Dollar Strengthens on Upbeat PMI Reading

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Amidst improving conditions in the Middle East conflict, international leaders and the United Nations advocate for Humanitarian Pauses to facilitate essential aid access for civilians. Gold prices remained stable, but oil prices faced a downturn due to disappointing European PMI readings. In contrast, favourable U.S. PMI data, coupled with better-than-expected Eurozone economic figures, led to the dollar rebounding above the $106 level. Additionally, the Australian dollar strengthened against the strong U.S. dollar following higher-than-expected CPI data from Australia, fueling market expectations of an upcoming rate hike by the Reserve Bank of Australia (RBA).

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

Source: CME Fedwatch Tool

0 bps (98.0%) VS 25 bps (2%)   

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Market Movements

DOLLAR_INDX

The US Dollar strengthened as positive economic data emerged, fostering optimism for the US economy. Markit's report showed the US Services Purchasing Managers Index (PMI) rising from 50.1 to 50.9, surpassing the market's expectations of 49.8. Additionally, the S&P Global Composite PMI climbed to 51 from 50.2 in September, signifying continued expansion in the private sector in early October.

The Dollar Index is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 55, suggesting the index might extend its gains toward resistance level since the RSI stays above the midline. 

Resistance level: 106.60, 107.15

Support level: 105.55, 104.80

XAU/USD

Gold prices remained relatively stable, with the strengthening US Dollar slightly dampening gains. However, uncertainties persist, prompting investors to closely monitor forthcoming economic data, particularly the inflation data from the PCE report, for further insights. Simultaneously, geopolitical tensions in the Middle East remain a significant factor that could potentially drive movements in the safe-haven gold market.

Gold prices are trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 69, suggesting the commodity might enter overbought territory. 

Resistance level: 1980.00, 2015.00

Support level: 1940.00, 1910.00

EUR/USD

The Euro faced significant downward pressure following a series of discouraging economic indicators. Reports from HCOB highlighted below-expectation manufacturing and services PMI data in the Eurozone, suggesting the region may be heading towards a potential recession. These developments are likely to limit the European Central Bank's ability to extend its current tightening policy cycle..

EUR/USD is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 51, suggesting the pair might extend its losses since the RSI retreated sharply from overbought territory. 

Resistance level: 1.0675, 1.0795

Support level: 1.0580, 1.0450

GBP/USD

The British Pound experienced volatility before sharply declining as the US Dollar strengthened significantly. Positive job data in the UK, with lower than expected unemployment rates, briefly supported the Pound. However, the Sterling weakened after disappointing UK PMI data was released. In contrast, strong economic indicators from the United States allowed the Dollar to recover its losses from Monday, further pressuring the Pound.

The Cable plunged by 0.7% but is still trading above its short-term support level at 1.2140. The momentum indicators suggest that the bullish momentum has waned, with the RSI dropping to near 50-level while the MACD is falling back to the zero line. 

Resistance level: 1.2220, 1.2300

Support level: 1.2120, 1.2050

S&P 500

Amid robust corporate earnings and optimistic forecasts, the US equity market experienced an upward trajectory, igniting a broad rally. The third-quarter earnings season has bolstered market confidence in corporate performance, with a significant portion of S&P 500 companies expected to report positive results. LSEG's data indicated that 118 of S&P 500 companies have reported so far, with 81% surpassing analyst expectation.

S&P 500 is trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 41, suggesting the index might extend its gains since the RSI rebounded sharply from oversold territory. 

Resistance level: 4315.00, 4444.00

Support level: 4200.00, 4060.00

AUD/USD

The Australian Dollar exhibited strength against the resilient US Dollar, surpassing its long-term downtrend resistance level. This surge was spurred by higher-than-expected CPI data in Australia, fueling speculation that the Reserve Bank of Australia (RBA) might resume its monetary tightening cycle by raising interest rates in November due to its data-dependent approach. Additionally, China's introduction of a new fiscal stimulus package, aimed at achieving its GDP target, had a positive effect on the Australian Dollar, often considered a proxy for the Chinese economy.

The AUD/USD pair has broken above the long-term downtrend resistance level, suggesting a trend reversal. The RSI is approaching the overbought zone while the MACD has broken above the zero line, suggesting the bullish momentum is forming. 

Resistance level: 0.6390, 0.6510

Support level: 0.6290,  0.6200

HK50

The Hang Seng Index surged during the opening session, experiencing a remarkable 5% jump, buoyed by China's government announcement of extensive measures to bolster its economy. These measures involve issuing additional sovereign debt and increasing the budget deficit ratio, with the objective of fortifying economic recovery and achieving the targeted GDP rate.

The Hang Seng index found support and rebounded above its psychological support level at nearly 17,000. The RSI spiked up sharply from the oversold zone and the MACD has crossed below the zero line, suggesting the bearish momentum has vanished. 

Resistance level: 17670, 18350

Support level: 16980, 16300

CL OIL

Oil prices saw a retreat from recent highs as global attention shifted towards leaders' negotiations aimed at de-escalating tensions between Israel and Hamas. Additionally, bearish sentiment in the oil market was influenced by lacklustre economic reports from the European and UK regions.

Oil prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 42, suggesting the commodity might extend its losses after breakout since the RSI stays below the midline. 

Resistance level: 89.35, 94.00

Support level: 82.50, 78.15