Dollar Strengthen Ahead of GDP Reading

• The U.S. dollar recorded a technical rebound ahead of the U.S. GDP.

• Chinese equity markets remain robust due to the Chinese government's economic stimulus package.

• Gold is Poised at all-time high levels as Middle-East tension escalates.

Market Summary

The U.S. dollar rebounded sharply towards the $101 mark ahead of key economic data releases, including GDP and the PCE reading due on Friday. The Dollar Index (DXY), however, faces resistance between $101.00 and $100.85 at its previous fair-value gap; a break above this range could shift the current bearish outlook. Meanwhile, Wall Street struggled for direction, with the Dow leading losses, closing nearly 300 points lower in the last session, as the market lacked fresh catalysts.

In contrast, Chinese equity markets remain robust, buoyed by the government's economic stimulus packages. Both the China A50 and Hong Kongs Hang Seng indexes opened higher today, reflecting optimism in Asia.

The release of the BoJ meeting minutes showed a divided board on the pace of future rate hikes. Out of the nine members, only two supported a faster pace, while the majority expressed concerns that aggressive hikes could harm the economy.

In the commodity market, gold prices remain elevated, hovering near all-time highs, with the precious metal eyeing the next psychological resistance level of $2700. The ongoing tension in the Middle East continues to drive safe-haven demand for gold.

Current rate hike bets on 7th November Fed interest rate decision:

Source: CME Fedwatch Tool

-50 bps (32%) VS -25 bps (68%)

Economic Calendar

(MT4 System Time)

Source: MQL5

Market Movements

DOLLAR_INDX, H4

The Dollar Index, which tracks the greenback against a basket of six major currencies, rebounded from a strong support level due to technical corrections and bargain buying. However, the long-term outlook for the Dollar remains bearish, with expectations of another aggressive rate cut by the Federal Reserve at its November meeting. According to the CME FedWatch Tool, the probability of a 50-basis point cut at the November 7th meeting has risen to 59%, up from 37% a week ago. Traders will be closely monitoring the US Personal Consumption Expenditures (PCE) index and Fed Chair Jerome Powell's upcoming statements for further direction.

The Dollar Index is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 56, suggesting the index might extend its gains since the RSI stays above the midline.

Resistance level: 101.80, 102.35

Support level: 100.45, 99.70

XAU/USD, H4

Gold prices are trading higher, currently testing a key resistance level. The weakening US Dollar, coupled with declining US Treasury yields, continues to support gold prices. Investors are advised to monitor the upcoming US Personal Consumption Expenditures (PCE) index and statements from Fed Chair Jerome Powell to gauge potential movements in gold.

Gold prices are trading flat while currently testing the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 57, suggesting the commodity might extend its gains after breakout since the RSI stays above the midline.

Resistance level: 2665.00, 2780.00

Support level: 2640.00, 2620.00

CL OIL, H4

Crude oil prices slumped over 2% on Wednesday as concerns over supply disruptions in Libya eased, and demand worries persisted despite China's latest stimulus measures. Libya's factions reached an agreement on appointing a central bank governor, an initial step toward resolving the dispute that has severely impacted the country's oil output and exports. Additionally, a hurricane threatening the US Gulf Coast changed course toward Florida, reducing fears of disruptions in oil and gas production areas near Texas, Louisiana, and Mississippi. However, losses in oil prices were limited by a downbeat Energy Information Administration (EIA) report showing a 4.5 million barrel decline in crude oil inventories, exceeding market expectations of a 1.4 million barrel drop.

Oil prices are trading lower following the prior retracement from the resistance level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 38, suggesting the commodity might experience technical correction since the RSI rebounded sharply from oversold territory.

Resistance level: 70.30, 71.95

Support level: 68.60, 67.15