Yen Falls on Election Risks, Dollar Gains Ground (10.28.2024)

The USD strengthened on positive US data, keeping EUR/USD steady at 1.0790.

The yen weakened below 153.5 after Japan’s ruling coalition lost its majority, raising potential BoJ intervention. Gold consolidated near $2,730 amid global uncertainties, and silver traded at $33.60, pressured by a strong dollar. GBP/USD hovered at 1.2960 as UK inflation fell below target, increasing BoE rate cut expectations. Markets await China’s National People’s Congress and key US economic data to calculate upcoming global market impacts.

Dollar Strengthens on Positive US Data

The EUR/USD pair remained stable at around 1.0790 in Monday's Asian session, following losses. It may encounter pressure from a stronger US dollar, supported by positive US economic data hinting at a cautious Fed stance in November. The US Michigan Consumer Sentiment Index rose to 70.5 in October, beating the 69.0 forecast, while Durable Goods Orders fell 0.8% in September, less than the expected 1.0% drop. Israel's recent airstrikes on Iran, coordinated with Washington and targeting missile and air defense sites, were more restrained than expected.

The US dollar’s strength is supported by uncertainties around the upcoming presidential election, where Trump’s Republican allies have lost at least 10 court cases in key states, potentially affecting the November 5 outcome.

ECB Governing Council member Klaas Knot stressed the importance of keeping "all options open" to manage growth and inflation risks, maintaining flexibility as a safeguard against economic suspense. He highlighted the ECB’s effective, data-focused, meeting-by-meeting approach, per Reuters.

Technically, the EUR/USD pair is testing support around the 1.0790 midpoint of its weekly horizontal range. If this level fails, the price may target the daily trendline at 1.0760, where it found support last Wednesday. A break below this trendline could push the pair toward 1.0700.

On the upside, the first resistance stands at the double top of 1.0840 on the 4-hour chart. Above this, the 200-day and 50-week moving averages create a second resistance zone at 1.0870-1.0880. A breakout here would make 1.0900 the third resistance level.

Yen Plunges Below 153.5 on Election Results

The Japanese yen fell below 153.5 per dollar on Monday, hitting a nearly three-month low after the ruling coalition lost its parliamentary majority, raising uncertainties around potential BoJ rate hikes. The Liberal Democratic Party and Komeito suffered their biggest lower house seat losses since 2009, complicating BoJ normalization plans amid political and economic concerns.

Ahead of the BoJ’s Thursday policy decision, expected to maintain the current stance, yen declines have prompted verbal interventions from Japanese officials. Further drops toward 160 may trigger actual intervention. The yen remains pressured by a strong dollar, fueled by cautious Fed rate cut expectations and speculation of a Trump win in November.

Following the weekend's general elections, USD/JPY opened with a gap up. The first resistance level is 154.40; if breached, the next is 155.60 at the 20-week moving average, followed by 156.60.

On a pullback, the first support is at 152.30, last week's close, which would close the gap. Below this, 151.30 aligns with the 200-day moving average as the second support, and 150.40 is the next level to watch if the decline continues.

Gold Consolidates Near $2,730

Gold fell below $2,730 per ounce on Monday as safe-haven demand eased after restrained Israeli airstrikes on Iran with no immediate retaliation. Markets are focused on US economic data, such as PCE inflation and Q3 GDP, which may impact Fed rate expectations. Despite stronger economic data lowering rate cut expectations, uncertainties around the US election and easing by other central banks continue to support gold prices.

Since its recent peak last Wednesday, gold has traded within a horizontal range. After a gap down at the open, it quickly recovered. If the upward move persists, Friday’s high at 2747 marks the first resistance, followed by the previous peak at 2758, and then 2770 as the third resistance level.

On the downside, the midpoint of the range at 2735 is initial support. Below this, key support levels include the rising trendline at 2723 and the lower boundary of the range at 2715.

Pound Under Pressure as UK Inflation Falls Below Target

GBP/USD is trading around 1.2960 on Monday. The British Pound (GBP) is under pressure due to increasing expectations of interest rate cuts by the Bank of England (BoE) in November and December, following a drop in the UK Consumer Price Index to its lowest level since April 2021, falling below the central bank's 2% target.

From a technical perspective, the rising trendline at 1.2925 serves as the first significant support level on the daily chart. If this critical level is breached, the 0.5 retracement level of the rally that began in April, at 1.2865, will act as the second support. Below this level, the 1.2800 mark, which represents both horizontal range support and the 200-day moving average, will be important to watch.

On the upside, the first resistance is at 1.2990. If this level is surpassed, the next resistance levels to monitor will be 1.3015 and the 20-day moving average at 1.3055.

Silver Dips Below $33.60 on Dollar Strength

Silver traded around $33.60 on Monday, down 0.3% from Friday, pressured by a stronger dollar and rising Treasury yields amid resilient US economic data, which has softened expectations for aggressive Fed rate cuts. Additionally, a potential Trump election win has supported the dollar and yields due to his inflationary policies.

Investors are also eyeing the National People’s Congress from November 4-8, where fiscal policy announcements are expected. Recent data showed China’s industrial profits dropped at their fastest pace since the pandemic, highlighting weak demand and affecting the outlook for metals.

Silver has rallied recently on positive news from China and is nearing critical retracement levels. On Friday, it closed in the green at 33.00, the 0.38 retracement level, which now serves as key support. Should the price drop below this, the next supports are the 0.5 retracement at 32.50 and horizontal support at 32.00.

If the upward momentum continues, resistance begins at the 0.5 extension level of the horizontal range at 34.00, followed by the 0.618 retracement at 34.90, and finally, the trendline at 35.30 as a third resistance level.