Wall Street Rallies on Dovish Fed's Policy

• Wall Street rallied after the market digested the dovish pivot of the Fed monetary policy.
• The U.S. dollar was hammered to a near recent low level as the dollar is weighing on the Fed rate cut event.
• Gold prices are poised at an all-time high, awaiting a fresh catalyst to break a new high.

Market Summary

Wall Street surged with strong bullish momentum after digesting the FOMC interest rate decision on Wednesday. All three major U.S. equity indexes saw significant gains, with the Nasdaq leading the charge, closing up by more than 2.5%. This tech-heavy index, sensitive to interest rate changes, is expected to catch up to the Dow Jones and S&P 500, which have already reached all-time highs.

On the currency front, the U.S. dollar faced pressure due to the Fed's dovish stance, but was supported by an upbeat Initial Jobless Claims report, which hit its lowest reading since May, signalling continued strength in the U.S. labour market. Meanwhile, Pound Sterling rallied, boosted by the BoE's decision to keep interest rates unchanged, pushing the Pound Sterling index (BXY) to its highest level since 2022.

Looking ahead, all eyes are on the BoJ monetary policy statement after Japan's CPI matched market expectations at 2.8%. A hawkish tone could potentially strengthen the Yen, which has traded softly this week.

In the commodity market, both gold and oil benefited from the Fed's dovish moves. Gold is hovering near its all-time highs, while oil prices are edging higher on expectations of lower U.S. interest rates, which could spur demand.

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

Source: CME Fedwatch Tool

-50 bps (32%) VS -25 bps (68%)

DOLLAR_INDX, H4

The Dollar Index, which tracks the performance of the dollar against a basket of six major currencies, continued to decline as investors absorbed the Federal Reserves 50 basis points rate cut and further dovish signals. According to the CME FedWatch Tool, market participants now assign a 65% probability of another 50 basis points cut in the upcoming meeting, despite earlier consensus leaning towards a 25 basis points reduction. The extent of the dollar's losses, however, was tempered by stronger-than-expected US economic data. The US Department of Labor reported Initial Jobless Claims at 219K, surpassing expectations of 230K, while the Philadelphia Fed Manufacturing Index registered a reading of 1.70, significantly outperforming the forecast of -0.80.

The Dollar Index is trading lower while currently testing the support level. MACD has illustrated diminishing bullish momentum, whale RSI is at 44, suggesting the index might extend its losses after breakout since the RSI stays below the midline.

Resistance level: 101.80, 102.35

Support level: 100.55, 99.70

XAU/USD, H4

Gold prices saw a rebound, driven by the depreciation of the US Dollar and the anticipation of further rate cuts by the Federal Reserve. Market participants now expect the Fed to implement a 50 basis points cut at its upcoming meeting, significantly above prior projections. The possibility of deeper rate cuts, combined with escalating tensions in the Middle East, has bolstered demand for gold as a safe-haven asset.

Gold prices are trading higher while currently testing the resistance level. However, MACD has illustrated increasing bearish momentum, while RSI is at 60, suggesting the commodity might experience technical correction since the RSI retreated sharply from overbought territory.

Resistance level: 2590.00, 2605.00

Support level: 2575.00, 2550.00

GBP/USD，H4

The Pound Sterling received a significant boost following the BoE's interest rate decision announced yesterday, which aligned with market expectations of holding interest rates steady. The BoE, being one of the few major central banks yet to shift away from its monetary tightening policy, is helping to strengthen the Sterling. The currency pair has gained upward momentum and is expected to continue trading higher, especially after breaking above the 1.3300 level. Traders are likely to keep an eye on further developments, as the Pound remains supported by this policy stance.

GBP/USD has broken above its recent high level, suggesting a bullish bias for the pair. The RSI is on the brink of breaking into the overbought zone, while the MACD had a bullish cross and edged higher, suggesting the pair's bullish momentum remains strong.

Resistance level: 1.3350, 1.3440

Support level:1.3280, 1.3140