Market Analysis

XAUUSD

Prediction: Increase

Fundamental Analysis:

Gold prices continue their upward momentum, reaching new record highs after surpassing the $2,700 level, driven by uncertainties surrounding the US election and escalating tensions in the Middle East. These factors have placed pressure on US Treasury bond yields and weakened the US Dollar, which fell to a two-day low of 103.45 after recently hitting a two-month high of 103.87. Currently, XAU/USD is trading at $2,721, reflecting a 1.09% gain. Investor sentiment remains positive, with Wall Street posting modest gains. Geopolitical developments are at the forefront, as Israel confirmed the death of Hamas leader Yahya Sinwar. Additionally, Hezbollah announced it is intensifying its confrontation with Israel, while US Defense Secretary Austin suggested the leader’s death may offer a window for ceasefire talks.

Technical Analysis:

The bullish trend in gold remains strong, supported by momentum indicators like the Relative Strength Index (RSI), which shows overbought conditions but no signs of correction yet. Given these factors, the likely trajectory for gold is upward. The next resistance levels are at $2,750 and $2,800. On the downside, if XAU/USD pulls back below $2,700, it may open the door for a correction. Initial support levels can be found at $2,696 (October 17 high) and $2,670 (October 4 high).

EURUSD

Prediction: Decline

Fundamental Analysis:

EUR/USD extended its downward trend this week, hitting a 10-week low of 1.0811 during the U.S. trading session on Thursday. Although the pair has recovered slightly and is trading around 1.0850 in early European trading on Friday, the technical outlook suggests that recovery momentum remains weak. The European Central Bank (ECB) followed expectations by reducing key rates by 25 basis points after its October meeting. In its statement, the ECB reiterated its commitment to a data-driven, meeting-by-meeting approach when deciding on the level and duration of policy tightening.

Technical Analysis:

The Relative Strength Index (RSI) hovers just above 30 after a modest recovery attempt, indicating that the bearish trend remains dominant in the short term. On the upside, immediate resistance stands at 1.0870, the 78.6% Fibonacci retracement of the recent upward movement, followed by 1.0900, a key psychological and static level. A daily close above 1.0900 could reduce selling pressure and pave the way for a potential move toward 1.0950, corresponding to the 61.8% Fibonacci retracement. On the downside, initial support is located at 1.0830, followed by 1.0780, the starting point of the recent uptrend, and further down at 1.0740, a key static level from April.

USDJPY

Prediction: Decline

Fundamental Analysis:

USD/JPY is currently undergoing a correction after two consecutive days of gains, as mixed economic data from Japan weighs on the currency. While the market continues to anticipate potential monetary tightening by the Bank of Japan (BoJ), the yen is under pressure due to a slowdown in domestic inflation, which may reduce the urgency for immediate rate hikes. In September, Japan's consumer prices rose by 2.5% year-on-year, a decline from the 3.0% inflation rate seen in August. This marks the first slowdown in inflation since March and the lowest rate since April. Core inflation, a key figure for BoJ policy, increased by 2.4%, down from 2.8% in August but has remained above the BoJ’s 2.0% target for 30 straight months. Inflation excluding food and energy ticked up slightly to 2.1% in September, from 2.0% in August.

Technical Analysis:

The USD/JPY pair recently hit a peak at 150.30 and is now retracing towards 149.75, testing this support level. Looking ahead, a potential rebound towards 151.15 is possible. If the pair breaks through this resistance, it could pave the way for a move toward 152.09. However, if it falls below 149.70, a deeper correction to 147.70 may be on the horizon. The MACD indicator supports a bullish outlook, with the signal line positioned above zero and showing potential for new highs.

USDCHF

Prediction: Increase

Fundamental Analysis:

The USD/CHF pair is experiencing slight losses around 0.8655 in the early European session on Friday. Expectations that the US Federal Reserve may ease its rate-cutting pace could limit further declines in the near term. Traders are awaiting more signals from upcoming US housing data and comments from Fed officials later today. The US dollar continues to find support as expectations for aggressive Fed rate cuts diminish, backed by robust US economic data. On Thursday, the US Census Bureau reported a 0.4% month-over-month rise in retail sales for September, exceeding both August’s 0.1% increase and the market forecast of 0.3%. In addition, initial jobless claims for the week ending October 11 rose to 241,000, lower than the consensus and the previous week’s revised figure of 260,000.

Technical Analysis:

A strong upward trend has emerged on the daily chart, following a recent rebound from 0.84—a level where ING analysts believe the Swiss National Bank (SNB) may have intervened. Despite this, the rally remains controlled and doesn’t appear overextended, unlike the USD/JPY. There is potential for USD/CHF to gain an additional 140 pips (about 1.6%) before challenging its 200-day EMA. Additionally, Monday’s bullish expansion was followed by a narrow inside day, suggesting continued demand for the pair. The widening US-Swiss 2-year yield spread further indicates that upward momentum for USD/CHF may persist.

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