Markets Mixed Ahead of Key US Data, ECB Decision, and Election Uncertainty (10.30.2024)

Global markets traded cautiously on Wednesday with the EUR/USD near 1.0810 as ECB rate cut expectations pressured the euro. USD/JPY hovered around 153.4 as Japan’s election added political uncertainty ahead of the BOJ's policy announcement.

Gold surged close to $2,780 amid rising Middle East tensions and US election concerns, while GBP/USD held near 1.3010 awaiting the UK's Autumn Budget. Silver stayed above $34.00, driven by safe-haven demand. Investors focus on US Q3 GDP and ADP data for clues on Fed policy.

EUR/USD Pressured Ahead of ECB Rate Decision

The EUR/USD pair has lost momentum after two days of gains, trading around 1.0810 in the Asian session on Wednesday. The Euro is pressured as the European Central Bank (ECB) is expected to lower its Deposit Facility Rate again, with a nearly 50% chance of a 50-basis-point cut at the December meeting.

Investors are focused on preliminary GDP figures from Germany and the Eurozone, along with Germany’s initial Harmonized Index of Consumer Prices (HICP) data due Wednesday. Attention also turns to US Q3 GDP data and October's ADP Employment Change report.

ECB officials have voiced mixed views on policy. Belgium’s Pierre Wunsch suggested no need for aggressive cuts, while Portugal’s Mario Centeno supported a 50-basis-point cut in December.

The recent EUR/USD dip is linked to a stronger US Dollar, driven by rising Treasury yields. The Dollar Index (DXY) is around 104.30, with 2-year and 10-year Treasury yields at 4.09% and 4.24%

Uncertainty around the US presidential election may add pressure on the pair, as a new Reuters/Ipsos poll shows a close race, with Kamala Harris narrowly leading Donald Trump, 44% to 43%.

After pulling back to the daily trendline, 1.0770 serves as key support for EUR/USD, followed by 1.0750 and 1.0700. Resistance levels to watch are 1.0840, 1.0880, and 1.0930.

Yen Declines; BOJ Expected to Hold Rates

The Japanese yen continued its decline, trading near 153.4 per dollar on Wednesday, marking a three-month low as markets await the Bank of Japan’s policy decision. The central bank is expected to maintain current rates on Thursday, though investors are watching for hints of a potential rate hike by year-end. This cautious approach is due to weak export data, stagnant household spending, and recent election results that saw the ruling coalition lose its parliamentary majority. Opposition leaders have advised the BOJ against major policy shifts given slow wage growth, and Finance Minister Kato stated that authorities are closely monitoring the yen, with concerns rising about intervention if it falls toward 160.

On lower timeframes, the yen shows a triangle pattern, with the 153.20 level acting as initial support. Below this, 152.40 and the 200-day moving average at 151.40 are key supports. If it breaks upward, resistance levels are 154.50, followed by 156.60 and 158.20.

Gold Rises to $2,780 on Safe-Haven Demand

Gold surged to nearly $2,780 per ounce on Wednesday, setting a new record as investors weighed recent labor data and geopolitical risks ahead of the US elections. The JOLTS report showed US job openings at their lowest since 2021, contrasting with September’s data on economic resilience, which has moderated expectations for aggressive Fed rate cuts. Markets still anticipate a 25 basis point cut in each remaining Fed meeting this year, as lower rates boost the appeal of non-yielding assets like gold. Focus now turns to upcoming PCE inflation, Q3 GDP, and payroll figures for further Fed insights. Ongoing tensions in the Middle East and Ukraine, alongside the US election, are also driving safe-haven demand.

For technical levels, gold’s next resistance stands at the psychological $2,800, with $2,820 and $2,850 as subsequent targets. In case of a pullback, the first support is at $2,770, with $2,758 and $2,735 acting as further support levels.

GBP/USD Awaits UK Budget, Key US Data

The GBP/USD pair is trading around 1.3010 on Wednesday during the early Asian session, with investors awaiting key releases, including the UK’s Autumn Budget, US ADP Employment Change, and Q3 GDP data.

In the UK, Chancellor Rachel Reeves is expected to unveil Labour's first budget in 15 years, which could propose £40 billion in tax hikes and spending cuts targeting Employer National Insurance, capital gains tax, and inheritance tax. Analysts at Commerzbank suggest that a balanced budget focused on long-term investment could strengthen the pound by boosting the UK's growth outlook.

Technically, resistance at 1.3015 remains key. If breached, the next levels to watch are 1.3055 (0.5 Fibonacci retracement) and 1.3105 (0.38 Fibonacci level). On the downside, initial support stands at 1.3000 (20-day moving average), followed by 1.2940 (trendline) and 1.2900, last week’s low.

Silver Pulls Back After Gains on US Election Jitters

Silver prices (XAG/USD) dipped slightly to around $34.30 on Wednesday during the Asian session, after gaining over 2% on Tuesday amid US election uncertainty. A Reuters/Ipsos poll shows a tight race, with Vice President Kamala Harris holding a slim lead over Donald Trump at 44% to 43%.

Silver may face headwinds from safe-haven flows as Israeli Prime Minister Netanyahu reportedly meets with military leaders to discuss a diplomatic resolution to the Lebanon conflict, according to Axios and Reuters. Additionally, silver’s performance benefits from a weaker dollar and lower Treasury yields, making it more appealing to foreign buyers.

Key US economic releases this week include preliminary Q3 GDP and ADP Employment Change on Wednesday, followed by PCE inflation on Thursday and Nonfarm Payrolls on Friday. Investors are also eyeing China’s parliamentary session from November 4-8 for potential fiscal stimulus news.

Technically, after breaching $34.00, silver tested $34.50, a key resistance level, with further resistance at $34.90 and $35.30. Support levels to watch are $34.00, $33.55, and $33.00.