U.S Dollar Jumps on Heightens Treasury Yield

• The U.S. dollar extended its rally as selling pressure in the bond market pushed Treasury yields higher, bolstering the dollar's strength.

• ECB's Christine Lagarde highlighted the subdued inflationary pressures in the eurozone, fueling expectations of a dovish stance from the ECB, which continues to weigh on the euro.

• Gold remained resilient, surging to the $2,750 level in the previous session, driven by increased demand for safe-haven assets amid market volatility.

Market Summary

The U.S. dollar has continued to strengthen against major currencies, supported by a sharp rise in long-term Treasury yields, which have reached their highest level since July. The market appears to be pricing in a soft landing by the Federal Reserve, particularly as the U.S. presidential election nears. Investors are preparing for the possibility of sticky inflationary pressures in the post-election period, keeping the dollar buoyant.

On the other hand, the ECB is shifting its focus, as policymakers express concerns about inflation falling well below the central bank's 2% target. This has fueled speculation about a more growth-oriented monetary policy approach, sending a dovish signal that has led the euro to suffer its fourth straight week of losses against the dollar.

In the commodity market, gold prices have surged to a new record high near the $2,750 mark, driven by bullish sentiment in the safe-haven market amidst global uncertainty. Oil prices also saw a strong rally, with WTI crude rising over 2%, breaking the $70.00 level, suggesting a potential turnaround for the energy sector.

In the crypto market, both Bitcoin (BTC) and Ethereum (ETH) have stabilised after sliding from their recent highs, and there is potential for a technical rebound if optimism remains intact in the lead-up to the U.S. election.

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 rose to a fresh 2-1/2-month high, continuing its recent ascent as expectations that the Federal Reserve will temper its interest rate cut path strengthened. Investors are also positioning ahead of the U.S. presidential election, which appears to be tightly contested. The greenback has risen for three straight weeks and is on track for its 15th gain in 17 sessions, driven by positive economic data that has pushed U.S. Treasury yields higher.

The Dollar Index is trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum. However, RSI is at 73, suggesting the index might enter overbought territory.

Resistance level: 104.95, 105.55

Support level: 103.95, 103.25

XAU/USD, H4

The fundamentals for the gold market remain unchanged, supported by rising Middle East tensions and uncertainty surrounding the U.S. election. Market participants are concerned that a Donald Trump win could trigger further tariffs, increasing market volatility and supporting gold prices. Gold is expected to benefit from continued safe-haven demand in the near term.

Gold prices are trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 68, suggesting the commodity might enter overbought territory.

Resistance level: 2735.00, 2770.00

Support level: 2705.00, 2685.00

CL OIL, H4

Oil prices edged down on Wednesday after U.S. crude inventories rose more than expected, weighing on the market. According to the American Petroleum Institute, U.S. crude stocks increased by 1.64 million barrels last week, surpassing analysts' expectations of a 300,000-barrel rise. Meanwhile, the market is closely monitoring diplomatic efforts in the Middle East, as Israel continues its attacks on Gaza and Lebanon.

Oil prices are trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 59, suggesting the commodity might extend its gains since the RSI stays above the midline.

Resistance level: 72.60, 74.75

Support level: 69.90, 67.10