News & Analysis

Gold and Oil surge on Geopolitical risk, USD pumps and dumps as Fed turns dovish

10 October 2023 By Lachlan Meakin


USD had a volatile session on Monday seeing two-way price action, with geopolitical risks from the conflict in the Middle East seeing DXY gap higher on the open and rally to a high of 106.60. The move higher dramatically reversed after dovish Fed commentary from both FOMC members Logan and Jefferson who acknowledged the recent move higher in yields had tightened financial conditions, meaning the Fed may not have to do as much as far as hiking rates goes. This saw a dovish repricing of Fed rate hike odds for their November meeting and a move forward of rate cuts to June 2024. DXY breaking it’s trendline support and the psychological 106 level.

JPY saw gains on haven flows on geopolitical risk seeing USDJPY fall below 149.00. A sharp move lower in US Treasury yields after the dovish Fed commentary also supporting the Yen. The ongoing Geopolitical risk, US inflation data and Fed commentary throughout the remainder of the week will likely be the driver of this pair going forward, and of course traders will be watching that 150 level as a “line in the sand”

Gold surged on Monday, XAUUSD continued it’s bounce off the Fib support level at 1811, buoyed by two major tailwinds being haven flows on geopolitical risk and a shar decline in the USD and yields on dovish Fed commentary, XAUUSD back to the highest level since the start of the month and looking to test the Fib resistance at 1866 USD an ounce.

Oil also moved strongly higher as traders baked in a geopolitical risk premium after the weekend’s events, WTI crude gapped higher by over 2% and continued to rally to finish the session over 5% higher. Conflict driven supply disruption fears and a dovish Fed both supporting USOUSD and looking likely to be the main drivers this week. Technical level in play on USOUSD is the 50% Fib retracement level at 87.12, which so far is showing itself as a resistance level.

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