Dock Strike Looms, Threatening Trade and Fed Rate Cut Plans

A potential major strike at U.S. ports has caught the attention of the Federal Reserve. The President of the Federal Reserve Bank of Chicago expressed concern over the possibility of a prolonged dockworkers' strike, as it could disrupt supply chains. Any negative supply shock would increase operating costs and lead to shortages, both of which are undesirable to deal with. The impact is never good. With negotiations at an impasse, a strike by dockworkers at ports along the U.S. East Coast and the Gulf Coast is imminent. The combined throughput of these ports accounts for half of the total U.S. trade volume. This could disrupt the flow of goods, affect commodity prices, and have broader economic implications, causing supply chain disruptions similar to those experienced during the COVID-19 pandemic. Policymakers had just initiated rate cuts earlier this month, which was appropriate as warning signs emerged in the labor market.

Economists and investors are now watching the Federal Reserve's next meeting on November 6th and 7th, as well as the subsequent release of economic data, to predict whether officials will again make a significant rate cut of 50 basis points or return to a more normal reduction of 25 basis points. The U.S. Dollar Index rose to 101.20; non-U.S. currencies retreated, with the Australian Dollar reaching 0.6880 against the U.S. Dollar, the Euro fell to around 1.1060 against the U.S. Dollar, and the offshore Renminbi reached 7.02. Spot gold rebounded to near 2659 U.S. Dollars, and spot silver came to 31.30 U.S. Dollars. Crude oil rebounded to near 71.50 U.S. Dollars.

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Fundamentals: For the first time in over three years, the Eurozone's inflation rate has fallen below the European Central Bank's target, indicating that the long-term efforts to control price increases are nearing an end. Data shows that the Eurozone's CPI rose by 1.8% year-on-year in September, down from 2.2% in August. This is the first time since June 2021 that the annual inflation rate has been below the European Central Bank's 2% target. Meanwhile, core inflation, which excludes the more volatile energy and food prices, slightly decreased from 2.8% a month ago to 2.7%.

Technicals: The Euro against the U.S. Dollar has fallen at the H4 level and is operating below the 48-day bull-bear line. Additionally, the MACD lines and volume bars have expanded after a bearish crossover near the zero axis. Easing inflationary pressures and a deteriorating Eurozone economy support a rate cut this month. Recent statistical data further confirm that inflation is slowing down, which means there is more reason for rate cuts at least at the October meeting.

Resistance and Support Levels:

First Resistance Level: 1.1120 First Support Level: 1.1010

Second Resistance Level: 1.1170 Second Support Level: 1.0960Fundamentals: The British pound's reaction to the revised UK Q2 GDP data was not surprising, but the country's economic performance still seems to outperform other nations. Investors continue to believe that the UK economy will outperform its rivals in 2024, and even the OECD's revised growth forecast of 1.1% appears somewhat pessimistic in the market's view. The direction of the pound in the later stages is more likely to be determined by this Friday's US non-farm employment report.

Technical Analysis: The GBP/USD has rebounded on the H4 chart and is trading below the 48-day moving average. Additionally, the MACD lines and volume bars are beginning to converge below the zero axis. Furthermore, the pound may decline due to weak global economic growth, and the Bank of England may be more inclined towards cutting interest rates and stabilizing monetary policy.

Resistance and Support Levels:

First Resistance Level: 1.3340 First Support Level: 1.3230

Second Resistance Level: 1.3390 Second Support Level: 1.3180

Fundamentals: Japanese Economy Minister Akira Amari is warning that the Bank of Japan should be cautious when considering further interest rate hikes to ensure the country truly defeats deflation. Amari's comments reinforce the view that the current administration under Prime Minister Shinzo Abe is not seeking further policy normalization, just days after Abe stated that it is not the time to discuss further rate hikes. These remarks may further solidify the perception among market participants that the Bank of Japan will not raise rates at the end of this month.

Technical Analysis: The USD/JPY has experienced a consolidation rebound on the H4 chart and has returned near the 48-day moving average. Additionally, the MACD volume bars and lines are slightly expanding around the zero axis. In the lead-up to the upcoming general election, the new finance minister has hinted that the government will compile a supplementary budget, which is another signal that the new government may be more inclined to increase economic support rather than policy normalization.Resistance and Support Levels:

First Resistance Level: 144.60 First Support Level: 143.00

Second Resistance Level: 145.50 Second Support Level: 142.20

Fundamental Analysis: Thanks to reduced spending, Australia has achieved a budget surplus for the second consecutive time, reaching a surplus of 15.8 billion Australian dollars for the year ending June 2024. Due to the pressure of living costs, Australians prioritize spending on essential services such as healthcare as they grapple with stubborn inflation and high mortgage interest rates. The surplus is a key part of the plan to alleviate inflationary pressures while providing relief to households under strain.

Technical Analysis: The Australian dollar against the US dollar has retreated after touching the top at the H4 level and is operating near the 48-day moving average line. Additionally, the MACD lines and volume bars are expanding above the zero axis. The Australian government has indicated that the final budget outcome data for 2023/24 shows a surplus that is approximately 0.6% of the Gross Domestic Product.

Resistance and Support Levels:

First Resistance Level: 0.6930 First Support Level: 0.6840

Second Resistance Level: 0.6970 Second Support Level: 0.6800Fundamental Analysis: On Tuesday, the short-term fluctuations in the gold market attracted widespread attention following the latest speech by Federal Reserve Chairman Jerome Powell. Powell's hawkish remarks cooled market expectations for aggressive interest rate cuts, which supported the US dollar to rebound, while gold sought a balance between safe-haven demand and the strength of the US dollar. Investors need to closely monitor the trend of the US dollar, US macroeconomic data, and the impact of geopolitical risks in the Middle East on gold prices.

Technical Analysis: Gold has rebounded at the H4 level and approached the 48-day bull-bear boundary. Additionally, the MACD lines and volume bars have begun to converge near the zero axis. If future economic data underperform expectations, the Federal Reserve may readjust its policy, which could bring upward momentum to gold prices.

Resistance and Support Levels:

First Resistance Level: 2675.00 First Support Level: 2640.00

Second Resistance Level: 2694.00 Second Support Level: 2620.00

Fundamental Analysis: Geopolitical tensions could pose a conundrum for the Federal Reserve. Asset management companies have indicated that rising oil prices might offset some of the recent progress made on inflation, causing hesitation within the Fed. Oil prices have a significant impact on consumer confidence and represent a risk that the Federal Reserve cannot control, exacerbating the potential price pressures brought about by port strikes. These developments may intensify Wall Street's inflation concerns and make it more difficult for the Federal Reserve to implement substantial interest rate cuts as desired.Technical Analysis: Crude oil has rebounded on the H4 chart level and is trading above the 48-day moving average, which acts as a dividing line between bullish and bearish trends. Furthermore, the MACD lines and volume bars are expanding near the zero axis. Due to the strengthening of the US dollar, potential increases in OPEC+ production, and weak global demand, oil prices may face additional downward pressure in the short term. Current technical and fundamental indicators suggest a bearish outlook for crude oil prices.

Resistance and Support Levels:

First Resistance Level: 74.00 First Support Level: 69.00

Second Resistance Level: 76.00 Second Support Level: 67.00