DBG Markets: Market Report for Oct 1, 2024

Market Overview

Fed Chairman Powells Speech & Rate Cut Outlook:

Earlier today, Fed Chairman Jerome Powell delivered a hawkish speech regarding the upcoming November rate cut. Powell emphasized that a 50-basis point cut is now less likely, with the 25-basis point reduction being the favored option. However, he noted that the decision will be data-dependent, particularly pointing to jobs data. A cooler-than-expected non-farm employment (NFE) report on Friday could increase the likelihood of a larger cut. Traders remain confident in another rate cut for November, though expectations for a 50-basis point cut have dropped from 53.3% to 35.4%, according to CME Group's FedWatch Tool.

Upcoming data releases, including the ISM Manufacturing and Services reports, will also provide insight into the Fed's direction for the remainder of the year.

GOLD - Gold has shown strong movement toward the lows, breaking out of its previous consolidation range. This retracement, likely caused by profit-taking, has provided a better entry point for buyers. The market is now poised to return to higher levels as it moves into a key supply and demand (S&D) zone.

SILVER - Silver has made a higher low while maintaining its bullish market structure. Although an inverse head and shoulders (SHS) pattern is forming, we remain optimistic about further upside due to strong fundamentals. That said, a brief drop could occur before the anticipated larger rise. Currently, prices are below 31.472, which could trigger additional buying opportunities.

DXY - The dollar has extended its recent rally, reaching an S&D zone, where further selling pressure is anticipated, especially given the upcoming November rate cuts. However, consolidation is expected until Fridays NFE report, which will provide a clearer direction for the greenback.

GBPUSD - The Pound remains consolidated between 1.34294 and 1.33593, but we expect further upside. The BoE's steady and slow approach to rate cuts, combined with a more secure rate cut expectation for November, provides a bullish outlook for the Pound.

AUDUSD - Market pricing suggests only an 18% probability of a rate cut at the RBAs November meeting, though a 71% chance remains for December. This delay in easing could lead to further strength for the Aussie dollar, as expectations for a weaker USD in November gain traction.

NZDUSD - The New Zealand dollar is set for a supersized rate cut in the coming week, pushing prices lower against major currencies. The price failed to break above 0.63672 and is expected to fall below 0.62898, with traders eyeing a move lower to align with the Fed's rate-cut trajectory.

EURUSD - Currently trading at 1.11386, the Euro is facing expectations of a rate cut in two weeks. This leaves room for further downside or a potential rally to sell at a higher price. Well wait for market reaction before making any conclusive calls on the Euro's movement.

USDJPY - The Yen saw gains during yesterdays trading session but began cooling toward the end of the day. Prices are fluctuating between 144.451 and 143.442, and further selling is anticipated, particularly if market conditions remain favorable for a weaker Yen.

USDCHF - The Franc has dropped to 0.84086 and looks set for further declines. While it followed our previous expectations, the downward momentum has since faded. We await further confirmation before making additional moves in the Franc.