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DXY
The U.S. Dollar Index (DXY) has struggled to build on its two-day recovery from the yearly lows. Reduced bets on a 50-basis-point Fed rate cut and escalating geopolitical risks have supported the dollar. Ahead of key data releases and multiple Fed speakers, the dollar extended Monday’s gains to reach a two-day high, bolstered by geopolitical concerns. Fed Chair Jerome Powell’s comments alleviated expectations of a significant rate cut in November, reducing the likelihood of a larger rate reduction, which supported the dollar by suppressing the performance of other currencies in the DXY basket, such as the euro. Market awareness is growing that the European Central Bank (ECB) may surprise with a rate cut in October, further widening the rate differential in favor of the dollar. Additionally, geopolitical risks are likely to prevent the dollar from weakening. Reports suggest Iran launched more than 200 ballistic missiles at Israel on Tuesday, just hours after the U.S. warned of retaliatory action. Israeli Prime Minister Benjamin Netanyahu vowed to retaliate against Iran's strikes, while Iran warned of "massive destruction" if there were any responses, deepening concerns about an expanding war in the Middle East.
With geopolitical risks likely to support the dollar, the DXY’s recovery this week appears robust. The index has already broken through the 101.00 (key psychological level) and 101.23 (last week’s high) resistance area during Tuesday's trading, reaching a four-day high of 101.62. If the bullish momentum in the dollar persists, the next resistance is at the 50-day simple moving average (SMA) at 101.91, with a break above that level targeting 102.00 (another psychological barrier). On the downside, 101.00 has transitioned from resistance to support, especially if the DXY closes above it on Tuesday. The next support lies at the 100.68 (Tuesday's low) level.
Today’s recommendation is to go short on the Dollar Index around 101.75, with a stop loss at 101.88 and targets at 101.30 and 101.20.
AUD/USD
AUD/USD was unable to sustain its earlier rise above 0.6900, giving up most of its gains amid a strengthening U.S. dollar, which has been supported by escalating geopolitical concerns. During the Asian session on Wednesday, AUD/USD traded flat around 0.6900. Market fears of a larger-scale war in the Middle East have temporarily supported the safe-haven flows into the U.S. dollar. Last month, the Federal Reserve cut the federal funds rate by 50 basis points rather than the usual 25 basis points. However, Fed Chair Jerome Powell emphasized on Monday that the Fed does not have a pre-set path for monetary policy. At the same time, geopolitical risks may prevent the dollar from weakening. On Tuesday, Iran launched over 200 ballistic missiles at Israel, further fueling concerns about an expanding war in the Middle East. For the Australian dollar, China's recent round of stimulus measures, given China’s role as Australia’s largest trading partner, could continue to support AUD. Additionally, the Reserve Bank of Australia’s hawkish stance could contribute to upward pressure on AUD.
Earlier this week, AUD/USD reached a high of 0.6934 before renewed geopolitical risks and a stronger dollar brought selling pressure, pushing the pair back below 0.6900 and ending a three-day rally. Therefore, short-term support for the rest of the week lies first at 0.6856 (Tuesday’s low) and 0.6867 (the 10-day moving average), with a break lower targeting 0.6815 (16-day moving average) and the psychological level around 0.6800. Additionally, the 14-day Relative Strength Index (RSI) remains in the positive territory at 63, indicating some bullish momentum. If buyers regain control, AUD/USD could retest the 200-week simple moving average at 0.6964 and approach the key 0.7000 psychological level.
Today’s recommendation is to go long on AUD around 0.6870, with a stop loss at 0.6860 and targets at 0.6925 and 0.6935.
EUR/USD
On Wednesday, EUR/USD accelerated its decline, falling for the fourth consecutive day under the pressure of a strengthening U.S. dollar and escalating Middle East tensions, dropping back to the 1.1030 range. The pair briefly rebounded to 1.1075 during the Asian session but was weighed down by geopolitical tensions and weak economic data, which suppressed risk appetite and boosted the dollar, driving EUR/USD to its lowest price in nearly a month. Eurozone’s September Harmonized Index of Consumer Prices (HICP) fell faster than expected. Core HICP dropped to 2.7% year-over-year, while the overall HICP was just 1.8% month-over-month. For the rest of the week, European economic data will take a backseat as investors shift their focus to Friday’s upcoming U.S. Nonfarm Payrolls (NFP) report. On the geopolitical front, reports indicated that Iran launched missile attacks on Israel in response to Israel’s recent incursion into Lebanon, raising concerns among investors about a rapidly escalating conflict in the Middle East and boosting the dollar.
