Precious Metals Surge, Dollar Slips as Fed Signals Monetary Easing (09.25.2024)

Global markets are reacting to rising expectations of further interest rate cuts from the Federal Reserve, as the dollar continues to weaken and precious metals surge. Gold reached record highs, driven by monetary easing prospects and escalating geopolitical risks, while silver remains near recent peaks. The EUR/USD pair is trading positively, buoyed by Fed easing bets and anticipation of Eurozone inflation data. The yen held steady as the Bank of Japan signaled caution on rate hikes. Meanwhile, the GBP/USD remains stable as traders await key US economic data, which could shape upcoming Fed decisions.

EUR/USD Eyes Resistance Levels as Dollar Declines on Fed Outlook

The dollar index continued its recent decline, trading around 100.3 on Wednesday, hovering near its lowest levels since July 2023 as traders increased their bets on Federal Reserve interest rate cuts following weak consumer sentiment data. Markets are anticipating that the Fed will cut rates by an additional 200 basis points before reaching its terminal rate next year, which loosely aligns with the Fed's dot plot. Investors are now focused on new home sales data on Wednesday, weekly jobless claims on Thursday, and the highly anticipated PCE report on Friday for further guidance on the economic outlook.

In the EUR/USD pair, the initial resistance will be at 1.1220 followed by 1.1250 and 1.1300 if this level is surpassed. On the downside, the first support is at 1.1150, with subsequent supports at 1.1100 and 1.1050 below that.

Japanese Yen Holds Near 143.4 as BOJ Signals Caution on Rate Hikes

The Japanese yen held steady at around 143.4 per dollar on Wednesday as investors evaluated the future of the Bank of Japan’s monetary policy. On Tuesday, BOJ Governor Kazuo Ueda stated that the central bank has time to monitor market and economic conditions before making any adjustments, indicating no urgency to raise rates. He also highlighted external risks, including increased volatility in financial markets and uncertainties regarding the US economy's ability to achieve a soft landing. Last week, the BOJ maintained its policy rate at 0.25%, as expected. These developments have diminished the likelihood of a rate hike in October, although a move in December remains anticipated. Additionally, the yen gained some support from recent dollar weakness following disappointing US consumer confidence data, which increased expectations for further monetary easing by the Federal Reserve.

In USD/JPY, the first support is at 143.15, with subsequent levels at 142.00 and 140.45 below that. On the upside, the initial resistance is at 144.60, followed by 145.90 and 146.50 if this level is breached.

Gold Surges to Record High as Fed Easing and Geopolitical Risks Fuel Demand

Gold surged above $2,660 per ounce on Wednesday, reaching another record high as expectations for further monetary easing and escalating geopolitical tensions boosted demand for the precious metal. Data released on Tuesday showed a sharper-than-expected decline in US consumer confidence, reinforcing a dovish outlook for the Federal Reserve and aligning with earlier indications of a potential interest rate cut. Markets are now awaiting additional economic data this week, including the PCE reports, which serve as the Fed’s preferred inflation measure. Meanwhile, on Tuesday, the People's Bank of China announced its largest stimulus package since 2020, which includes interest rate reductions. Gold’s appeal as a safe haven was further enhanced by increasing violence in the Middle East.

In gold, the first support is at 2630, with subsequent levels at 2600 and 2550 below that. Above, the initial resistance is at 2670, followed by 2700 and 2730 if this level is surpassed.

GBP/USD Holds Steady at 1.3400 as US Data Looms

The pound started Wednesday trading at 1.3400. While the news flow from the UK has been relatively quiet this week, important data releases are scheduled for today and tomorrow from the US. These figures will provide clues about the timing and magnitude of the Federal Reserve's upcoming interest rate cuts, which are likely to introduce volatility into the GBP/USD pair.

In GBP/USD, the first support is at 1.3360, with subsequent levels at 1.3300 and 1.3250 below that. On the upside, the initial resistance is at 1.3430, followed by 1.3470 and 1.3500 if this level is surpassed.

Silver Faces Pivotal US Data After Rally, Eyes Resistance at $32.50

Silver started the day with a pullback after yesterday's rally, trading at $31.75. The US economic data scheduled for release today and tomorrow is likely to be pivotal in determining whether the industrial metal can break through its last high of $32.50.

In silver, the first support is at 30.75, with subsequent levels at 30.40 and 30.00 below that. On the upside, the initial resistance is at 31.10, followed by 31.50 and 32.00 if this level is surpassed.