All eyes on the US inflation data

All eyes on the US inflation data – Federal Reserve Chair Jerome Powell is unlikely to secure another significant interest-rate cut from his policy committee as long as the labor market remains strong.

Powell described the move as a recalibration aimed at ensuring a strong labor market during his press conference after officials lowered the benchmark lending rate by half a percentage point to a range of 4.75% to 5%.

The move deviated from the typical gradualism of Fed interest-rate changes. Some officials cited recent inflation data as the reason for the move, convinced that the rate of price changes was heading toward their 2% target.

However, the meeting minutes indicated that some officials preferred a more gradual pace of rate cuts, possibly due to the economy’s resilience in the face of what Fed officials consider “restrictive” policy.

“Some participants indicated a preference for a 25-basis-point reduction in the target range at this meeting, and a few others said they could have supported such a decision,” the minutes stated.

Inflation data ahead

During the US session today, all eyes will be on the US inflation data. Estimates are pointing to a softer report in September compared to August.

As long as there are no upside surprises, markets are likely to continue pricing in 25-basis-point rate cuts in the November and December meetings.

DXY upside retracement continues

The US Dollar Index continued its upward retracement during yesterday’s trading, reaching as high as the 102.90 resistance area. This is the highest level since mid-August. However, the technical indicators are now showing that the market is nearly overbought, indicating that the upward movement may not have much room to continue.

Inflation data could be the catalyst for the downside pressure to resume, especially if the core inflation slows down more than expected. The next resistance area is around 103.40, while the next support area is at 102.40 for now.

Gold near $2600

Gold prices have decreased significantly in the past few days. Yesterday, the price dropped to as low as $2605 during trading, marking the lowest level since September 20^th.

At the moment, the price of Gold is close to a strong support level at $2600. It’s crucial to monitor this level closely because if it breaks, it could lead to a significant drop towards $2580. On the other hand, if the price stabilizes above $2600, it could signal a potential upward movement towards $2630.

EURUSD below 1.10

EURUSD has been unable to break above the 1.10 resistance area in the past few days. This has led to another downward movement, with the currency pair dropping to as low as the 1.0930s, the lowest level since mid-August. At the same time, the technical indicators are approaching oversold territory.

In the meantime, the next support area is at 1.09. A break below this support could lead to further declines, possibly towards 1.0885 and then 1.0860. On the upside, a break above 1.10 is needed for the upward trend to continue.

Brent holding above $75

After reaching $81 a few days ago, Brent crude declined sharply back towards $75.25 but managed to hold above the $75.80 support area, which keeps the bullish outlook unchanged for now. The decline is considered as another short-term retracement before the recent rally, which flipped the bearish outlook to bullish.

Currently, tensions are escalating in the Middle East, and there are significant weather developments in the US. It is more likely that the upward rally will continue in the coming days, but it is necessary for the price to stabilize above $75 for the upward trend to continue. If this happens, it is highly likely that Brent crude will retest the $81 resistance area in the next two weeks.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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