Risk Currencies Gain While Markets Await Powell’s Speech and Key Inflation Data (09.30.2024)

The EUR/USD pair remained stable, trading around 1.1160 as traders anticipated German consumer inflation data and Federal Reserve Chair Jerome Powell's speech for further direction. Meanwhile, the Japanese yen held steady near 142.3 after a strong rally following dovish comments from Japan’s new prime minister and stronger retail sales data. Gold hovered near $2,650 per ounce, supported by growing expectations of further interest rate cuts by the Federal Reserve, as well as rising geopolitical risks. The British pound traded higher at 1.3385, benefiting from speculation that the Bank of England may proceed with rate cuts more slowly than the Federal Reserve. Silver prices faced selling pressure around $31.55 as improved global risk sentiment and upcoming speeches from central bank officials, including Powell, fueled profit-taking.

EUR/USD Flat as Traders Await Powell's Speech and German CPI

The EUR/USD pair is having difficulty building on Friday's modest recovery from the 1.1125-1.1120 support zone, starting the week quietly around 1.1160, showing little change for the day. Traders are eagerly anticipating the release of German consumer inflation data and a speech from Federal Reserve Chair Jerome Powell for a new direction.

In the pair, the first support level is at 1.1150. If this level is breached, the next supports to watch will be 1.1100 and 1.1050. On the upside, the first resistance is at 1.1180; if this level is surpassed, the next targets will be 1.1200 and 1.1250.

Yen Pauses After Rally, Japanese Retail Sales Beat Expectations

The Japanese yen stabilized around 142.3 per dollar on Monday after a recent rally, influenced by dovish comments from the new prime minister, Shigeru Ishiba. Following his election as leader of the ruling party on Friday, the yen surged nearly 2% as Ishiba was viewed as less dovish than his competitor, Sanae Takaichi. However, Ishiba supports economic stimulus and expansionary fiscal measures. Additionally, today’s data revealed that Japanese retail sales exceeded expectations in August, while industrial production fell short. Markets are split on whether the Bank of Japan will raise interest rates in October or December.

From a technical perspective, the first resistance level is at 143.00. If this level is surpassed, the next targets will be 143.60 and 144.00. On the downside, the initial support is at 141.75; if this level is breached, the next support levels to watch will be 141.10 and 140.50.

Gold Holds Firm as Fed Rate Cut Speculation Boosts Demand

Gold was trading around $2,650 per ounce on Monday, poised for its largest quarterly increase since early 2016. This surge is fueled by a growing belief that the Federal Reserve may implement additional rate cuts. Last week, both the PCE and core PCE price indices rose slightly by 0.1%, with the core index increasing less than the anticipated 0.2%. Meanwhile, personal spending has slowed, and income growth has unexpectedly dipped. Fed fund futures indicate that the market sees a 54% likelihood of a 50 basis point rate cut in November. The potential for further rate reductions by the Fed, along with dovish stances from central banks worldwide, is boosting the attractiveness of holding non-yielding gold. Additionally, China’s new monetary stimulus and the increasing risk of broader conflict in the Middle East are further supporting this demand.

Technically, the first support level is at 2,650. If this level is breached, the next supports to watch will be 2,630 and 2,600. On the upside, the initial resistance is at 2,665; if this level is surpassed, the next targets will be 2,685 and 2,700.

Pound Gains Against Dollar Amid Fed Rate Cut Speculation

The GBP/USD pair is performing well, trading around 1.3385 in the early Asian session on Monday. This positive movement is supported by expectations of further interest rate cuts from the Federal Reserve, alongside a less dovish stance from the Bank of England, which is reducing speculation about rate cuts. Fed Governor Michelle Bowman is scheduled to speak later today. The Pound Sterling (GBP) is benefiting from the belief that the Bank of England's rate-cutting cycle will proceed more slowly than that of the US, which creates a favorable environment for GBP/USD. However, with today’s GDP data falling short of expectations, the GBP is likely to be influenced by this data as well as movements in the US dollar index.

For GBP/USD, the initial support lies at 1.3365, followed by 1.3320 and 1.3300 below. On the upside, the first resistance is at 1.3400, with subsequent levels at 1.3430 and 1.3450 if the pair breaks above this resistance.

Silver Faces Selling Pressure Near $31.55 Amid Improved Risk Sentiment

Silver prices (XAG/USD) are facing selling pressure near $31.55 during the early Asian session on Monday, driven by improved global risk sentiment prompting profit-taking. Traders are closely watching a speech from Federal Reserve Chair Jerome Powell later today, which may provide insights into the US interest rate outlook. This positive market mood could add to the selling pressure on silver as investors await new catalysts. Powell's speech is anticipated to shed light on potential interest rate changes this year. Meanwhile, the People's Bank of China (PBoC) Governor Pan Gongsheng announced new stimulus measures aimed at reviving the struggling property sector and boosting domestic demand, including a reduction in reserve requirements for banks. Amelia Xiao Fu, head of commodity markets at BOCI, stated that silver is likely to continue rallying in the coming quarters due to ongoing rate cuts and sustained Chinese stimulus. On the geopolitical front, the killing of Hezbollah leader Hassan Nasrallah by Israel has heightened tensions in the Middle East, potentially further boosting silver prices as conflicts escalate along its border with Lebanon.

From a technical perspective, the first resistance level to watch is at 31.80. If silver breaks above this level, the next resistance levels to watch will be 32.30 and 32.70, respectively. On the downside, the initial support level is at 31.40, with subsequent support levels at 31.10 and 30.60.