Strong U.S. Jobs and Rising Yields Boost Dollar, Gold Falls (10.08.2024)

The U.S. dollar strengthened, supported by rising Treasury yields and diminishing expectations for significant rate cuts following strong September nonfarm payrolls. 

The yen stabilized after earlier declines, while gold fell for the fifth consecutive session as markets await U.S. inflation data for further Fed guidance. Silver holds steady, with upcoming U.S. economic releases likely to shape its direction. The GBP/USD pair remains focused on external influences, primarily U.S. Fed remarks, amid limited UK economic updates.

Dollar Holds Strong as Treasury Yields Rise and Fed Cut Bets Diminish

The dollar index stabilized around 102.4 on Tuesday, hovering near its highest levels since mid-August as investors adjusted their expectations for Federal Reserve interest rate cuts following a robust September jobs report. Markets now estimate an 87% likelihood that the Fed will implement a modest 25 basis point rate reduction in November, while completely dismissing the possibility of a larger half-percentage point cut, as indicated by CME’s FedWatch Tool. The dollar also benefited from rising US Treasury yields, with the benchmark 10-year bond yields surpassing 4% for the first time since early August. Investors are now looking forward to releasing the latest Fed meeting minutes on Wednesday and the consumer price index report on Thursday for further guidance on interest rates. Additionally, increasing tensions in the Middle East have continued to elevate safe-haven demand for the dollar.

In the EUR/USD pair, the initial resistance will be at 1.1000 followed by 1.1050 and 1.1100 if this level is surpassed. On the downside, the first support is at 1.0950, with subsequent supports at 1.0900 and 1.0850 below.

Yen Stabilizes at 147.7 as Investors Eye BoJ Policy Outlook

The Japanese yen stabilized at around 147.7 per dollar on Tuesday after dropping to a seven-week low the previous day. Investors are closely monitoring the Bank of Japan's monetary policy outlook. In its latest quarterly report, the central bank noted that rising prices and wages are becoming more widespread in Japan. It also expressed concerns about the declining profit margins faced by small and medium-sized businesses. Additionally, data revealed that Japan’s real wages fell by 0.6% in August after two months of growth, and household spending decreased by 1.9%. The yen has faced downward pressure recently, especially after new Prime Minister Shigeru Ishiba and Economy Minister Ryosei Akazawa urged caution regarding further interest rate hikes given the current economic climate. The currency's decline was exacerbated by a stronger-than-expected US jobs report released on Friday, which led markets to discount the likelihood of a 50 basis point rate cut from the Federal Reserve in November.

In USD/JPY, the first support is at 147.30, with subsequent levels at 145.20 and 144.00 below that. On the upside, the initial resistance is at 149.30, followed by 150.00 and 151.00 if this level is breached.Top of Form

Gold Falls for Fifth Session as Markets Focus on US Inflation Data and Fed

Gold prices fell below $2,640 per ounce on Tuesday, marking a decline for the fifth straight session. This drop was influenced by a stronger jobs report, which diminished hopes for more aggressive interest rate cuts from the Federal Reserve. Currently, markets are anticipating an 86% chance that the Fed will opt for a modest 25 basis point rate cut in November. Lower interest rates typically make holding non-interest-bearing assets like gold more attractive. Traders are also focused on key Consumer Price Index (CPI) and Producer Price Index (PPI) data set to be released this week, as well as the minutes from the Federal Open Market Committee (FOMC) and comments from various Fed officials for additional insights. Additionally, gold's status as a safe-haven asset is being reinforced by rising tensions in the Middle East. On a related note, China's central bank has not added to its gold reserves for the fifth month in a row as of September.

In gold, the first support is at 2630, with subsequent levels at 2600 and 2550 below that. Above, the initial resistance is at 2685, followed by 2700 and 2730 if this level is surpassed.

GBP/USD Focuses on Fed Remarks Amid Lack of UK Economic Updates

The pound began trading on Tuesday at a level of 1.3075. With limited news flow from the UK on this day, market participants are primarily focused on monitoring the speeches of Federal Reserve officials. The lack of significant domestic economic updates in England means that investors are looking to the insights from the Fed to gauge future monetary policy direction. As traders assess these remarks, they will be particularly attentive to any indications of interest rate changes or shifts in economic outlook that could influence currency movements. Overall, the market's focus on external factors, especially from the US, highlights the interconnectedness of global economies and the importance of central bank communications in shaping investor sentiment.

In GBP/USD, the first support is at 1.3085, with subsequent levels at 1.3050 and 1.3000 below that. On the upside, the initial resistance is at 1.3145, followed by 1.3200 and 1.3250 if this level is surpassed.

Silver Holds at $31.10 as Markets Eye US Data for Direction

Silver is trading around the 31.10 level on Tuesday morning. The metal experienced an increase last week due to rising geopolitical risks but has started this week on a weaker note. In the coming days, economic data to be released from the United States will play a crucial role in determining the direction of silver prices. Market participants will be closely monitoring these announcements, as they could significantly impact investor sentiment and trading strategies for silver. Overall, the interplay between geopolitical factors and upcoming economic indicators will be key in shaping the short-term outlook for this precious metal.

In silver, the first support is at 31.10, with subsequent levels at 30.50 and 29.85 below that. On the upside, the initial resistance is at 31.85, followed by 32.20 and 32.50 if this level is surpassed.