US Economy Outperforms Eurozone, Dollar Benefits (09.24.2024)

The dollar index remained strong, supported by a sharp decline in the euro due to disappointing PMI reports from the Eurozone, while US private sector data highlighted substantial services activity. Similarly, the Japanese yen stabilized around 143.6 per dollar, pausing its decline ahead of comments from Bank of Japan Governor Kazuo Ueda, who adopted a more dovish tone than expected. Gold prices surged to $2,630 per ounce, benefiting from expectations of further Federal Reserve rate cuts and heightened geopolitical tensions. Meanwhile, the pound continued its upward momentum, trading at 1.3360, with upcoming US economic data set to influence the GBP/USD pair. Silver, trading at $30.80, was impacted by recession concerns, with US data expected to shape its future trajectory. 

Dollar Index Surges as Eurozone Struggles

The dollar index held onto its recent gains, trading around 101 on Tuesday, buoyed by a sharp decline in the euro after disappointing September PMI reports from the Eurozone, Germany, and France. In contrast, data released on Monday showed that the US private sector remained strong, with services activity offsetting a deeper contraction in manufacturing. Atlanta Fed President Bostic remarked that progress on inflation and the cooling labor market had occurred "much more quickly" than expected, supporting the argument for "normalizing monetary policy sooner." Similarly, Minneapolis Fed President Kashkari suggested that future policy adjustments would likely involve smaller steps unless the data showed significant changes. Markets are now awaiting the release of the PCE report later this week for further insight into the interest rate outlook.

In the currency pair, initial resistance is expected at 1.1150, followed by 1.1200 and 1.1250 if breached. On the downside, the first support is at 1.1150, with additional support levels at 1.1070 and 1.1015.

Yen Stabilizes Ahead of BoJ Governor's Speech

The Japanese yen stabilized around 143.6 per dollar on Tuesday, pausing its recent decline as investors awaited comments from Bank of Japan Governor Kazuo Ueda on potential interest rate hikes. Last week, the yen fell by more than 2% after the BoJ kept its policy rate at 0.25%, as expected. Ueda acknowledged "some weakness" in the economy during his post-meeting remarks, taking a more dovish tone than previously, which lowered expectations for an October rate hike, though a December increase is still eyed. He also restated that the economy is gradually moving towards a modest recovery and that the central bank would adjust its easing measures based on future economic and price forecasts.

In the USD/JPY pair, the first support is at 143.60, followed by 142.00 and 140.45 below that. On the upside, the initial resistance is at 144.60, with additional resistance at 145.90 and 146.50 if breached.

Gold Prices Surge as Fed Signals Further Rate Cuts

Gold was trading around $2,630 per ounce on Tuesday, remaining at record highs as expectations for less Gold traded around $2,630 per ounce on Tuesday, holding at record highs as expectations for a less restrictive monetary policy and increasing geopolitical tensions fueled demand for safe-haven assets. The recent notable rate cut by the Federal Reserve has made gold more attractive, with signs pointing to another potential 50 basis point cut by year-end.

Atlanta Fed President Bostic commented that inflation and the cooling labor market have improved faster than foreseen, raising the possibility of an imminent monetary policy normalization. Traders are now closely watching the upcoming PCE report and speeches from Fed officials to estimate the central bank's next moves. Gold's appeal as a safe-haven asset has been reinforced by escalating tensions in the Middle East, especially following Israeli airstrikes on Lebanon, marking the most intense conflict since the 2006 Israel-Hezbollah war.

For gold, the first support level is at $2,600, with further support at $2,550 and $2,530. On the upside, the initial resistance is at $2,635, followed by $2,650 and $2,700 if breached.

US Data to Determine Pound Momentum

The pound continued its upward momentum, trading at 1.3360 on Tuesday morning. While the UK news remains relatively quiet, key economic data from the US is expected to influence the dollar index, which could impact the GBP/USD pair. Last week, the pound saw a notable rally driven by a weakening dollar and stronger pound dynamics, and the upcoming US data will shape the pair's direction this week.

In GBP/USD, the first support is at 1.3300, followed by 1.3270 and 1.3250. On the upside, initial resistance is at 1.3360, with further resistance at 1.3400 and 1.3450 if breached.

Recession Fears Weigh on Silver

Silver started the week with a negative divergence compared to gold, trading around $30.80 on Tuesday morning. This week's US economic data, which could provide insights into potential rate cuts, will shape silver's trajectory, as the industrial metal is highly sensitive to recession concerns.

In silver, the first support level is at $30.75, followed by $30.40 and $30.00. On the upside, initial resistance stands at $31.10, with further levels at $31.50 and $32.00 if surpassed.