Market Shifts on Fed Speculation and BoJ Caution (09.26.2024)

The financial markets faced mixed movements on Thursday as key indicators and events shaped trading. The dollar index held steady around 100.9 after rebounding on Wednesday, with investors awaiting US economic data and potential impacts on Federal Reserve rate cuts. The yen dipped to a three-week low at 144.8, reflecting caution from the Bank of Japan over inflation risks and the yen's effect on the economy. Gold remained strong near $2,660 per ounce, supported by expectations of further Fed rate cuts and Middle East tensions enhancing its appeal. GBP/USD opened at 1.3350, with expected volatility before US data release potentially influencing the rate cut cycle. Silver, trading around 32.20, faced downward pressure amid global tensions and anticipated US economic reports, highlighting its sensitivity to recession concerns. Across these assets, various support and resistance levels indicate potential trading shifts.

Dollar Index Pauses After Inflation Fears

The dollar index remained around 100.9 on Thursday after rebounding in the previous session, as investors awaited the latest weekly jobless claims report for insights into the labor market's condition. Additionally, data on August durable goods orders and the final reading of second-quarter GDP are scheduled for release later today. On Wednesday, the index gained 0.6% as Treasury yields increased amid renewed inflation concerns and uncertainty over potential Federal Reserve interest rate cuts. This development aligns with Fed Governor Bowman's comments about the need for a cautious approach to policy changes, considering the inflation risks following the recent 50 basis point cut. The market's perspective on inflation will be further clarified on Friday with the release of the PCE price indices.

For the EUR/USD currency pair, initial resistance is expected at 1.1220, followed by 1.1250 and 1.1300 if that level is breached. On the downside, the first support is at 1.1150, with additional supports at 1.1100 and 1.1050.

BoJ's Cautious Stance Weighs on Yen

The Japanese yen slipped to around 144.8 on Thursday, hitting a three-week low as the dollar strengthened amid ongoing uncertainty about inflation and the outlook for Federal Reserve rate cuts. Minutes from the Bank of Japan's recent meeting highlighted members' calls for caution regarding potential upside inflation risks while also warning against raising excessive market expectations for future rate hikes. Additionally, a cabinet minister stressed the need to monitor the weak yen's impact on household purchasing power and external risks from other major economies. Earlier this week, BoJ Governor Kazuo Ueda indicated that the bank has time to assess market and economic conditions before making any adjustments to monetary policy, suggesting no immediate urgency to further raise rates. These comments came after the central bank's decision to maintain its policy rate at 0.25% this month, aligning with market expectations.

For USD/JPY, the first support is at 144.30, followed by 143.50 and 143.00. On the upside, the initial resistance is at 145.90, with additional levels at 146.50 and 147.00 if this resistance is surpassed.

Fed's Cautious Tone Supports Gold

Gold held steady near $2,660 per ounce on Thursday, reaching record highs as markets assessed the potential for further rate cuts from the Federal Reserve amid the ongoing easing cycle. Several Fed officials have emphasized caution following the 50 basis point cut earlier this month. However, market expectations are tilting towards a rate cut in November, with fed fund futures indicating a 62% probability of another 50 basis point reduction. Investors are awaiting key US economic data for further insights, including the PCE report, final Q2 GDP figures, weekly initial jobless claims, and durable goods orders. Additionally, they are closely watching upcoming speeches from FOMC members, particularly Fed Chair Jerome Powell's address later today. At the same time, escalating violence and the risk of a broader conflict in the Middle East continue to strengthen gold's status as a safe-haven asset.

For gold, the first support level stands at 2,630, with additional support at 2,600 and 2,550. On the upside, the initial resistance is at 2,670, followed by 2,700 and 2,730 if this level is breached.

GBP/USD Holds Near 1.3350

The GBP/USD opened at 1.3350 on Thursday morning. Volatility is expected to rise throughout the day before the US growth and unemployment data, which could potentially slow down the rate cut cycle compared to the Federal Reserve.

For GBP/USD, the first support level is at 1.3330, followed by 1.3300 and 1.3250. On the upside, the initial resistance is at 1.3370, with additional levels at 1.3400 and 1.3470 if this resistance is surpassed.

Market Worries Weigh on Silver

XAG/USD started Thursday morning around the 32.20 level. With rising tensions in the Middle East and a weaker dollar, silver is once again testing its recent lows. Today’s US data will be critical, as the industrial metal is highly sensitive to recession concerns and will be closely impacted by the unemployment and growth figures.

For silver, the first support level is at 31.60, with additional support at 31.30 and 30.50. On the upside, the initial resistance is at 32.20, followed by 32.50 and 33.00 if this resistance is breached.