Dow Jones Set New High on Earnings Optimism

• Dow Jones recorded a new high as the market is optimistic about the mega caps earnings performance.

• The U.S. dollar remains robust ahead of Initial Jobless Claims and Retail Sales readings.

• Gold rose to all-time high levels as the market perceived heightened geopolitical risks.

Market Summary

The Dow Jones continues its upward momentum, reaching a new all-time high as the market enters the 3rd quarter earnings season. Strong performances from mega-cap banks such as Goldman Sachs, Morgan Stanley, and Bank of America, which exceeded earnings expectations, have further fueled risk appetite in the U.S. equity market. 

In the forex market, the U.S. dollar index (DXY) has climbed more than 3% in October, supported by robust U.S. economic data. Traders are now eyeing the release of the Initial Jobless Claims report, which is expected to provide further insights into the strength of the U.S. dollar. Meanwhile, the ECBs interest rate decision, due today, is highly anticipated as it could significantly influence the euro's direction.

The precious metal is now close to its all-time high of $2,685.50, benefiting from its safe-haven status. Oil prices have traded sideways, easing from their bearish trend, but any escalation in geopolitical tensions could lead to a renewed rally in oil prices.

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

Source: CME Fedwatch Tool

-50 bps (7%) VS -25 bps (93%)

Market Movements

DOLLAR_INDX, H4

The U.S. dollar firmed on Wednesday, reaching an 11-week high. This strength is attributed to investors ruling out a large interest rate cut from the Federal Reserve at its next policy meeting, coupled with expectations of a potential election victory for former President Donald Trump. Trumps proposed policies, such as tax cuts, looser financial regulations, and higher tariffs, are seen as dollar positive. Higher tariffs may negatively impact Asian and European exporters, potentially leading their central banks to cut interest rates, thereby weakening their currencies and supporting the dollar.

The Dollar Index is trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 68, suggesting the index might enter overbought territory.

Resistance level: 103.95, 104.95

Support level: 103.25, 102.50

XAU/USD, H4

Gold advanced toward record highs on Wednesday, supported by falling U.S. bond yields and expectations for further rate cuts by major central banks. The drop in U.S. Treasury yields, which reached a one-week low, bolstered golds appeal, as the metal generally performs well in a low-interest rate environment. Additionally, geopolitical tensions continue to provide safe-haven demand for gold.

Gold prices are trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 64, suggesting the commodity might extend its gains since the RSI stays above the midline.

Resistance level: 2690.00, 2705.00

Support level: 2670.00, 2645.00

HSI (HK50), H4

Hong Kong's Hang Seng Index (HSI) has declined by over 10% from its recent peak, driven by profit-taking sentiment and geopolitical tensions, which have dampened risk appetite in the market. The uncertainty surrounding global events has contributed to a cautious tone among investors. Additionally, improved sentiment on Wall Street may also provide a positive spillover effect, boosting the HSI's chances for recovery in the near term.

The HSI is approaching its critical zone at near 20100. A break below this mark will be considered a bearish signal for the index. The RSI has declined to near the 50 level, while the MACD is edging lower, suggesting that the bullish momentum is easing.

Resistance level: 21260.00, 22220.00

Support level: 19810.00, 19135.00