On Tuesday, EUR/USD retraced to a daily low around 1.1032, approaching the 50-day moving average at 1.1036. Although the pair saw a slight rebound by the end of the session, it remains imbalanced, completely reversing the recent bullish push toward the yearly high of 1.1200. With buying interest weakening, EUR/USD is retreating from its highs, and momentum is increasingly favoring the bears. The immediate target for sellers is pushing EUR/USD back above the 1.1100 level. From a technical perspective, EUR/USD appears poised for further declines. On the daily chart, the pair has already broken below its 20-day simple moving average, which is now offering dynamic resistance around 1.1106. The next resistance is at 1.1144 (Tuesday’s high). Meanwhile, the pair remains above the 100-day (1.0927) and 200-day (1.0875) moving averages, limiting the downside risks. Finally, the 14-day Relative Strength Index (RSI) has turned downward, reflecting continued selling interest. The next downside targets are at 1.1036 (50-day moving average), followed by 1.1001 (September 11 low) and the key psychological level of 1.1000.
Today’s recommendation is to go long on EUR around 1.1030, with a stop loss at 1.1020 and targets at 1.1095 and 1.1110.
GBP/USD
On Wednesday during the U.S. session, GBP/USD continued to slide below 1.3300. The U.S. ADP employment change for September came in at 143,000, surpassing market expectations of 120,000, which hindered the pair’s ability to rebound. On Tuesday, GBP/USD plummeted after the weaker-than-expected U.S. ISM Purchasing Managers' Index (PMI) data, dropping to its lowest level in over a week. Additionally, geopolitical tensions have taken center stage as risk sentiment worsened following reports that Iran fired missiles at Israel, escalating tensions in the Middle East. The economic calendar for the British pound remains relatively light, with GBP traders now awaiting the Bank of England’s monetary policy report hearing on Thursday. Investors' attention has shifted to the Middle East, with reports of Iran launching missiles at Israel in response to recent Israeli incursions into Lebanon. The U.S. has pledged support for Israel, further stoking concerns of a rapidly escalating conflict.
On Tuesday, GBP/USD dropped below the 1.3300 mark to hit a low of 1.3237. The pair now appears poised to continue its downtrend, opening the door for further declines. Sellers are eyeing Tuesday’s low of 1.3237 and the 20-day moving average at 1.3239. If GBP/USD breaks below this support zone in the short term, its momentum could turn more bearish, as suggested by the 14-day Relative Strength Index (RSI), which has fallen from a high of 63.50 earlier in the week to 55.30. A break below the 1.3237-1.3239 zone would target the next support at 1.3200. Further weakness would bring the September 17 low of 1.3145 into play, followed by the key psychological level of 1.3100. Conversely, for a bullish continuation, GBP/USD must climb back above 1.3300 and clear the upper trendline of the ascending channel around 1.3380-90 to have a chance at retesting the previous high of 1.3434.
Today's recommendation is to go long on GBP around 1.3250, with a stop loss at 1.3235 and targets at 1.3315 and 1.3325.
USD/JPY
The Japanese yen fell as the Bank of Japan’s (BoJ) summary of opinions indicated its intent to maintain an accommodative monetary stance. Japan’s Economy Minister, Akira Amari, noted that Shinjiro Ishiba, Japan's likely next prime minister, expects the BoJ to evaluate the economy before considering further rate hikes. With escalating geopolitical tensions in the Middle East, traders adopted a cautious stance, supporting the U.S. dollar. On Wednesday, the yen weakened against the dollar as concerns about further BoJ rate hikes rose. The BoJ’s September monetary policy meeting summary indicated that there are currently no plans for a rate hike. The central bank intends to maintain its accommodative stance but remains open to adjustments if economic conditions show significant improvement. Incoming Prime Minister Shigeru Ishiba said last Sunday that Japan’s monetary policy should remain loose, underscoring the need for low borrowing costs to support the fragile economic recovery. This put pressure on the yen, providing support to USD/JPY. The cautious market sentiment amid rising Middle East tensions further bolstered the dollar.
