Heighten Geopolitical Tension Hit on Wall Street

• Wall Street weighed on the heightened geopolitical situation, with Nasdaq declining by 1.6% in the last session.

• Gold encountered profit-taking sentiment and slid nearly 1% yesterday.

• USD/JPY is trading with a strong uptrend as the Yen continues to weigh on poor economic indicators.

Market Summary

Wall Street was hit hard by the escalating geopolitical tensions in the Middle East, with Israel and Hezbollah exchanging heavy fire. The Dow Jones led the decline, closing around 400 points lower, marking a nearly 2% drop from its all-time peak. As earnings season progresses, market participants are bracing for volatile price action in the near term, driven by both geopolitical uncertainties and corporate earnings.

In the commodity markets, oil prices surged due to the unrest in the Middle East, with WTI crude holding steady above the $71.00 mark. In contrast, gold prices fell by more than 1% from their record high, driven by a wave of profit-taking. This selling spree could push the precious metal down toward the $2700 mark before it regains its bullish momentum.

In the forex market, the U.S. dollar remains one of the strongest currencies, supported by rising long-term treasury yields. Meanwhile, the yen continues to weaken, weighed down by disappointing Japanese economic data. The USD/JPY pair briefly touched the 153 mark, as poor economic indicators leave the Bank of Japan in a dilemma regarding its rate hike strategy.

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, which trades against a basket of six major currencies, continued to extend its gains, supported by rising U.S. Treasury yields and signs of economic recovery in the U.S. region. Recent comments from Fed officials suggest a more cautious approach to cutting interest rates. Meanwhile, the U.S. Beige Book, released yesterday, indicated an uptick in hiring, reinforcing expectations for a slight easing in Fed monetary policy.

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 74, suggesting the index might enter overbought territory.

Resistance level: 104.95, 105.55

Support level: 103.95, 103.25

XAU/USD, H4

Gold prices tumbled as U.S. Treasury yields edged higher, driven by hawkish remarks from several Federal Reserve members, indicating a less aggressive monetary policy approach. The U.S. Beige Book also showed continued positive economic growth, pushing yields higher and weighing on gold prices. However, the long-term outlook for gold remains positive, as Middle East tensions and U.S. election uncertainties could trigger further market volatility.

Gold prices are trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 45, suggesting the commodity might extend its gains since the RSI rebounded sharply from oversold territory.

Resistance level: 2735.00, 2770.00

Support level: 2705.00, 2685.00

Nasdaq, H4

The U.S. equity market was pressured by escalating geopolitical tensions in the Middle East, leading to a notable decline in the Nasdaq, which dropped by nearly 300 points in the last session. The tech-heavy index has broken down from its ascending triangle pattern, indicating a potential bearish bias. This technical breakdown, combined with ongoing geopolitical uncertainty, suggests that further downside risk may persist for the Nasdaq in the near term.

The index has broken below from the ascending triangle price pattern, suggesting a bearish signal for the index. The RSI has broken below the 50 level white, and the MACD is edging lower, suggesting the bullish momentum is easing.

Resistance level: 21070.00, 22020.00

Support level: 19700.00, 19120.00

USD/JPY, H4

The USD/JPY pair has broken above its uptrend channel, signalling that bullish momentum is gaining strength. The Japanese yen has been weighed down by weaker-than-expected economic data, including the Japan National CPI and PMI readings, both of which fell short of market expectations. Additionally, Bank of Japan (BoJ) Governor Kazuo Ueda's recent comments, which lacked clarity on the timing of the next rate hike, further hindered the yen's strength. This indecision has contributed to the yen's continued decline, allowing the USD/JPY pair to extend its upward trajectory.

The pair continues to trade on an uptrend basis, suggesting a bullish bias for the pair. The RSI has broken into the overbought zone while the MACD continues to edge higher suggesting the bullish momentum is gaining.

Resistance level: 153.85, 155.00

Support level: 150.85, 149.40