Dollar Stays Strong as U.S. Election is Approaching

• Gold Remain strong despite facing slight technical retracement in the last session.

• The dollar remains robust, with the dollar index notching its highest level in October as treasury yield surged.

• Eye on the Canadian dollar with the expectation of a 50 bps rate cut from the Bank of Canada tomorrow.

Market Summary

Safe-haven gold continues to trade within a bullish trajectory as traders closely watch developments in the Middle East. With the U.S. presidential election looming, demand for gold has surged due to the uncertainty surrounding the event. Meanwhile, silver has exhibited extreme bullish momentum, rising nearly 7% last week and holding at its highest levels in a decade in recent sessions.

In contrast, oil prices remain subdued as a pessimistic demand outlook weighs on the commodity. The Dollar Index (DXY) rose to a new high in the latest session, driven by extended sell-offs in the bond market, pushing U.S. Treasury yields higher. If Donald Trump wins the presidential election, concerns over his policies potentially stoking higher inflation could lead the Fed to maintain elevated interest rates.

In the forex market, the Bank of Canadas interest rate decision is due tomorrow, with a 50 basis point rate cut expected. If realised, it could further weaken the Canadian dollar against its peers.

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

Source: CME Fedwatch Tool

-50 bps (7%) VS -25 bps (93%)

Market Movements

DOLLAR_INDX, H4

The dollar climbed on Monday, buoyed by a rise in U.S. bond yields, as solid U.S. economic data suggested the Federal Reserve can afford to be patient in cutting rates. Investors are positioning for the Nov. 5 presidential election. The greenback has risen for three straight weeks and in 14 of the past 16 sessions, as a run of positive economic data led investors to scale back expectations about the size and speed of rate cuts from the Fed. Markets are pricing in an 87% chance of a 25-bps cut at the Fed's November meeting.

The Dollar Index is trading lower while currently near the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 67, suggesting the dollar might enter overbought territory.

Resistance level: 103.95, 104.95

Support level: 103.25, 102.50

XAU/USD, H4

As the U.S. election approaches, investors are continuing to price in safe-haven assets, including the dollar and gold. However, gains in the gold market paused as investors decided to take profit. In the long term, Middle East tensions and uncertainty around the U.S. presidential election increased flows toward safe-haven assets over the last five trading days.

Gold prices are trading higher while currently testing the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 58, suggesting the commodity might extend its gains after breakout since the RSI stays above the midline.

Resistance level: 2735.00, 2770.00

Support level: 2705.00, 2685.00

GBP/USD，H4

The GBP/USD pair has formed a double-bottom price pattern near the 1.2978 level, indicating the possibility of a technical rebound. However, the pair remains under strong selling pressure as the U.S. dollar continues to strengthen ahead of the U.S. presidential election and ongoing tensions in the Middle East. If the pair manages to break above the 1.3080 level, it could signal a potential trend reversal for the pound, though until then, the bearish bias persists. Traders should watch for any significant developments that could shift market sentiment.

GBP/USD seems to have found support and formed a double-bottom price pattern at the 1.2975 mark. The RSI remains close to the oversold zone, but the MACD is edging higher, suggesting the pair is still trading with bearish momentum. A break below the support level suggests a solid bearish signal for the pair.

Resistance level: 1.3075, 1.3140

Support level: 1.2910, 1.2850

USD/JPY, H4

The USD/JPY pair has been trading steadily within its uptrend channel over the past 10 sessions, indicating a continued bullish bias. This upward momentum is driven by the combination of uncertainty around the BoJ's upcoming monetary policy and the robust performance of the U.S. dollar. The release of the BoJ Core CPI reading later today is expected to have a direct influence on the pair's direction, as a higher-than-expected reading could prompt speculation on tighter monetary measures, while a softer reading may further weaken the yen and fuel the pair's uptrend.

The pair continues its bullish rally and is trading to its 10-week high, suggesting a bullish bias for the pair. The RSI remains close to the overbought zone, while the MACD is edging lower, suggesting that the bullish momentum is easing.

Resistance level: 152.25, 153.85

Support level: 149.40, 147.30