The recent fluctuations in the XAU/USD (gold vs. US dollar) reflect a complex interplay of economic indicators and geopolitical concerns. Despite the positive surprise in initial jobless claims and stronger-than-expected PMI figures, the US dollar is struggling to regain momentum. This weakness can be attributed to rising uncertainty surrounding the upcoming presidential election and the mixed performance in US equity markets.
Looking ahead to the September Durable Goods Orders and Michigan Consumer Sentiment Index, strong results could bolster the dollar's position, particularly with a 90% probability of a Fed rate cut next month weighing on market sentiment.
Across the Atlantic, the ECB's recent rate cut reflects ongoing economic challenges in the eurozone, with inflation dipping below target. The mixed signals from ECB officials suggest a cautious approach to future rate adjustments, influenced by persistently low inflation and stagnant growth.
In the Asia-Pacific region, the RBA's dovish stance amid economic cooling raises questions about potential rate cuts. The Australian dollar's recent underperformance highlights concern about China's economic recovery, with fluctuations in commodity prices contributing to trader sentiment.
As central banks navigate these uncertain waters, the direction of currencies will hinge on broader economic trends and geopolitical developments. The US dollar may retain support as a safe haven, but ongoing volatility will likely shape short-term trading strategies.
The EUR/USD pair struggles to maintain momentum following the previous day’s 60-pip rally, trading with a slight negative bias during the Asian session on Friday. Despite this, spot prices remain comfortably above the 1.0800 level, recovering from a near four-month low touched earlier in the week amid muted US Dollar (USD) movement.
The USD Index (DXY) stabilizes after a pullback from its July 30 high, as US Treasury yields ease and equity markets show signs of stability, limiting demand for the safe-haven dollar. However, expectations of smaller rate cuts by the Federal Reserve, coupled with US deficit-spending concerns post-election, support bond yields and keep the USD underpinned, capping gains for EUR/USD.
On the Euro side, weak Eurozone PMIs point to stalled economic activity and slowing inflation in October, reinforcing the European Central Bank’s (ECB) outlook for continued disinflation and potential further policy easing, which weighs on the Euro. Traders now await Germany's Ifo Business Climate Index and key US data, including Durable Goods Orders and the revised Michigan Consumer Sentiment Index, for fresh catalysts. With bond yields and overall risk sentiment, these will shape near-term EUR/USD price movements.
The EUR/USD pair remains in a downtrend, confirmed by the downward-sloping 20-day and 50-day moving averages. The 20-day MA is below the 50-day MA, reinforcing short-term bearish momentum. Key support lies at …, as seen in the June 2024 low. On the other hand, resistance is at …, aligned with the 20-day MA. Current price action shows consolidation above …, indicating indecision. The outlook remains bearish unless there is a clear break above resistance or strong support emerges near current levels.
The Australian Dollar (AUD) dipped against the US Dollar (USD), despite some gains in the AUD/USD pair due to a slight softening of the USD linked to lower US Treasury yields. The Australian Dollar may receive support from the Reserve Bank of Australia's (RBA) hawkish stance, as Deputy Governor Andrew Hauser pointed out the strong labor participation rate and emphasized the RBA's data-driven approach without being overly fixated on it.
The USD has gained strength as traders monitor the Federal Reserve's interest rate plans, with expectations that the Fed will be less aggressive in cutting rates than previously anticipated. Speculation around a potential second term for Donald Trump in the upcoming presidential election is also supporting the USD. Traders are expected to focus on US Durable Goods Orders and Michigan Consumer Sentiment Index data on Friday.
The AUD/USD pair is currently testing a two-month low of $…, with the next significant support level at $…. On the upside, resistance is expected at the 100-day EMA of $… and the 20-day EMA of $…. If the pair breaks above these resistance levels, it could potentially move toward the psychological barrier of $….
