Economic Expansion vs. Rate Cuts: Powell Supports Job Market

On Wednesday (October 9th), Federal Reserve Governor Kugler stated at the European Central Bank's monetary policy conference in Frankfurt on Tuesday that the Federal Reserve should continue to commit to reducing the inflation rate to the 2% target, but with a balanced approach to avoid an undesirable slowdown in job growth and economic expansion. While the focus should remain on reducing inflation to 2%, there is support for shifting attention to the full employment aspect of the Federal Open Market Committee's dual mandate. Kugler reiterated his support for the Federal Reserve's decision last month to lower the benchmark borrowing rate by 50 basis points. Federal Reserve Chairman Powell indicated that the significant rate cut aims to protect the strong labor market, as hiring slows and price pressures ease.

According to the dot plot released by the Federal Reserve after its September interest rate meeting, officials expect the Federal Reserve to cut rates by another 50 basis points in the remaining two meetings of 2024. The market is closely monitoring the impact of hurricanes and geopolitical events in the Middle East on the economy, as these events could affect the U.S. economic outlook. The US dollar index rose to 102.50; non-US currencies retreated, with the Australian dollar against the US dollar reaching 0.6730, the euro against the US dollar falling to around 1.0970, and the offshore renminbi reaching 7.06. Spot gold fell to around $2620, and spot silver came to $30.60. Crude oil fell to around $74.00.

Fundamentals: ING Group believes that due to the almost complete digestion of the European Central Bank's interest rate cut in October by the money market, the euro faces the risk of weakening, although the possibility of a rate cut may be smaller than the market suggests. Data continues to show high service sector inflation, and rising oil prices mean that the European Central Bank may raise inflation expectations. However, the market is unlikely to easily give up its bets on an October rate cut, with a large interest rate differential between the dollar and the euro, and the euro against the US dollar still faces some pressure in the short term.

Technical analysis: The euro against the US dollar fell on the H4 level and continued to operate below the 48-day bull-bear boundary. In addition, the MACD lines and volume bars converged below the zero axis. Despite geopolitical resistance, the eurozone's economic growth this year will approach the European Commission's forecast of 0.8%.

Resistance and support levels:

First resistance level: 1.1030 First support level: 1.0920

Second resistance level: 1.1080 Second support level: 1.0870Fundamentals: The current UK macroeconomy is weak, new industrial sector officials have not yet been determined, and the domestic budget remains unresolved. Industry insiders believe that it will be challenging for the UK to attract investment to boost the economy in the short term. The UK government recently announced that the new administration will organize its first international investment summit, aimed at promoting foreign direct investment to help improve the UK's economic growth. The UK Business Secretary stated that an industrial strategy will be launched in the coming weeks to reclaim global investment from competitors.

Technical Analysis: The British Pound against the US Dollar is consolidating at a low level on the H4 chart and is operating below the 48-day moving average. Additionally, the MACD lines and volume bars have begun to expand below the zero axis. Since the COVID-19 pandemic, the UK has been the laggard in economic recovery among the G7 countries, with a continuous decline in foreign direct investment.

Resistance and Support Levels:

First Resistance Level: 1.3150 First Support Level: 1.3040

Second Resistance Level: 1.3200 Second Support Level: 1.2990

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Fundamentals: A Goldman Sachs research team pointed out in a report that the impact of the economic stimulus plan planned by Japan's new government may be minimal. Due to the limited scale of cash expenditures and low consumption propensity, the expected cash outlay may only produce a weak stimulus effect. Moreover, due to the limited capacity of the construction industry, public works will crowd out private projects. The supplementary budget to fund the economic stimulus plan is expected to be formed in early December, with the current estimated budget size being around 3 trillion yen.

Technical Analysis: The US Dollar against the Japanese Yen is fluctuating and consolidating on the H4 chart and is operating above the 48-day moving average. Additionally, the MACD volume bars and lines are contracting above the zero axis. A former Japanese finance official stated that the trend of the yen's depreciation may continue in the short term, but the US economy may weaken in the future, making the Japanese economy relatively strong in comparison.Resistance and Support Levels:

First Resistance Level: 149.00 First Support Level: 147.30

Second Resistance Level: 149.80 Second Support Level: 146.50

Fundamental Analysis: According to a recent report released by the National Australia Bank, the business confidence index in Australia increased by 3 points to -2 points in September, and the business conditions index rose by 3 points to 7 points. Analysts believe that after two years of economic slowdown, there are preliminary signs that Australian business conditions are bottoming out. Nevertheless, businesses remain somewhat pessimistic about the outlook, and it will take time for business confidence to truly recover.

Technical Analysis: The Australian dollar against the US dollar continues to retreat at the H4 level, moving away from the 48-day bull-bear line. In addition, the MACD lines and volume bars are contracting below the zero axis. From a trend perspective, the business confidence levels in Australian retail and wholesale sectors remain the weakest.

Resistance and Support Levels:

First Resistance Level: 0.6780 First Support Level: 0.6690

Second Resistance Level: 0.6820 Second Support Level: 0.6650Fundamentals: The US dollar is hovering at its highest level in seven weeks, making gold priced in dollars more expensive for investors holding other currencies. The yield on the US 10-year Treasury note broke 4% on Monday for the first time in over two months, which means the opportunity cost of holding gold increases, reducing its appeal. The strengthening dollar is currently a short-term resistance affecting gold's record highs, yet gold still has the potential to rise in the medium to long term.

Technical Analysis: Gold has fallen at the H4 level and is operating below the 48-day moving average. Additionally, the MACD lines and volume bars are converging below the zero axis. Due to the safe-haven demand brought about by geopolitical tensions and the political uncertainty surrounding the upcoming US elections, the target for gold's phased rebound remains unchanged.

Resistance and Support Levels:

First Resistance Level: 2636.00 First Support Level: 2600.00

Second Resistance Level: 2654.00 Second Support Level: 2582.00

Fundamentals: GSC Commodity, in a research report sent to clients, stated that as the war enters a new phase more related to energy, investors are pricing in the significant risk of Israel potentially attacking Iranian oil fields. According to data from the US Energy Information Administration, Iran is the third-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC), producing nearly 4 million barrels of oil per day. As the US Strategic Petroleum Reserves are depleted, the loss of Iranian oil could ultimately lead to a supply shortage in the market.Technical Analysis: Crude oil continues to decline at the H4 level and is operating near the 48-day bull-bear boundary. Additionally, the MACD lines and volume bars are expanding downward above the zero axis. Iran's latest attack on Israel has allowed the oil market to regain a geopolitical war premium.

Resistance and Support Levels:

First Resistance Level: 76.00 First Support Level: 72.00

Second Resistance Level: 78.00 Second Support Level: 70.00