Technical analysis on the daily chart shows that USD/JPY is trading around 146.00 in the middle of the week, consolidating within an ascending channel pattern, suggesting a bullish outlook. The 14-day Relative Strength Index (RSI) has also rebounded to around 58, hovering near a critical point. If the pair can break above this threshold, it would further confirm the bullish trend. USD/JPY could test the upper boundary of the ascending channel near 146.80, with a break above that level targeting the 60-day moving average at 147.45 and the five-week high of 147.21, reached on September 3. On the downside, immediate support lies near the 40-day moving average at 144.52, followed by Wednesday’s low of 143.43. A break below this level could push USD/JPY toward the key psychological level of 143.00.
Today’s recommendation is to go short on USD around 146.60, with a stop loss at 146.80 and targets at 145.80 and 145.70.
XAU/USD
On Wednesday, spot gold prices hovered around $2,650 per ounce, with both gold and the U.S. dollar trading in a tight range amid overall pessimistic market sentiment. In the middle of the week, gold prices rebounded over 1%, ending a two-day losing streak as geopolitical tensions in the Middle East escalated. Iran’s missile strikes on Israel heightened the risk of a full-scale war in the region, boosting demand for traditional safe-haven assets like gold. Despite this, diminishing expectations for more aggressive easing from the Federal Reserve kept bulls cautious about betting too aggressively on zero-yield assets like gold. Additionally, strong U.S. labor market data lent support to the U.S. dollar, further limiting gold's gains. Still, gold remains close to last week’s record high, and the fundamental backdrop favors the bulls. Investors are now looking ahead to Friday’s U.S. Nonfarm Payrolls report.
From a technical standpoint, the overnight rally reinforced the strength of the short-term ascending channel, with resistance near the $2,625-$2,624 level turning into support. This area should now act as a key pivot point, and a clear break below this level could trigger some technical selling. Further downside could push gold below the psychological $2,600 mark, with the next relevant support around $2,560, followed by the $2,535-$2,530 region. On the upside, resistance is likely to emerge around the $2,670-$2,675 zone, followed by last week’s record highs at $2,685-$2,686. Beyond this, the psychological $2,700 level could serve as a trigger for bulls to extend the established multi-month uptrend toward $2,750.
Today’s recommendation is to go long on gold around $2,654.00, with a stop loss at $2,650.00 and targets at $2,672.00 and $2,675.00.
XTI/USD
On Wednesday, U.S. WTI crude oil traded around $70.74. WTI prices rose slightly after Iran directly launched missiles at Israel, sparking concerns about potential supply disruptions in the region. WTI held above $70.00, fluctuating higher amid growing fears of a broader conflict in the Middle East following the missile strikes. Israel vowed to retaliate against Iran’s missile attacks, while Iran warned that any response would lead to "massive destruction," heightening concerns about the escalation of war. Additionally, Israel warned that it might target Iran's oil facilities, which could trigger a regional war and further exacerbate fears of disrupted oil supplies. U.S. crude inventories fell last week, though the decline was less than expected. Meanwhile, Fed Chair Jerome Powell’s relatively hawkish comments downplayed the likelihood of a substantial rate cut in November, potentially weighing on WTI prices. Should other Fed officials also deliver hawkish remarks, it could lead to further downward pressure on WTI prices. It’s important to note that rate cuts typically lower borrowing costs, which tends to boost oil demand.
From the daily chart, technical indicators such as the 14-day Relative Strength Index (RSI) and Stochastic Oscillator show signs of a recovery in oil prices. Currently, oil is testing resistance at $72.45 (the 50-day moving average) and $72.20 (last week’s high). A clear break above these levels could signal a resumption of the uptrend, with extended targets at $73.67 (the 60-day moving average) and $75.46 (the 76.4% Fibonacci retracement from $78.78 to $64.75). On the support side, the first target is $70.00 (a psychological level) and the 25-day moving average at $69.70, followed by $68.06 (the 23.6% Fibonacci retracement) and $64.75 (the September 10 low).
Today’s recommendation is to go long on crude oil around $70.50, with a stop loss at $70.30 and targets at $71.60 and $71.70.
Disclaimer:
The information contained herein (1) is proprietary to BCR and/or its content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and, (4) does not constitute advice or a recommendation by BCR or its content providers in respect of the investment in financial instruments. Neither BCR or its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
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