The dollar index rose to 104.24, posting gains for the fourth straight week. Strong economic indicators, including better-than-expected business spending data and improved consumer confidence data, have tempered expectations for aggressive interest rate cuts by the Federal Reserve. Watch for early Asian trading patterns on Sunday evening as the Japanese election results are announced.
Rate Cut Expectations Are Cool: What’s the Fed’s Next Move?
Market positioning now shows a 95.6% probability of a 25 basis point rate cut at the November Federal Reserve meeting, which is significantly lower than previous expectations of larger cuts. Fed officials are maintaining a cautious stance, with the Cleveland Fed’s Hammack making it clear that the inflation battle continues. Next week’s payroll figures could completely change these expectations.
Short-term forecast: Safe harbor demand tests technical limits
The short-term outlook for gold remains bullish despite opposing market forces. The rare combination of rising interest rates, strong dollar and climbing gold prices indicates that safe haven purchases are overshadowing traditional market relationships. Support remains at $2,708.76, with resistance at $2,758.53 becoming the next major target. Critical factors to monitor include:
- Weekend developments in tensions in the Middle East
- Early reaction of the Asian market to the Japanese election results
- Technical resistance levels at $2,758.53
- Next week’s US payroll data, taking into account the effects of the Boeing strike