Market Analysis

XAUUSD

Forecast: Upside Potential Amid Market Volatility

Fundamental Analysis: 

Gold is currently trading just below its all-time high, with a modest decline of 0.09%, influenced by a sharp rise in US Treasury yields, which have surged over 10 basis points to 4.192%. Safe-haven demand persists due to ongoing tensions in the Middle East and uncertainty surrounding the US presidential election, where polls indicate a close race between Harris and Trump. Meanwhile, Federal Reserve officials have hinted at a gradual easing of interest rates, with market expectations heavily favoring a 25 basis point cut in the November meeting.

Technical Analysis: 

Gold's upward trend appears poised to continue, although the formation of a 'gravestone doji' signals the potential for a near-term pullback. While the momentum remains bullish, it shows signs of weakening as reflected in the Relative Strength Index (RSI), which, despite staying in positive territory, has flattened. Should XAU/USD break above the October 21 peak at $2,740, the next targets are $2,750 and $2,800. However, if gold retraces below the $2,700 level, it could lead to a deeper pullback. Key support levels to watch include the October 17 high at $2,696 and the October 4 high at $2,670.

EURUSD

Forecast: Downward Momentum Continues

Fundamental Analysis:

EUR/USD extended its sharp multi-week decline on Monday, testing two-month lows near the 1.0800 level and staying below the critical 200-day Simple Moving Average (SMA) at 1.0871. The US Dollar (USD) maintained its strength, with the US Dollar Index (DXY) approaching the 104.00 mark, a level last seen in early August. The USD's upward momentum has been supported by rising US Treasury yields, which are hitting multi-week highs across the curve. The dollar rally, which has been gaining steam throughout the month, is backed by solid US economic data and cautious commentary from Federal Reserve (Fed) officials. Additionally, the resurgence of the “Trump trade” on Monday further boosted the dollar.

While several Fed policymakers are leaning towards a 25 basis point interest rate cut in the near future, some officials, like FOMC Governor Michelle Bowman and Atlanta Fed President Raphael Bostic, have voiced a more cautious approach. Bostic even hinted that the Fed may hold off on a rate cut in November. According to the CME Group’s FedWatch Tool, there is currently an 85% chance of a quarter-point cut being priced in for next month.

Technical Analysis:

If the EUR/USD pair continues to weaken, it could test its recent low of 1.0810 (from October 17), followed by the psychologically important 1.0800 level, and potentially the August low of 1.0777 (from August 1). On the upside, initial resistance is found at the 100-day and 55-day SMAs, located at 1.0935 and 1.1038, respectively. Beyond that, the 2024 high of 1.1214 (from September 25) and the 2023 peak of 1.1275 (from July 18) serve as key resistance points. However, staying below the 200-day SMA at 1.0871 could signal a more bearish outlook.

On the four-hour chart, the pair is continuing its downward trend, with early support at 1.0810, followed by 1.0777. On the upside, resistance is found at the 55-SMA at 1.0897, followed by 1.0954 and the 100-SMA at 1.0968. The Relative Strength Index (RSI) is below the 30 threshold, indicating oversold conditions.

AUDUSD

Prediction: Gradual Increase Expected

Fundamental Analysis:

The Australian Dollar (AUD) remains subdued against the US Dollar (USD) as of Tuesday, with the AUD/USD pair facing downward pressure following a significant rise in US Treasury yields, which surged by over 2% on Monday. This upward move in yields was fueled by robust economic indicators and renewed concerns about potential inflationary pressures in the US. However, downside risks for the AUD are likely to be mitigated by growing hawkish sentiment surrounding the Reserve Bank of Australia's (RBA) monetary policy stance, supported by encouraging employment data from Australia. Additionally, China’s recent rate cuts provided some relief to the Aussie, as China is Australia’s largest trading partner, contributing to underlying support for the AUD.

Technical Analysis:

The AUD/USD pair is trading near 0.6660 as of Tuesday. On the daily chart, the pair remains below the nine-day Exponential Moving Average (EMA), indicating a bearish short-term outlook. Additionally, the 14-day Relative Strength Index (RSI) remains under 50, further confirming the bearish trend. On the downside, the pair may test its recent eight-week low of 0.6622, last seen on September 11, with additional support at the psychological level of 0.6600. On the upside, initial resistance lies around the nine-day EMA at 0.6700, followed by stronger resistance near the 50-day EMA at 0.6734. A break above this level could pave the way for a push toward the key psychological resistance at 0.6800.

US30

Prediction: Decrease

Fundamental Analysis:

The Dow Jones Industrial Average (DJIA) declined sharply on Monday, dropping nearly 350 points, or 0.8%, as the equity markets retreated from their recent record highs. The Dow led the market losses at the start of the week, with the bulk of the decline concentrated within the major index. Bond yields edged higher, and construction stocks took a hit, as renewed concerns emerged that the Federal Reserve (Fed) may have to maintain elevated interest rates for an extended period. Despite a significant 50-basis point rate cut in September, investors remain wary as the US economy shows unexpected resilience, suggesting the Fed may need more time to bring core inflation down to its 2% target.

Technical Analysis:

The Dow Jones is presenting conflicting signals on the daily chart. While price action remains in bullish territory, supported by momentum that continues to push above long-term moving averages, technical indicators are raising caution. The index recently retreated from a record high above 43,200, slipping back below 43,000 and shedding over 300 points. Despite the pullback, prices remain elevated, with the 50-day Exponential Moving Average (EMA) sitting lower at 41,740, suggesting ongoing upward pressure. However, the Moving Average Convergence-Divergence (MACD) indicator, though still above the zero line (a bullish sign), shows declining momentum as the fast line approaches a bearish crossover with the slower signal line. This may indicate an upcoming short-term correction, particularly if the price breaks below the 42,000 support level.

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