BoJ Signal No Rate Hike Next Week

• The Japanese Yen is expected to weaken in the near term as BoJ hinted there was no intention of a rate hike next week.

• U.S. treasury yield slid, leading to a softening U.S. dollar and buoying Wall Street in the last session.

• BTC gained over 3%, suggesting a bullish trend reversal.

Market Summary

The Japanese Yen is likely to weaken further as BoJ Governor Kazuo Ueda signalled no intention to raise rates in the upcoming central bank meeting, even with the yen trading near a 3-month low. Ueda expressed concern about potential economic impacts tied to the upcoming U.S. presidential election, which could also weigh on Japan's economy.

Meanwhile, a marginal decline in U.S. Treasury yields softened the dollar, preventing the USD/JPY pair from moving higher. The easing yields provided support to Wall Street, with the Nasdaq and S&P 500 closing higher. The tech sector, in particular, found a boost from Teslas better-than-expected earnings.

In the crypto market, Bitcoin (BTC) gained over 3%, breaking out of its bearish trend, suggesting optimism around the upcoming U.S. election as both candidates are seen as crypto-friendly.

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

Source: CME Fedwatch Tool

-50 bps (7%) VS -25 bps (97%)

Market Movements

DOLLAR_INDX, H4

The Dollar Index, which measures the greenback against a basket of six major currencies, retreated slightly as the 10-year Treasury yields experienced a mild pullback, marking its first decline this week due to technical correction. Despite this, US economic data continues to show resilience, with stronger-than-expected new home sales and initial jobless claims falling, while business activity remains solid. Investors are now pricing in an 97% chance that the Federal Reserve will implement a 25-basis-point rate cut next month, rather than the previously expected 50 basis points.

The Dollar Index is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 52, suggesting the index might extend its losses after breakout since the RSI retreated sharply from overbought territory.

Resistance level: 104.95, 105.55

Support level: 103.95, 103.25

XAU/USD, H4

In the short term, better-than-expected US economic data has shifted market sentiment, prompting a selloff in gold as risk appetite strengthened. However, gold's long-term outlook remains positive. Ongoing geopolitical tensions in the Middle East and the upcoming US Presidential Election are expected to fuel demand for safe-haven assets like gold. 

Gold prices are trading higher while currently testing the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 54, 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 posted modest gains in the last session as the U.S. dollar eased amid a decline in U.S. Treasury yields. However, due to recent economic data, the pair is expected to remain under bearish pressure. UK PMI readings fell short of expectations, while U.S. job data outperformed, reinforcing the view of a robust U.S. dollar against a weaker Pound Sterling. These fundamentals suggest the dollar‘s strength will likely continue to weigh on the pair’s upside potential.

GBP/USD edged higher in the last session but failed to form a higher high, suggesting the pair remains trading within its bearish trajectory. The RSI remains below the 50 level, while the MACD remains below the zero line, suggesting the pair remains trading with bearish momentum.

Resistance level: 1.2980, 1.3065

Support level: 1.2910, 1.2850

CL OIL, H4

Crude oil prices experienced a retreat, primarily due to concerns over a pessimistic global economic outlook and rising demand for electric vehicles.  Meanwhile, economic activity in the Eurozone remains in contraction territory, with demand falling both domestically and internationally. Similarly, the UK is facing a dip in business optimism, as firms anticipate challenging economic conditions ahead of the new government's budget announcement.

Oil prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 48, suggesting the commodity might extend its losses after breakout since the RSI stays below the midline.

Resistance level: 72.60, 74.75

Support level: 70.95, 69.90