Middle East Tensions Fuel Safe-Haven Surge

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Safe-haven assets such as gold and the US Dollar have experienced a substantial upswing in response to the deepening Middle East conflict. As tensions escalated on the Israel-Lebanon border, with over 2,000 civilian casualties in the Gaza Strip, the US entered back-channel discussions with Iran to defuse the situation. However, the potential for a direct confrontation between Israel and Iran, a significant supporter of Hamas, raises concerns. Concurrently, oil prices surged dramatically following these US-Iran talks, fueled by apprehensions of looming oil sanctions. Bloomberg Economists estimate that such a scenario could propel oil prices to $150, potentially tipping the world economy into recession. 

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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 its bullish momentum, propelled by robust inflation data emanating from the US. Additionally, the escalating geopolitical tensions in the Middle East have further bolstered the greenback's status as a safe-haven asset of choice. While the overall trend for the Dollar remains poised for potential fluctuations, the imminent address by Fed Chairman Jerome Powell looms large on the horizon.

The Dollar Index is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 59, suggesting the index might experience technical correction since the RSI retreated sharply from overbought territory. 

Resistance level: 106.60, 107.15

Support level: 105.65, 104.80

XAU/USD

Safe-haven assets like gold witnessed a significant surge in response to the intensifying conflict in the Middle East. The situation on the Israel-Lebanon border escalated, with over 2,000 civilian casualties reported in the Gaza Strip. Amid the hostilities, the US engaged in back-channel talks with Iran to defuse tensions, raising concerns that further escalation could lead to a direct confrontation between Israel and Iran, a significant supporter of Hamas.

Gold prices are trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 61, suggesting the commodity might extend its gains toward resistance level since the RSI stays above the midline. 

Resistance level: 1945.00, 2000.00

Support level: 1885.00, 1835.00

EUR/USD

The EUR/USD pair has continued its bearish trajectory, driven by the prevailing strength of the US Dollar, which retains its safe-haven status. Amidst global economic uncertainties and escalating geopolitical tensions, investors have sought refuge in the greenback, putting downward pressure on the euro. However, there is potential for a shift in this trend as Europe's economic prospects take on a positive bias. European Central Bank (ECB) President Christine Lagarde has highlighted the enduring strength of underlying inflation in the eurozone, citing robust wage growth.

EUR/USD is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 39, suggesting the pair might extend its losses since the RSI stays below the midline. 

Resistance level: 1.0605, 1.0795

Support level: 1.0450, 1.0325

USD/JPY

The Japanese yen has experienced a slight decline in value, influenced by the International Monetary Fund's (IMF) assessment of the currency's bearish trend. IMF officials have emphasised that this trend is primarily driven by fundamental factors, which do not meet the criteria for intervention by Japanese authorities in the currency market.

USD/JPY is trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 57, suggesting the pair might extend its losses toward support level since the RSI retreated sharply from overbought territory. 

Resistance level: 149.95, 151.45

Support level: 148.40, 147.50

Dow Jones

Rising geopolitical risks triggered a significant sell-off in global equity markets, as risk-off sentiment dominated the financial landscape. Investors are closely monitoring this week's economic data releases and central bank officials' comments for policy clues. Fed Chairman Jerome Powell is scheduled to address the market later this week, adding to the eventful calendar.

The Dow is trading lower while currently near the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 50, suggesting the index might be traded flat since the RSI near the midline.

Resistance level: 34355.00, 34900.00

Support level: 33425.00, 32840.00

GBP/USD

GBP/USD faced bearish momentum as the US Dollar continued to exert pressure on the pair. However, the UK is poised to release its latest employment and inflation reports this week, marking the final such reports before the Bank of England's November meeting. UK inflation, despite surpassing expectations, exhibited a slowdown in August. In contrast, the last jobs report underscored the strength of the UK employment sector. Investors will closely scrutinise the latest economic data for clues regarding potential implications for the Bank of England's monetary decisions.

GBP/USD is trading flat while currently near the resistance level. However, MACD has illustrated increasing bullish momentum, while RSI is at 40, suggesting the pair might experience technical correction since the RSI rebounded sharply from oversold territory. 

Resistance level: 1.2170, 1.2250

Support level: 1.2110, 1.2040

AUD/USD

Risky assets, including the Australian Dollar, faced downward pressure amid mounting uncertainties ahead of critical events. These include the release of Meeting Minutes from the Reserve Bank of Australia (RBA) and next week's employment data. Furthermore, downbeat Chinese inflation data may affect the Australian Dollar, given Australia's significant role as a major exporter to China. Investors will also closely watch a flurry of economic data from China for insights into the pace of economic recovery.

The Aussie dollar is trading lower while currently testing the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 36, suggesting the pair might enter oversold territory. 

Resistance level: 0.6395, 0.6510

Support level: 0.6285,  0.6205

CL OIL

Oil prices witnessed an aggressive surge in response to the US-Iran talks, with investors apprehensive about the potential for increased tensions between the two nations culminating in oil sanctions. The rising Israel-Palestine conflict has been a catalyst for the US engaging in back-channel discussions with Iran, aimed at defusing tensions. The fear of further escalation, possibly resulting in a direct clash between Israel and Iran, a significant supporter of Hamas, is a cause for concern. Bloomberg Economists have calculated that in such a scenario, oil prices could skyrocket to $150, raising the spectre of tipping the global economy into a daunting recession.

Oil prices are trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 61, suggesting the commodity to extend its gains toward resistance level since the RSI stays above the midline. 

Resistance level: 89.35, 94.00

Support level: 86.40, 92.50