Wall Street Calm after Fed’s Rate Cut Rally

• The U.S. dollar remains lacklustre, but support for the dollar index was found at near $100.60 level.
• My eyes are on the RBA's interest rate decision, which is due tomorrow with Hawkish expectations.
• BTC climbed to its highest level in September as sentiment improved in the broader market. 

Market Summary

The U.S. dollar continues to trade at its lowest levels, but the Dollar Index (DXY) has found support above 100.60, with bearish momentum easing. Market sentiment is largely driven by anticipation of another 50 bps rate cut by the Fed before year-end. This week's GDP and PCE readings will be key in shaping those expectations.

Wall Street remains at all-time highs, with major indexes standing pat, awaiting a catalyst to push them further. In the commodity market, gold is benefiting from a soft dollar and the prospect of continued Fed rate cuts, trading bullishly. Oil prices have also risen to their highest levels this month, aided by improved demand outlook following the Chinese central bank's surprise rate cut of 10 bps on short-term repo rates.

In the crypto market, Bitcoin (BTC) has surged to its highest level since August, buoyed by improved risk-on sentiment following the Fed's rate cut. The ongoing accumulation of BTC by MicroStrategy and strong inflows into BTC ETFs are further bolstering confidence in the market.

Lastly, the Reserve Bank of Australia (RBA) is set to announce its interest rate decision tomorrow, with a hawkish stance expected, which has been supporting the strength of the Aussie dollar.

Current rate hike bets on 7th November Fed interest rate decision: 

Source: CME Fedwatch Tool

-50 bps (32%) VS -25 bps (68%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index continues to decline as investors assess the likelihood of further aggressive rate cuts by the Federal Reserve. With monetary policy remaining data-dependent, attention is now shifting toward key US economic indicators, including the Personal Consumption Expenditures (PCE) price index and statements from Fed officials due this week, which could provide clearer trading signals for the Dollar. 

The Dollar Index is trading flat while currently testing the support level. However, MACD has illustrated increasing bullish momentum, while RSI is at 50, suggesting the index might experience technical correction since the RSI rebounded sharply from oversold territory. 

Resistance level: 101.80, 102.35

Support level: 100.55, 99.70

XAU/USD, H4

Gold remains steady near record highs as traders await further US data to determine if last week’s 50-basis-point rate cut is the start of more aggressive monetary easing. Additionally, rising tensions in the Middle East, particularly between Hezbollah and Israel, are bolstering gold’s status as a safe-haven asset.

Gold prices are trading flat while currently testing thes support level. However, MACD has illustrated increasing bearish momentum, while RSI is at 64, suggesting the commodity might experience technical correction since the RSI retreated sharply from overbought territory. 

Resistance level: 2635.00, 2660.00

Support level: 2615.00, 2605.00

GBP/USD，H4

The Pound Sterling has emerged as one of the strongest currencies recently, particularly after the Bank of England (BoE) chose to maintain its interest rate levels unchanged last week. This decision positions the BoE as one of the few major central banks still holding onto a monetary tightening policy, which has provided substantial support to the pound. The Sterling Index (BXY) has climbed to its highest level since March 2022, further signalling ongoing strength in the currency and suggesting a bullish bias for GBP moving forward.

GBP/USD continued to climb, rising by more than 1.5% last week. The pair remains in a bullish trend. The RSI is poised close to the overbought zone, while the MACD continues to edge higher, suggesting the pair’s bullish momentum remains strong. 

Resistance level:  1.3350, 1.3440

Support level:1.3280, 1.3140

EUR/USD，H4

The EUR/USD pair is currently positioned at its highest level in September, but the bullish momentum appears to be waning. While the dollar's strength has been curbed by the Fed's pivot towards a more dovish monetary policy, weak economic data from the eurozone and another rate cut from the European Central Bank (ECB) have offset the softening effect on the dollar. As a result, the dollar has found support recently, and this may lead to a technical correction for the EUR/USD pair. 

EUR/USD seems to face strong selling pressure at below 1.1200 and may have a potential technical retracement. The RSI remains above 50, but the MACD is flowing flat, suggesting the bullish momentum is easing. 

Resistance level: 1.1223, 1.1360

Support level: 1.1130, 1.1020

S&P 500, H4

The S&P 500 hit an all-time high last week following the Fed's 50-basis-point rate cut, initiating the first monetary easing cycle since 2020. The index is up 0.8% in September and 19% year-to-date. However, the market rally could face pressure if economic data does not align with expectations of a "soft landing" where inflation slows without hampering growth. Investors are also paying close attention to the tight US presidential race between Donald Trump and Kamala Harris, which may add volatility. Economic performance will be the key driver for market movement post-Fed decisions.

S&P 500 is trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 66, suggesting the index might experience technical correction since the RSI retreated sharply from overbought territory. 

Resistance level: 5790.00, 5900.00

Support level: 5650.00, 5505.00

AUD/USD, H4

The Aussie dollar is trading sideways at its highest level in 2024 ahead of the Reserve Bank of Australia (RBA) interest rate decision. The RBA Deputy Governor previously indicated that Australia's labour market remains tight, suggesting the central bank might maintain its monetary tightening policy for an extended period to manage inflationary pressures. Should the RBA's interest rate decision align with market expectations, it may further boost the strength of the Aussie dollar, reinforcing its bullish momentum. 

The pair is consolidating at its recent high level, suggesting a bullish bias. The RSI remains at the above 50 level, while the MACD edged higher, suggesting the pair remains trading with bullish momentum. 

Resistance level: 0.6850, 0.6920

Support level: 0.6780, 0.6730

CL OIL, H4

Oil prices continue to climb amid heightened geopolitical risks, with the conflict between Israel and Hezbollah escalating after Hezbollah launched numerous rockets and drones into northern Israel. Fears that this could involve OPEC producer Iran have reintroduced a risk premium in oil markets. However, gains are tempered by China’s weak economic performance, as government spending slows and the youth jobless rate hits a yearly high.

Oil prices are trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 63, suggesting the commodity might extend its gains since the RSI stays above the midline. 

Resistance level: 71.95, 74.15

Support level: 70.50, 68.60