Dollar Softens as Middle East Tension Eases

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Amid escalating Middle East tensions, Western allies have intensified diplomatic efforts. U.S. President Joe Biden's upcoming visit to Israel signals a show of support, bolstering market confidence. Equities surged, reflecting improved risk appetite, while traditional safe-havens like USD and gold dipped for the second consecutive session. Despite a slight easing, oil prices found stability above $86. As the earnings season unfolds, U.S. equity markets are poised for heightened volatility. Analysts anticipate challenging reports, influenced by elevated borrowing costs throughout the year.

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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 saw a period of consolidation as profit-taking ensued following its recent highs. Market attention now centres on upcoming crucial economic data releases, particularly core retail sales and retail sales, to gain insights into the US economy's trajectory.

The Dollar Index is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 49, suggesting the index might extend its losses toward support level since the RSI stays below the midline. 

Resistance level: 106.60, 107.15

Support level: 105.65, 104.80

XAU/USD

After experiencing a significant surge last week due to rising tensions in the Middle East, gold prices retreated slightly as investors booked profits. However, with the Israel-Hamas conflict ongoing, and the potential for further international involvement, the safe-haven appeal of gold remains strong, with all eyes on geopolitical developments.

Gold prices are trading lower while currently testing the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 67, suggesting the commodity might enter overbought territory.

Resistance level: 1945.00, 1970.00

Support level: 1915.00, 1880.00

EUR/USD

The EUR/USD pair maintains its upward momentum, driven by diplomatic efforts to ease Middle East tensions and reduce demand for the safe-haven USD. Despite this, the euro faces resistance at 1.0560. Market attention shifts to the eurozone's upcoming CPI data, with expectations of a decline from previous readings, potentially leading to depreciation against the robust USD.

EUR/USD rebounded strongly by 0.5% yesterday but is suppressed under its strong resistance level at 1.0560. The MACD has crossed while the RSI has a sign of rebound, suggesting the bearish momentum has vanished. Resistance level: 1.0630, 1.0750

Support level: 1.0500, 1.0460

USD/JPY

The ongoing apprehension regarding potential monetary intervention by the Bank of Japan is currently strengthening the Japanese yen. The recent discussion among policymakers about the need for possible intervention on the Japanese yen reflects their concerns over its trajectory. Any moves by the Bank of Japan to intervene could further bolster the yen and consequently lead to a continued decline in the USD/JPY pair.

USD/JPY is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 56, suggesting the pair might extend its losses since the RSI retreated sharply from overbought territory. 

Resistance level: 149.95, 151.45

Support level: 148.40, 147.30

Dow Jones

US equity markets inched higher as investors increased bullish bets on big tech companies in anticipation of forthcoming financial reports from major corporations. Attention has shifted from US Treasury yields to quarterly earnings from influential players like big banks, Netflix, and Tesla this week.

The Dow is trading higher following the prior breakout above the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 59, suggesting the index might extend its gains since the RSI stays above the midline. 

Resistance level: 34355.00, 34900.00

Support level: 33900.00, 33370.00

NZD/USD

The Kiwi faced a sharp decline amid a robust USD, fueled by heightened Middle East tension. Despite positive sentiment following the recent New Zealand general election, the Kiwi failed to gain traction. Additionally, New Zealand's disappointing CPI data indicates easing inflation, potentially paving the way for a more dovish monetary policy stance from the RBNZ.

NZD/USD is currently buoyed by its strong support level at 0.5890 but macroeconomic factors hinder the technical rebound momentum. The RSI and the MACD continue to hover in the lower region, suggesting the bearish momentum is still strong. 

Resistance level: 0.5980, 0.6060

Support level: 0.5890,  0.5800

BTC/USD

BTC briefly soared to $29,900, its highest since mid-August, fueled by false news of SEC approval for the BlacoRock BTC ETF. Prices retracted below $29,000 after the misinformation was clarified. Despite this, optimism surged as the SEC chose not to appeal the court's rejection of Grayscale Investments' spot BTC ETF application, fostering optimism for future approvals in the sector and providing buoyancy for BTC prices.

The bullish momentum was strong yesterday, boosted by the false news. The MACD has broken above the zero line, and the RSI has gotten into the overbought zone, suggesting the bullish momentum is strong. 

Resistance level: 28800, 29350

Support level: 27400,  26700

CL OIL

The oil market witnessed a slight decline as hopes for potential sanction relief for Venezuela emerged. Talks between Venezuela's government and the opposition have the potential to lead to a relaxation of sanctions on the country, which could increase its oil exports and alleviate pressure on the global crude market.

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

Resistance level: 89.35, 94.00

Support level: 86.40, 82.50