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The AUD/USD pair is attempting a recovery toward 0.6681, though the prospects seem uncertain as the pair remains near a six-week low. The strengthening of the US dollar and the rise in US Treasury yields, driven by expectations of a confident victory for Donald Trump in the upcoming US presidential election, are weighing heavily on the Australian dollar.

Despite ongoing expectations for interest rate cuts by the US Federal Reserve in November and December, signs of stability in the US economy further bolster the US dollar. However, the market is tempering its expectations for further monetary easing next year.

On the domestic front, Australia's recent labour market data was positive. September figures showed a job increase of 64.1k, significantly above the forecasted 25.0k. The unemployment rate held steady at 4.1%. Investors are now looking forward to upcoming PMI data, which could provide further insights into the health of Australia's economy.

Despite these positive domestic indicators, China's influence remains a critical factor for the Australian dollar, given its role as Australia's primary trading partner. The market has deemed recent stimulus measures in China insufficient, adding to the challenges for the AUD.

Technical analysis of AUD/USD

The AUD/USD is downward towards the target level of 0.6636. Upon reaching this target, the market may form a new consolidation range at these lows. If an upward breakout occurs, a correction towards 0.6790 might be considered. The MACD indicator supports this scenario, with its signal line below zero and poised for potential growth, suggesting a possible shift in momentum.

On the hourly chart, AUD/USD has completed a downward wave to 0.6650, followed by a correction to 0.6690. Another downward movement towards 0.6636 is anticipated today. A subsequent growth wave towards 0.6722 may develop if this level is reached. The Stochastic oscillator backs this outlook, with its signal line currently above 80 but expected to descend sharply towards 20, indicating the potential for further downward movement before any recovery.

• Republican president nominee Donald Trump prospect of winning the White House has increased in the past week based on data from betting markets.
• Resurgence of “Trump Trade” narrative has triggered a positive feedback loop into Gold (XAU/USD).
• An increase in tail-risk hedging activities also led to higher demand for Gold (XAU/USD).
• Watch the US$2,590 key medium-term support on Gold (XAU/USD)

Since our last publication, the price actions of Gold (XAU/USD) have staged the bullish breakout and cleared above the US$2,640/715 medium-term resistance. The yellow metal has rallied by 9.6% from 11 September to Monday, 21 October current all-time high of US$2,740.

“Trump Trade” narrative has reinforced the uptrend in Gold

The “Trump Trade” narrative has gained traction in the recent week due to rising odds of Trump winning the US election based on data from betting markets (60%Trump versus 39% Harris based on Real Clear Politics data as of 20 October).

Given that Trump’s “generous” corporate tax cuts proposal to reduce the tax rate to 15% from 21% will likely widen the US federal deficit further, in turn leading the market to question the credit standing of the US government (such as the prospect of more frequent government shutdowns) that may see an erosion of confidence in US Treasuries and strengthened Gold (XAU/USD).

Gold is being used as tail-risk hedge

Fig 1: S&P 500 & S&P 500/Gold ratio long-term secular trends as of 22 Oct 2024 (Source: TradingView, click to enlarge chart)

Trump’s proposed tax and trade tariffs policies are likely to reignite upward inflationary pressures in the medium to long-term.

In addition, geopolitical risk premium has not been totally eradicated yet in the Middle East due to the ongoing Israel-Hamas war.

Hence, higher inflationary pressure and an increase in geopolitical risk premium are deadly concoctions that may lead to stagflation which in turn can spark a potential risk-off episode in the global financial markets.

In the lens of technical analysis, the ratio chart of S&P 500 over Gold (XAU/USD) together with its monthly RSI momentum indictor of the S&P 500 / Gold (XAU/USD) ratio has displayed a significant underperformance of S&P 500 against Gold (XAU/USD) since February 2024 (see Fig 1).

Similar observation has been detected in the past during the peak of the Dot.com bubble in August 2000 before the S&P 500 staged a major correction of 35% over the next two years.

Therefore, the recent heightened demand for Gold (XAU/USD) is likely reinforced by portfolio tail-risk hedging activities as well.

Medium-term uptrend remains intact

Fig 2: Gold (XAU/USD) medium-term & major trends as of 22 Oct 2024 (Source: TradingView, click to enlarge chart)

The price actions of Gold (XAU/USD) have been trading firmly above its rising 20-day and 50-day moving averages since 9 August 2024 supported by a parallel ascending trendline support seen in the daily RSI momentum indicator (see Fig 2).

These observations suggest that medium-term upside momentum remains intact for Gold (XAU/USD).

Watch the US$2,590 key medium-term pivotal support for the potential continuation of the impulsive up move sequence for the next medium-term resistances to come in at US$2,850/886 and US$2,933 (also the upper boundary of the medium-term ascending channel from 15 February 2024 low).

On the flipside, failure to hold at US$2,590 negates the bullish tone for a multi-week correction sequence to unfold within its major uptrend phase to expose the next medium-term supports at US$2,484 and US$2,360 (also the 200-day moving average).

• USDJPY jumps back into the 150 area after two months
• Caution needed due to overbought conditions

USDJPY kicked off the week on a strong note, rising at a faster pace to close above the 150.00 mark for the first time since August. The pickup in the price confirms a bullish breakout above the August high of 149.40 and the 200-day exponential moving average (EMA). Now, all eyes are on the important trendline, which has shifted from support to resistance, sitting at 151.80—this level previously led to a dip to a 14-month low.

That said, it's worth noting that technical indicators are raising some red flags. The Relative Strength Index (RSI) and the stochastic oscillator are flatlining near their overbought levels. Note that the 50% Fibonacci retracement of the July-September downtrend is currently keeping the bulls in control around the 150.75 level.

