The Federal Reserve is expected to make its first interest rate cut since it began raising rates in March 2022, with the current rate between 5.25% and 5.5%. Investors hope the cut will help businesses affected by inflation and borrowing costs. Markets are split between expecting a 25 or 50 basis point cut, with a larger cut signalling recession worries. Stocks have rallied ahead of the meeting, but some experts expect a market pullback after the announcement. Investors are also eyeing upcoming retail sales data and key earnings reports.
DOW JONES
U30USD (Daily). After hitting 40,000, which acted as a resistance-turned-support level, the index rebounded sharply. As it approaches the all-time high of 41,600, we recommend a "wait and see" approach until a reversal or breakout is confirmed.
OIL
US crude oil surged over 2% on Thursday, closing above $68 per barrel after Hurricane Francine disrupted Gulf of Mexico oil production, though the storm has since weakened. Over 730,000 barrels per day remain shut in due to the storm. UBS forecasts further price increases, expecting crude to rise above $77 per barrel in the coming months.
WTIUSD (Daily). Oil remains below the dynamic level where support has turned into resistance and is targeting a return to 71.00. We are looking to buy around $68 with a profit target of $71.
GOLD
Gold prices surged to record highs on Friday, driven by optimism that the US Federal Reserve will soon cut interest rates. Gold rose to $2,585 per ounce. Bullish sentiment, fund inflows, and a weakening dollar contributed to the rally, with analysts eyeing $3,000 per ounce as a potential milestone. Expectations of aggressive rate cuts from major central banks, including the Fed, are fuelling the rise, along with a weakening dollar and increased investment in gold-backed exchange-traded funds.
XAUUSD (H4). The price broke through the strong resistance at 2530.00. Gold surged confidently, reaching above 2580.00. Monitor for the possibility of a price correction back to the yellow region.
USD/JPY
A US recession could lead to more aggressive Fed cuts and push USD/JPY to 135 or lower. However, this would require significant economic deterioration. BoJ tightening policy could impact USD/JPY too. As long as the divergence between the Fed and BOJ policies remains, we expect the downtrend to continue.
USDJPY (Daily). The price is approaching the solid support level at 140.00. The upcoming FOMC will determine the fate of this pair. A more dovish forward guidance from the Fed will push this pair lower.
Fullerton Markets Research Team
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