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Asset Watch
Thursday, September 28, 2023
The US dollar continued its rally yesterday, driven by the market pricing in the possibility of interest rates staying elevated for a prolonged period in the US. This sentiment was fueled by persistently high inflation levels, which surged from 3% to 3.7% in August, primarily due to the spike in energy prices.
Moreover, the US dollar benefited from its status as a safe-haven currency, experiencing gains amidst a risk-off sentiment prompted by concerns about the European and Chinese economies. The greenback further strengthened following speeches by Fed members that hinted at the potential for a rate hike this year, potentially raising the US base rate from 5.5% to 5.75%.
Collectively, these factors propelled the US dollar index to its highest level since November of the previous year. In contrast, the price of gold fell to its lowest point since March.
Looking ahead, the market is eagerly anticipating a series of significant data releases tomorrow. These include the US Personal Consumption Expenditures (PCE) data, which is the Federal Reserve’s preferred tool for measuring inflation, as well as the Eurozone inflation figures for September. Additionally, market participants are awaiting speeches from Federal Reserve Chair Mr. Powell and European Central Bank President Ms. Lagarde.
Chart source ADSS Platform
On September 27, the price broke below the support level located at 1890 and tested a multi-month low then traded towards the following support located at 1872. Thus, a daily close below that level reflects a stronger bearish momentum and could send the price towards 1855. Furthermore, a daily close below this level could send the price even lower towards $1831/oz.
On the other hand, a daily close above 1890 signals a weaker bearish momentum and this allows the bulls to take the initiative and possibly push towards the resistance area between 1911-1916. Additionally, a Daily close above that area highlights a stronger bullish sentiment and could encourage bulls to rally the price towards $1933/oz.
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