In trend signals, the recent crossover between the 20-day and 50-day EMAs is instilling a sense of optimism, suggesting any pullbacks might be short-lived.

If buyers step in and push above the 151.80 resistance, the next area of resistance might develop between 153.40 and 154.20, which aligns with the 61.8% Fibonacci level. A sustained move higher could peak near the 157.00 level.

On the flip side, a pullback might initially retest the 200-day EMA at 149.40. If this base breaks this time, the 20-day and 50-day EMAs may come to the rescue near the 38.2% Fibonacci level at 148.11. Any further declines could lead the price toward the 144.85-145.65 range.

In summary, while USDJPY bulls have shown impressive strength lately, there are signs of exhaustion in the short term. A slight correction in the bullish trend seems likely before we see new higher highs.

Precious metal prices are fluctuating near multi-year highs due to safe-haven demand driven by:

→ Uncertainty surrounding the U.S. elections,

→ Ongoing tensions in the Middle East,

→ Expectations of central banks lowering interest rates.

As seen on the XAG/USD chart, silver prices:

→ Are near their highest levels in 12 years,

→ Are approaching the $35 mark,

→ Have risen by over 43% since the start of the year.

Technical analysis of the XAG/USD chart indicates that silver is following an upward trend (shown in a blue channel), with the current price near its median line. This suggests a potential balance between supply and demand, which could stabilise price fluctuations.

Key observations:

→ A red resistance line on the chart reflects a corrective phase within the blue channel.

→ Breaking through this resistance in September triggered a strong bullish impulse (marked by a blue arrow).

→ This impulse was so robust that it pushed the price above the psychological $30 level, turning it into support.

A similar pattern might emerge in the future. After another strong bullish move (marked by a second blue arrow), the $32.5 level could also become a support area.

Read analytical Silver price forecasts for 2024 and beyond.

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Daily Pivots: (S1) 194.99; (P) 195.44; (R1) 196.32; More...

GBP/JPY's rebound from 180.00 resumed by breaking 195.95 resistance. Intraday bias is back on the upside for 61.8% retracement of 208.09 to 180.00 at 197.35 next. Sustained break there will target 208.09 high. On the downside, below 194.55 minor support will turn intraday bias neutral again first.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

Daily Pivots: (S1) 162.37; (P) 162.77; (R1) 163.54; More....

Outlook in EUR/JPY is unchanged and intraday bias stays neutral. On the upside, firm break of 163.86 resistance will resume the rebound from 154.40 to 61.8% retracement of 175.41 to 154.40 at 167.38. On the downside, break of 161.83 minor support will turn bias back to the downside. Further break of 158.09 will target 154.40/155.14 support zone.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). The range of consolidation should have been set between 38.2% retracement of 114.42 to 175.41 at 152.11 and 175.41 high. However, decisive break of 152.11 would argue that deeper correction is underway.

Daily Pivots: (S1) 0.8318; (P) 0.8329; (R1) 0.8340; More...

As long as 0.8433 resistance holds, EUR/GBP's down trend is still in progress for 0.8201 key support next. Strong support could be seen from there to bring rebound. But for now, break of 0.8433 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

In the bigger picture, down trend from 0.9267 (2022 high) is in progress. Next target is 0.8201 (2022 low), but strong support should be seen there to bring rebound. However, outlook will remain bearish as long as 0.8624 resistance holds even in case of strong rebound. Decisive break of 0.8201 will indicate long term bearish reversal.

Daily Pivots: (S1) 1.6182; (P) 1.6222; (R1) 1.6281; More...

EUR/AUD's decline from 1.6351 is still in progress and further fall would be seen towards 1.6002 low. On the upside, however, break of 1.6351 will resume the rebound from 1.6002 to 38.2% of 1.7180 to 1.6002 at 1.6452.

In the bigger picture, as long as 1.5996 cluster support holds (38.2% retracement of 1.4281 to 1.7062 (2023 high) at 1.6000), up trend from 1.4281 (2022 low) is still expected to resume at a later stage. However, decisive break of 1.5996 will argue that the medium term trend has reversed and turn outlook bearish.

Daily Pivots: (S1) 0.9351; (P) 0.9377; (R1) 0.9392; More....

EUR/CHF is staying in converging range and intraday bias stays neutral for the moment. On the downside, break of 0.9332 will resume the fall from 0.9579 towards 0.9209 low. On the upside, break of 0.9506 will turn intraday bias to the upside for 0.9579 resistance and above.

In the bigger picture, fall from 0.9928 is seen as part of the long term down trend. Repeated rejection by 55 D EMA (now at 0.9439) keeps outlook bearish for breaking through 0.9209 low at a later stage. Nevertheless, sustained trading above 55 D EMA will confirm medium term bottoming and bring stronger rebound back towards 0.9928 key resistance.

AUDUSD bounces from new six-week low in early Tuesday trading after bears repeatedly faced strong headwinds from solid supports at 0.6645/27 (50% retracement of 0.6348/0.6942 / 200DMA).

Fresh recovery attempts pressure strong barriers at 0.6695 (100DMA / daily cloud top) with firm break here needed to ease downside pressure and open way for extension through recent congestion top (0.6723) break of which to generate initial reversal signal on formation of a double-bottom pattern (0.6658/50).

Technical picture is negative on daily chart and bears will keep control as long as the price holds within current consolidation range, with near term risk to remain shifted to the downside for renewed attack at 0.6645/27 pivots, violation of which to expose daily cloud base / Fibo 61.8% (0.6586/75).

Res: 0.6695; 0.6705; 0.6723; 0.6759.
Sup: 0.6645; 0.6627; 0.6586; 0.6575.