US Dollar Prepares for Fourth Weekly Close of Gains

The US dollar (USD) consolidated on Friday after a slight decline the previous day but looks set to post a fourth consecutive week of gains ahead of the release of US durable goods data. In what was otherwise a sharp rise this week, Thursday was a profit-taking day for King Dollar. Uncertainty surrounding the US presidential election resurfaced after Thursday’s decline

The US economic calendar faces two major events on Friday. The first will be the release of US durable goods orders for September. Second, to close the week, the University of Michigan will release its final reading of October consumer confidence data.

The rise of the US Dollar Index (DXY) faces a crucial moment to confirm whether it has more room to advance. Support is tested at 104.00, and a close at the end of the US trading session will be vital. A close above 104.00 could send the US dollar index towards 105.00 as uncertainty over next week’s US presidential election gains momentum.

The US dollar index has breached the 104.00 level and is in empty territory that may quickly see the 105.00 level appear as the first ceiling on the upside. Once this level is surpassed, watch out for the pivot levels of 105.53 (the highest level on April 11) and 105.89 (the high on May 2). In the end, a level of 106.52 (a double high from April) or even 107.35 (the high of October 3, 2023) may show sharp resistance and selling pressure due to profit taking.

On the downside, the 200-day SMA at 103.81 appears as a very strong support. Watch out for false outages, and consider waiting for a daily close below this level when reassessing whether there is a further decline for the US dollar index.

Dollar extends gains, gold consolidates amid geopolitical concerns

The US dollar is set to close the fourth consecutive week of gains, driven by rising risk aversion and expectations of a rate cut by the Federal Reserve. Meanwhile, Treasury yields remained flat on Friday, with a 10-year yield at 4.2% after peaking at 4.25% earlier in the week. Fed officials continue to signal a cautious approach to future rate cuts, reflecting ongoing inflation concerns.

While profit-taking and strong dollar fundamentals represent short-term headwinds for gold, the prevailing safe-haven demand amid geopolitical concerns, coupled with inflationary pressures, points to the potential for further gains.

Market outlook: Cautious optimism amid volatility risks

Gold remains in a position to take off potentially bullish, especially if geopolitical risks escalate or if inflation data fuels the Fed’s dovish expectations. Traders should keep an eye on the support level at $2598.78 and resistance near $2758.53 as crucial levels that shape the gold price outlook.

Gold prices settled on Friday after hitting record highs earlier in the week, reflecting investor hesitation and anticipation of upcoming volatility. After peaking at $2,758.53, prices have since fallen, with Friday’s consolidation signaling a possible turnaround.

The director of the macroeconomic and market strategy department for securities said that exchange rate pressures may increase in the first half of the fourth quarter of 2024, before subsiding. With the Fed planning two more rate cuts in the final meetings of this year, the US dollar index could see a recovery, but a significant rise remains unlikely. The peak period of domestic corporate demand for dollars has passed, so exchange rate risks in the fourth quarter of this year are no longer too great, but pressures may appear at some points in the first half of the quarter.

AUD/USD Stabilizes on Interest Expectations

The AUD/USD pair is holding above the 0.6000 psychological support level in Friday’s European session. The Australian dollar pair turns sideways with the US dollar (USD) holding steady after Thursday’s corrective move. The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies, is hovering near 104.00.

Growing expectations of a more gradual Fed monetary policy easing approach and a potential victory for former US President Donald Trump in the upcoming national elections on November 5 limit the downside of the US dollar.

Traders are confident that the Fed will cut interest rates at the usual pace of 25 basis points at policy meetings in November and December. The Fed began its monetary policy easing cycle in September with a larger-than-usual volume of 50 basis points, pushing interest rates down to 4.75%-5.00%..

Politically, investors expect higher tariffs and lower taxes if Trump returns to the White House, forcing the Fed to keep interest rates high. It indicates the likelihood of further gains.

Meanwhile, the Australian dollar recorded a weaker-than-expected performance against its major peers this month despite investors expecting the Reserve Bank of Australia to leave the official interest rate at current levels by the end of the year. The latest upbeat employment data reinforced expectations that the RBA will not cut interest rates for the rest of the year.  .

Going forward, investors will focus on Australia’s third-quarter CPI data, which will be published on Wednesday. Australian inflation grew by 1% in the second quarter of this year.