On Friday (October 4), the US dollar index remained strong at 101.91. The new Japanese prime minister said he was not ready to raise interest rates, and initial jobless claims in the United States exceeded expectations. Gold was supported by Middle East safe-haven assets at $2,660, while Bitcoin held on to the $61,000 mark. Israel attacked Hezbollah in Beirut, and US President Biden said he was discussing retaliatory actions against Iran.
Israel raids Beirut Hezbollah Biden: We are discussing retaliation against Iran's actions
Bloomberg reported that Israel attacked Hezbollah in Beirut, the Group of Seven (G7) called for restraint, and the United States said it was discussing retaliatory actions against Iran with Israel. The situation in the Middle East escalated and oil prices soared.
The Israeli military ordered the evacuation of southern Lebanese villages and towns north of a U.N.-declared buffer zone created after the 2006 war, AP News reported. The warnings suggest Israel could expand its incursions into southern Lebanon, which have so far been limited to areas close to the border.
The southern suburbs of Beirut were hit by more than 10 airstrikes, Lebanon's state news agency reported. It was not clear what the targets were or whether there were any casualties. The attacks came as the year-long conflict between Israel and the Lebanese militant group Hezbollah escalates.
Israel has stepped up its campaign against the Iran-backed militant group after a series of devastating attacks in Lebanon over the past month that killed many of Hezbollah's top brass, including its leader, Hassan Nasrallah. The Iranian government fired about 200 ballistic missiles into Lebanon on Tuesday, partly in response to Nasrallah's killing.
Israeli Prime Minister Benjamin Netanyahu is also considering retaliatory measures against Iran.
Adding to uncertainty about the next steps, Biden was asked Thursday whether the United States would support an Israeli attack on Iranian oil facilities. "We're talking about it," Biden told reporters outside the White House. "I think it's going to be a little bit (difficult) anyway."
Oil prices surged after Biden's comments suggested action against energy infrastructure was under consideration. It was a contrast to more pointed earlier comments about a possible Israeli attack on Iran's nuclear program, which the president said he would not support. Biden also said he did not expect Israel to retaliate the next day.
Japan's "black swan" comments, initial jobless claims support the dollar
Japan's new Prime Minister Shigeru Ishiba said on Wednesday that the economy is not ready for another rate hike, which led to a depreciation in the yen, according to Bloomberg. Bank of Japan (BoJ) board member Asahi Noguchi was quick to say that markets should not react to every comment from politicians.
There was also surprising comment from Bank of England Governor Andrew Bailey, who told The Guardian that the Bank of England may need to start cutting interest rates sharply soon.
The US economic calendar was early in the day with the release of Challenger layoffs data for September. The number of layoffs in September was about 72,821, while the number of layoffs in August was 75,891.
The U.S. reported 225,000 initial jobless claims for the week, slightly higher than the expected 222,000 and higher than the revised 219,000, which was revised to 218,000. Continuing jobless claims fell from 1.827 million to 1.826 million.
The final value of the US S&P Global Services Purchasing Managers' Index (PMI) for September was 55.2, lower than the expected 55.4. The composite PMI fell from 54.4 to 54.0.
The Institute for Supply Management (ISM) released its services sector data for September, with the overall PMI jumping to 54.9 from 51.5 last month, compared with expectations for 51.7.
In terms of major sub-indices, the employment index was 50.2 in August and dropped to 48.1 in September; the new order index jumped to 59.4 from the previous value of 53; and the price payment index jumped to 59.4 from the previous value of 57.3.
Atlanta Fed President Raphael Bostic and Minneapolis Fed President Neel Kashkari participate in a discussion as part of the Opportunity & Growth Institute's Fall 2024 Research Conference.
Former Fed official Dudley said a 25 basis point rate cut was the only healthy way forward given the economic data, reducing the likelihood of another big rate cut by the Fed in November.
European stocks remained in the red, although off Thursday's lows. U.S. futures fell slightly on Thursday.
The CME Group’s Fed Watch tool shows a 67.4% chance that the Fed will cut rates by 25 basis points at its next meeting on Nov. 7, while the probability of another 50 basis point cut is 32.6%.
The U.S. 10-year benchmark interest rate was 3.83%, a three-week high.
US Dollar Technical Analysis
FXStreet analysts said that the US dollar index rebounded strongly this week, although this was partly due to external factors. With the US dollar index currently hitting the upper limit of 101.90, there may be a risk of rejection, and the US dollar index cannot break out of the September range. Ideally, the US dollar index will be able to stay near these levels and use non-farm payrolls as a catalyst to either push the US dollar index higher or fall back at the end of the month.
The recovery has performed well and may be facing an end for now. The September high of this year at 101.90 is expected to remain the first resistance level on the upside for now. Above this, the 55-day simple moving average (SMA) of 102.09 will come in. The uptrend line on the chart shows 103.18 as the final level for the upside this week.
On the downside, if the US Dollar Index closes above 100.62 this Tuesday, the level will turn from resistance to support. The new low in 2024 is 100.16, so it will be tested before further declines. Further declines, which means abandoning the 100.00 mark, the July 14, 2023 low of 99.58 comes into play.
Gold Technical Analysis
FXEmpire analyst Vladimir Zernov said gold prices were largely flat as traders ignored rising Treasury yields and focused on geopolitical developments.
From a technical perspective, gold prices remain below the key resistance level of $2,675-2,685.
Bitcoin Technical Analysis
CoinTelegraph noted that Bitcoin’s latest sell-off was triggered by geopolitical tensions in the Middle East, causing the price to lose key support levels, the 50-day exponential moving average (EMA) at $61,318 and the 100-day EMA at $61,438.
Bitcoin analyst AlphaBTC said in the post: "Bitcoin seems to be still going lower."
The analyst was referring to Bitcoin’s price action since Sept. 29, when the cryptocurrency retreated from a high of $66,071, offsetting some of the gains made by “fear of missing out (FOMO) buying” when Bitcoin recovered from a local low of $52,546 on Sept. 6.
AlphaBTC said that given the geopolitical situation and the signs of weakness that are beginning to show in U.S. economic data, the price of Bitcoin could fall further.
"In my opinion, it's better to keep some dry powder for a deeper rinse."
Another analyst, Crypto Rover, shared a similar sentiment, saying that Bitcoin traders would be in a bad situation if Bitcoin loses support at $60,000.
In a previous article, AlphaBTC shared a chart showing two possible scenarios for the Bitcoin price in the short term. The first is a bullish scenario where Bitcoin will confirm a double bottom structure around the 61.8 Fibonacci level, or $61,370. This would allow Bitcoin to start a V-shaped recovery with a target price of $70,000.
The second scenario is a bearish one, involving a breakout of the $60,000 support level and a rapid drop to $58,000. “In the event of a possible further escalation of a black swan event in the Middle East, it is best not to place limit orders on exchanges.”
Based on the current price action, AlphaBTC sets a short-term target for Bitcoin between $57,500 and $61,300.
Other analysts believe that Bitcoin price could see a deeper correction with a target price between $58,000 and $52,000.
Independent trader Emperor Keo Xplus set a bearish target of $52,000 and said $63,000 is an important level for bulls.
