The yield on long-term U.S. Treasuries hit its lowest level since September, sparking a rally in bond prices. This phenomenon, triggered by market expectations of a more dovish Fed, has also pushed gold prices higher.
Prominent Wall Street figure Bill Ackman is speculating that the Federal Reserve (Fed) is ready to cut interest rates as early as the first quarter of next year. This expectation is in line with the consistent delivery of dovish statements by Fed officials.
At the same time, market expectations are pointing to another rate cut in December, a sentiment that has triggered a decline in the US dollar. At the same time, the yield on long-term U.S. Treasuries has fallen to its lowest level since September, fueling a surge in bond prices. This in turn has pushed gold prices higher as the market perceives a more uncertain economic landscape ahead. In addition, the Reserve Bank of New Zealand opted to keep interest rates on hold, but hinted at a possible future hike if price risks escalate. This hawkish statement was well received by the market and led to a notable rise in the New Zealand Dollar.
Dollar Index
Dovish sentiment prevails among Federal Reserve policymakers, as highlighted by Fed Governor Christopher Waller, who asserted that current inflation trends are in line with the Fed’s objectives. His confidence in existing policies to manage the economy and bring inflation back to the 2% target hints at potential rate cuts if inflation continues on a downward trajectory. This dovish stance is contributing to a significant decline in the US Dollar, which has reached its lowest level in over three months.
The Dollar Index is trading lower and is currently testing support. The MACD is showing an increase in bearish momentum, while the RSI is at 23, indicating that the index may enter the oversold territory.
Resistance level: 103.05, 103.60.
Support: 102.50, 101.90.
XAU/USD
The depreciation of the U.S. dollar is serving as a robust catalyst for dollar-denominated gold, which is experiencing an aggressive rally amid heightened expectations of a dovish Federal Reserve. With uncertainties looming ahead of the Core PCE report, gold is emerging as a safe-haven asset, attracting significant demand from investors seeking refuge in times of market unpredictability.
Gold is trading higher as it tests the resistance level. The MACD is showing increasing bullish momentum. However, the RSI is at 86, suggesting that the commodity may be entering overbought territory.
Resistance level: 2050.00, 2080.00.
Support level: 2025.00, 2005.00.
GBP/USD
The British Pound (Sterling) has enjoyed a robust trading session against the U.S Dollar, breaking above its uptrend resistance level. This impressive performance is due to the divergence in monetary policy between the two nations; the Bank of England‘s (BoE) hawkish stance is in contrast to the Federal Reserve’s (Fed’s) consistent dovish statements, which has fueled the market’s belief that the Fed may begin cutting interest rates in the coming year. This has added to the downward pressure on the US Dollar, which has further contributed to the strength of the British Pound.
The GBP/USD is trading in an extremely bullish momentum and has broken through its September high. The RSI has again entered the overbought territory, while the MACD continues to float above the zero line, indicating that the bullish momentum is strong.
Resistance level: 1.2729 1.2815.
Support: 1.2630, 1.2528.
EUR/USD
The euro has reached its highest level against the dollar since August, mainly due to the dollar’s weakness. A steady stream of dovish statements from the Federal Reserve (Fed) has raised market expectations for a potential Fed rate cut next year, putting pressure on the dollar’s strength. At the same time, the yield on long-term U.S. Treasuries has fallen to its lowest level since September, further contributing to the dollar’s diminished resilience. Adding to the currency dynamics, the Eurozone’s Consumer Price Index (CPI) is scheduled for release tomorrow, and market participants are anticipating its potential impact on the euro’s strength.
The EUR/USD has formed another bullish channel and is currently trading firmly within the channel, indicating a bullish bias for the pair. The MACD is pointing down, but the RSI is floating in the upper region, indicating that the bullish momentum is still intact, but losing steam.
