Article by: ETO Markets
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.
Gold prices faced a pullback despite the ongoing uptrend, reversing some of the previous day’s gains but staying within the week’s trading range. Political uncertainty from the upcoming November 5 US presidential election, combined with Middle East tensions, continues to offer support to the safe-haven metal.
However, this support is limited by renewed demand for the US Dollar, driven by expectations of reduced policy easing from the Federal Reserve. Strong US economic data has diminished the likelihood of another large rate cut in November, strengthening the dollar and applying pressure on the non-yielding Gold.
In terms of technical analysis, the Relative Strength Index (RSI) shows a pullback from overbought conditions, suggesting that long holders may want to close their positions and consider shorting. If XAU/USD reaches $…, the next resistance level would be the year-to-date high of $…. On the other hand, if gold prices continue to pull back, the next support level would be $… (the September high), with further support at the 20-day Simple Moving Average (SMA) of $….
Crude oil prices are currently around $71.00, facing downward pressure after disappointing diplomatic efforts by U.S. Secretary of State Antony Blinken concerning Israel and Iran. His inability to secure a humanitarian aid deal has raised concerns about escalating tensions in the region, dampening market optimism.
which reached a three-year high, though it had surged above 104.00 earlier this week. With the U.S. presidential election approaching, the dollar is expected to remain under pressure, potentially benefiting crude prices.
Saudi Arabia’s oil export revenues have fallen to a three-year low due to sluggish demand, contributing to weaker crude prices. Meanwhile, ExxonMobil has sold its Nigerian onshore assets to Seplat Plc for $1.3 billion, and Mexico’s Pemex is reportedly increasing its oil and gas reserves under President Claudia Sheinbaum. Traders are also purchasing short-dated options to hedge against potential oil price spikes amid ongoing geopolitical tensions.
Crude oil prices are encountering resistance at the 55-day Simple Moving Average (SMA) at $…. The next key resistance level to watch is $…, aligning with the 100-day SMA. On the downside, traders should monitor the $… level, the October low. A break below this level would shift attention to the next support at $…, the September low.
