Dollar Holds Firm, But Will the Strength Persist?

• Dollar Strengthens as Market Expects Smaller Rate Cut

• Oil Prices Driven by Middle East Tensions and Demand Uncertainty

• Equities Edge Higher, Though Volatility Persists Ahead of Earnings Reports

Market Summary

The Dollar Index remains volatile as mixed economic data sparks uncertainty around Federal Reserve policy. While stronger-than-expected CPI and job numbers initially boosted the dollar, a lower-than-anticipated PPI reading has led to speculation about a cautious Fed stance on rate cuts. Investors are now awaiting retail sales data and earnings reports for further insight into the U.S. economy's trajectory.

Oil prices dipped due to profit-taking and technical corrections, though concerns over supply risks remain amid Middle East tensions. Iran's missile strikes against Israel have raised fears of retaliatory actions potentially impacting oil infrastructure. Meanwhile, the IEAs downward revision of oil demand forecasts—driven by slower growth in China and increased electric vehicle adoption—adds to the uncertain outlook.

Gold is slightly down as traders expect only a modest Fed rate cut, despite Middle East tensions supporting safe-haven demand. U.S. equities are upbeat, fueled by strong earnings from major banks like JPMorgan Chase and Wells Fargo. Next week, investor attention will shift to reports from Bank of America, Citigroup, and Netflix, with particular focus on consumer trends revealed by Netflix's subscriber data.

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 Dollar Index remains in a state of flux as investors digest a mixed set of economic indicators. While the Consumer Price Index (CPI) and U.S. jobs reports came in hotter than expected, the Producer Price Index (PPI) showed a weaker reading, slipping from 0.20% to 0.10%, which dampened the dollars appeal. This mixed data has led to speculation that the Federal Reserve may adopt a more cautious approach to rate cuts. Market participants are now closely watching earnings reports and U.S. retail sales figures for further insight into economic health and the Fed's potential rate moves.

The Dollar Index is trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated increasing bearish momentum, while RSI is at 71, suggesting the index might enter overbought territory.

Resistance level: 103.25, 104.05

Support level: 102.55, 101.80

XAU/USD, H4

Gold prices are on track to end the week slightly lower as traders anticipate a less aggressive rate cut from the Fed. While the CPI inflation data suggests sustained price pressures, a rise in weekly jobless claims has tempered expectations for deeper rate cuts. The current market sentiment reflects an 81% likelihood of a 25-basis-point cut in November. Despite the Fed's dovish outlook, escalating tensions in the Middle East have limited losses in the gold market, supporting its role as a haven.

Gold prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 52, suggesting the commodity might extend its losses after breakout since the RSI stays below the midline.

Resistance level: 2670.00, 2690.00

Support level: 2645.00, 2630.00

GBP/USD，H4

The British Pound (GBP) is under significant pressure as market expectations suggest the Bank of England (BoE) may accelerate its rate-cutting cycle. The current market sentiment indicates a 90% probability of a rate cut in November. This shift in outlook follows recent remarks from BoE Governor Andrew Bailey, who hinted at the potential for more aggressive cuts if inflation data continues to trend positively. As a result, GBP/USD is likely to remain vulnerable as markets digest the possibility of a dovish pivot from the BoE.

GBP/USD is trading lower while currently testing the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 39, suggesting the pair might extend its losses after breakout since the RSI stays below the midline.

Resistance level: 1.3205, 1.3315

Support level: 1.3040, 1.2940

Dow Jones, H4

U.S. equity market remains optimistic as investors look forward to the earnings season. JPMorgan Chase and Wells Fargo both surpassed expectations in their earnings reports on Friday, fueling optimism. Bank of America and Citigroup are set to report next week, with Netflix releasing its earnings on Thursday. Investors will be particularly focused on Netflixs subscriber metrics, as these could provide valuable insights into consumer spending trends amidst an evolving economic landscape.

The Dow is trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 67, suggesting the index might extend its gains since the RSI stays above the midline.

Resistance level: 43440.00, 44900.00

Support level: 42420.00, 41400.00