October 06th Daily Analysis
October 06th Daily Analysis
U.S. DOLLAR INDEX (USDX)
The dollar staggered during the Asia session on Thursday, as investors looked ahead to U.S. labor and inflation data where softness may signal an eventual slowdown in U.S. rate hikes. Federal Reserve officials have repeatedly stressed they will hike and hold rates high until inflation subsides, and markets expect a steep 75 basis point hike next month.
The U.S. services industry posted another month of expansion in September, while labor market figures were solid, and the trade deficit narrowed. The U.S. dollar index traded 0.08% lower at 110.84, though some distance below last week’s 20-year high of 114.78.
Technically, the index remains positive on both the daily and hourly charts after the correction. The hourly chart is bouncing after the correction that hit 111.00. Meanwhile, the daily chart shows strong resistance below 112.30. On the other hand, technical indicators show a possible continuation of the uptrend on MACD figures and a horizontal trend signal on the RSI on the daily chart.
The index remains positive as long as it is trading above 109.25, otherwise, in the case of breaking below this level, it is expected to change direction. On the other hand, the hourly chart shows a continuation of the downtrend. The index is seen heading to 109.90 based on the current readings.
Pivot Point: 110.50
Traders remain optimistic as mixed U.S. ADP and ISM Services PMI doused expectations for aggressive Fed rate hikes. However, it has barely impacted the market pricing of a 75 bps November Fed rate increase.
Despite the renewed upside in the major, EURUSD bulls remain cautious amid escalating geopolitical tensions between the West and Russia over the Ukraine crisis. The European Union (EU) backed new sanctions against Russia, including the oil price cap on Wednesday.
EURUSD was down 0.45% at $0.9938 while it remains negative on the daily chart as long as it trades below the parity levels.
Pivot Point: 0.9910
SPOT GOLD (XAUUSD)
Gold price is holding onto the latest bounce, as the US dollar sags alongside yields amid underperformance of the Treasury yields across the curve. Investors remain wary about the size of the next Fed rate hike after Wednesday’s mixed U.S. economic data. Markets also remain unconvinced about Fed officials’ denial of rate cuts next year, which could be also boding ill for the greenback.
Meanwhile, markets priced in a 65% chance of a 75 bps Fed rate hike next month. The U.S. Nonfarm Payrolls on Friday will provide clarity on the Fed tightening outlook. The U.S. economy is expected to add 250K jobs in September.
XAUUSD is trading near $1,735 per ounce on a sustained break above the 50 DMA barrier. The bearish 50-Daily Moving Average (DMA) at $1,724 continues to limit the upbeat momentum. A firm break above the latter could revive bullish interest, calling for a test of $1,730.
The 14-day Relative Strength Index (RSI) is inching higher above the midline, supporting the renewed upside in the metal. A sustained break above the 50 DMA is needed to challenge the September highs at $1,735. Alternatively, sellers could test the previous critical resistance now support at $1,700 before approaching Tuesday’s low of $1,695.
Pivot Point: 1,725
WEST TEXAS CRUDE (USOUSD)
Oil prices kept to a three-week high during the early trades. However, prices appeared to have paused a recent rally as OPEC+ intends to carry out a massive supply cut. OPEC and allies said on Wednesday it will cut supply by 2 million barrels per day (bpd) to counter recent weakness in crude prices.
The move, coupled with signs of a bigger weekly drawdown in U.S. crude inventories, spurred a sharp rally in oil prices, helping them recover further from an eight-month low hit in September.
But the OPEC and allies provided light details on which of its members would cut supply, and how the cut would be implemented. The cartel also did not address how the cut would factor into a 3.5 million bpd shortfall in its daily production target.
Brent futures fell 0.2% to around $93.59 a barrel, while West Texas Intermediate futures rose 0.2% to $87.95 a barrel.
Pivot Point: 88.00