As Trump continues to threaten a 100% tariff increase on China in his tweets, the rebound of the US dollar index has encountered a relatively obvious resistance around 99.50. Powell’s remarks overnight, indicating support for two more rate cuts this year and hinting at a possible halt to balance sheet reduction in the future, have added pressure on the dollar. Currently, the US dollar index is holding at around 98.80, with key support at 98.60/50 within the day. A break below this level could trigger further technical corrections.
ING analysts Chris Turner and Francesco Pesole wrote that the “re-emergence of the dollar as a safe haven” and “some additional dollar bullish momentum” could support the dollar in the short term.
The options market shows that demand for exposure to a stronger dollar has picked up, particularly against the pound, the Australian dollar and the Canadian dollar. Traders, however, hold the opposite view on the yen, which led gains among G-10 currencies on Tuesday.
Turner and Pesole said, “If the market finds reasons to ease concerns over Japan’s political situation, then the undervalued yen will be in a favorable position and can benefit from further escalation.”
Federal Reserve Chair Jerome Powell said that although the government shutdown has led to a significant drop in the Fed’s expectations for the economy, the Fed still expects to cut interest rates by a quarter of a percentage point again later this month.
After Powell’s speech, market expectations for a rate cut in October remained largely unchanged. According to federal funds futures contracts, investors believe the probability of a rate cut is almost 100%.
Powell also hinted that the central bank might halt the reduction of its balance sheet in the coming months, which is an important shift necessary to maintain liquidity in the overnight funding market.
Powell said in a speech on Tuesday: “Our long-standing plan is to stop the balance sheet reduction when reserves are slightly above the level we judge to be consistent with ample reserve conditions. We may approach this level in the coming months and we are closely monitoring various indicators to make this decision.”
Technical analysis:
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Gold: Yesterday, the gold price fluctuated widely, with an amplitude of about 2%. Our green buy limit operation was not successful; however, the yellow low-sweep liquidity (breaking below the yellow area) and then direction-buying operation we arranged achieved good results twice. Currently, gold continues to maintain a strong upward trend, continuously setting new highs. Our operation strategy also remains a relatively aggressive buying stance. Pay attention to the support at 4150/65 within the day. If there is an opportunity, you can try to buy at a low price. At the same time, if there is a signal of direct momentum breakthrough, you can also try to chase a long position once at a high level, with a priority to reduce positions when the profit-to-loss ratio reaches 1:1. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
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Nasdaq: Yesterday, the Nasdaq’s liquidity sweep at the lower end saw the index drop to 24,245, which was 100 basis points away from the position we were aiming for with our plugin. Currently, the price has rebounded and returned to a convergent pattern. For today, we will wait for a breakout in the pattern to seize the opportunity for a retracement buy. Meanwhile, if the price fails to break upwards, we will retain the strategy of sweeping liquidity at around 24,200/24,100 and catching a rebound. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: The price further refreshed the recent low yesterday, but a corrective rebound as expected occurred after the refresh. Given that there is a relatively clear demand zone at around 57.80, a buy limit can be attempted at 57.40/57.85 within the day. At the same time, the option of buying on a break and pullback is also reserved. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Today’s key economic data and events to focus on:
17:00 Eurozone industrial output for August
20:30 Canadian wholesale sales for August
20:30 US October New York Fed Manufacturing Index
