Market Tensions Lift Gold, Silver as Currencies Stabilize (10.24.2024)

The EUR/USD rebounded from a recent losing streak, supported by a dip in US Treasury yields, with key resistance levels ahead

The Japanese yen weakened, impacted by political uncertainty and weaker economic data, while facing further downside pressure. Gold prices climbed, benefiting from its safe-haven appeal amid geopolitical tensions, and continue to show strength despite a stronger dollar. The GBP/USD remained close to its recent low, with traders focusing on economic reports that could influence its direction. Meanwhile, silver stabilized after testing its highest level since 2012, attracting buyers in the market.

Euro Finds Support as US Yields Retreat

The EUR/USD pair gained during the Asian session on Thursday, rebounding from a three-day losing streak that hit a low of 1.0760, its lowest since early July. Spot prices have since risen near 1.0800, helped by a slight dip in the US dollar. A pullback in US Treasury yields from a three-month high led to some profit-taking on the dollar after its strong rally. However, the likelihood of modest Fed cuts and investor caution before the November 5 US presidential election may support the dollar, while dovish ECB expectations could cap gains for the EUR/USD.

The Eurozone's annual inflation rate dropped to 1.7% in September, falling below the ECB's 2% target for the first time since June 2021. This supports the central bank's view of a disinflationary trend and the potential for further policy easing. ECB official Mario Centeno highlighted growth and inflation risks, suggesting a possible 50 basis point rate cut in December. Similarly, Bostjan Vasle noted recent data may delay expected growth improvements. Market attention now shifts to upcoming flash PMI reports from the Eurozone and the US, which could provide insights into the global economy and influence market sentiment, along with US bond yields impacting the dollar.

The first support level for the pair is at 1.0760. If this level is breached, the next supports to watch will be 1.0725 and 1.0660. On the upside, the first resistance is at 1.0830; if this level is surpassed, the next targets will be 1.0875 and 1.0920.

Yen Dips as Japan's Ruling Party Faces Challenges

The Japanese yen traded around 152.4 per dollar, down over 1% from the previous session, marking its lowest in nearly three months. This drop comes before Japan's general election, where the ruling coalition may lose its majority, raising uncertainty about future Bank of Japan rate hikes. Investors also reacted to data showing a contraction in private sector activity in October, the first in four months, with declines in manufacturing and services. Deputy Chief Cabinet Secretary Kazuhiko Aoki noted the government is keeping an eye on currency fluctuations, as the yen has lost over half of its gains since the July intervention. Globally, the yen remains pressured by a strengthening dollar, driven by expectations of cautious Fed rate cuts and speculation about Trump's potential November victory.

From a technical perspective, the first resistance level is at 153.20, with further targets at 154.40 and 155.20 if surpassed. On the downside, initial support is at 151.30; if breached, the next support levels are 150.20 and 148.60.

Uncertainty Fuels Gold Rally Despite Dollar Pressure

Gold prices rose above $2,720 per ounce on Tuesday, reflecting a likely technical rebound after a more than 1% drop in the previous session. This decline was driven by a stronger US dollar and rising Treasury yields amid growing expectations that the Federal Reserve will take a cautious approach to monetary easing. However, gold's upward momentum is supported by its safe-haven appeal, fueled by ongoing geopolitical tensions in the Middle East and concerns about escalating violence potentially leading to a broader conflict. Additionally, uncertainties surrounding the upcoming US presidential election and potential monetary easing by major central banks are also contributing to gold's strength.

Technically, the first support level is at $2,707. If breached, the next supports are at $2,698 and $2,685. On the upside, initial resistance is at $2,735, with further targets at $2,757 and $2,800.

BoE Governor's Remarks to Influence GBP/USD Direction

The GBP/USD pair traded around 1.2930 during the Asian session on Thursday, remaining close to its 10-week low of 1.2907, reached on Wednesday. Traders are likely to focus on the Purchasing Managers Index (PMI) figures from both the United Kingdom and the United States, which are set to be released later in the day. In a discussion at the Institute of International Finance's annual meeting in Washington, D.C., on Wednesday, Bank of England Governor Andrew Bailey commented that inflation is currently below target due to annual base effects. He pointed out that the high savings rate reflects consumer caution and suggested that pension funds should not be mandated to allocate a certain percentage to UK assets.

For GBP/USD, the initial support lies at 1.2900, followed by 1.2865 and 1.2805 below. On the upside, the first resistance is at 1.2985, with subsequent levels at 1.3050 and 1.3100 if the pair breaks above this resistance.

Silver Stabilizes Following Test of 2012 High

Silver (XAG/USD) is attracting buyers during the Asian session on Thursday, pausing its recent decline from the $34.85-$34.90 range, which marked its highest level since October 2012 earlier this week. The white metal is currently trading just below $34.00, up over 0.50% for the day.

The first resistance level to watch for silver is at $34.00. If the precious metal breaks above this, the next resistance levels are $34.90 and $35.20. On the downside, the initial support is at $33.50, followed by $33.00 and $32.00.