volatility in their respective currencies. Traders should closely monitor these economic indicators for potential market impacts.

Current rate hike bets on 18th September Fed interest rate decision: 

Source: CME Fedwatch Tool

-50 bps (52%) VS -25 bps (48%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index is under pressure due to the growing expectations of a larger rate cut from the Federal Reserve, ahead of the central bank's monetary policy decision on Wednesday. Currently, the index is holding near its support level at $101.00. Traders are advised to closely monitor Tuesday's U.S. Retail Sales report, as it could provide key insights and influence the dollar's movement before the Fed's announcement.

The Dollar Index is seemingly facing strong resistance at the near $101.80 level. The RSI and the MACD suggest that the bullish momentum for the dollar has vanished. If the index falls below this level, it may be a bearish signal for the dollar. 

Resistance level: 101.80, 102.35

Support level: 100.60, 99.70

XAU/USD, H4

Gold prices have surged to an all-time high, surpassing the $2,580 mark. The primary driver behind this rally is the expectation of a larger rate cut by the Federal Reserve, pushing investors toward safe-haven assets like gold to hedge against broader market uncertainties. Additionally, concerns over the attempted assassination of Donald Trump, a candidate in the upcoming U.S. presidential election, in California have further spurred demand for gold, adding to its bullish momentum.

Gold prices are currently trading with extremely strong bullish momentum and are poised at their highest level. The RSI has been hovering in the overbought zone, while the MACD is edging higher and diverging, suggesting that bullish momentum is gaining. 

Resistance level: 2605.00, 2625.00

Support level: 2560.00, 2542.00

GBP/USD，H4

The GBP/USD pair has erased all its early-week losses during the last two sessions, indicating a potential trend reversal. The pair's recovery was driven by a weaker dollar, allowing it to rise back into its fair-value gap. Pound Sterling traders are advised to closely monitor the upcoming Wednesday CPI reading, which could influence market expectations ahead of the Bank of England's interest rate decision on Thursday. The CPI data will be critical in determining the BoE's monetary policy stance, potentially impacting the pair's future direction.

GBP/USD has gained strength from its recent low level but is yet to record a higher-high which suggests the pair remain trading within its downtrend trajectory. The RSI has risen above 50 level while the MACD is breaking above the zero line suggesting the bearish momentum is vanishing. 

Resistance level:  1.3220, 1.3280

Support level:1.3105, 1.3025 

EUR/USD，H4

The euro gained against the dollar last week, recording a net weekly increase, primarily due to dollar weakness rather than euro-specific catalysts. Despite the lack of momentum for the euro, several upcoming events could significantly impact the EUR/USD pair. These include the FOMC interest rate decision and the Eurozone CPI reading. Both factors are expected to influence market sentiment and could either reinforce or reverse the euro's recent gains, depending on the outcomes. Traders are advised to monitor these key developments closely.

The pair has broken above its downtrend resistance level, suggesting a potential trend reversal for the pair. Should the pair form a higher-high price pattern and surpass the 1.1105 mark, it may be a bullish signal for the pair. The RSI and the MACD have been gaining, suggesting a bullish momentum is forming. 

Resistance level: 1.1105, 1.1170

Support level: 1.1040, 1.0985

NASDAQ, H4

The U.S. equity market rallied ahead of the Fed's monetary policy decision, with expectations of a larger rate cut providing optimism. The Dow Jones and S&P 500 have surged to their highest levels, while the Nasdaq lags slightly behind its peers. This underperformance in the tech-heavy Nasdaq could present growth potential, as it tends to be more sensitive to interest rate shifts. If the Fed delivers a bigger rate cut as speculated, the Nasdaq could experience a significant boost, catching up with the other indices and possibly outperforming in the near term.

Nasdaq has gained nearly 5% in the last 5 sessions suggest a bullish bias for the index. The index is now poised at its previous price consolidation zone, a break above from such level suggest a solid bullish signal for the index. The RSI and the MACD suggest that bullish momentum is forming. 

Resistance level: 20,000.00, 20,705.00

Support level: 18,860.00, 18,320.00 

USD/JPY, H4

The USD/JPY pair dropped below the 141.00 mark, indicating a bearish bias ahead of critical economic data releases. The upcoming U.S. Retail Sales data, expected to show a decline, could further pressure the pair, leading to additional downside. On the Japanese side, the focus will be on the Japanese CPI release on Friday, which could provide important clues regarding the BoJ's future monetary policy. A stronger CPI reading may support the Japanese yen, amplifying the bearish outlook for USD/JPY as markets weigh potential BoJ rate hikes.

The USD.JPY has broken below its lowest point in August, suggesting a bearish bias for the pair. The RSI has been flowing near the oversold zone, while the MACD is edging lower, suggesting a bearish momentum is gaining. 

Resistance level: 141.40, 143.45

Support level: 138.90, 137.40

CL OIL, H4

Oil prices have eased from their recent bullish trend after rebounding from 2024's lowest levels. The latest Chinese economic indicators, particularly the unemployment rate, which reached its highest point since April, suggest that China's economic performance remains sluggish. This has raised concerns over the demand outlook for oil, as China's economy plays a key role in global energy consumption. As a result, the weakening demand prospects may hinder oil prices from gaining further upward momentum.

Oil prices remain supported at the fair-value gap at near $68.50, which suggests that oil remains trading within its uptrend trajectory. The RSI remains above the 50 level, while the MACD is on the brink of breaking above the zero line, suggesting that the bullish momentum remains intact with oil. 

Resistance level: 69.90, 71,95

Support level: 67.55, 65.60