DXY Holds Above 100; Wall Street Rebounds Ahead of Fed Speakers

Market Wrap-up: DXY Firm, Wall Street Rebounds and Oil Falls 

US equities rebounded strongly on Monday, 21 September, as major technology stocks advanced while lower oil prices and Treasury yields helped Wall Street recover from a broadly weaker previous week. 

The S&P 500 rose 1.49% to 7,764.70, while the Nasdaq Composite gained 2.26% to a record 27,122.09. The Dow Jones Industrial Average increased 366.19 points, or 0.71%, to 52,048.83.

Semiconductor stocks led the technology-sector gains. Intel surged 12%, AMD rose about 10% and pushed its market capitalisation above $1 trillion, while Qualcomm gained more than 9%.

The rebound followed a weaker previous week, when the Dow Jones fell 1.7%, its worst weekly performance since March. The S&P 500 declined about 0.1%, while the Nasdaq was the only major index to finish the week higher, gaining 0.7%.

Oil prices declined sharply, with WTI crude falling 4.5% to $95.78 a barrel and Brent crude dropping 3.4% to $100.34. Brent briefly fell to $98.98 during the session. The move came as markets assessed the potential for reduced tensions following reports that US President Donald Trump was open to dialogue with Iran.

Oil markets were also assessing the impact of Saudi Arabia's East-West pipeline closure. JPMorgan analysts said Middle Eastern oil exports remained relatively resilient following the disruption, while flows from the broader Middle East had recovered to around 80% of pre-war levels, according to TD Securities' Ryan McKay. 

US Treasury yields moved lower alongside oil prices. The 10-year Treasury yield fell more than 4 basis points to 4.951%, while the 30-year yield declined to 5.284%. The moves came after the Federal Reserve raised interest rates the previous week, its first rate increase in three years, amid persistent inflation concerns.

Ed Yardeni, President of Yardeni Research, said prolonged high energy prices could reinforce the case for tighter monetary policy and increase the risk of second-round inflation effects. 

Jeffrey Roach, Chief Economist at LPL Financial, also highlighted the interaction between geopolitical developments, energy prices, inflation and monetary policy.

The US dollar started the week higher, recovering from two consecutive sessions of losses as markets continued to assess the prospect of further Federal Reserve tightening. 

The DXY remained above the 100.00 psychological level. EUR/USD fell back below 1.1500, while USD/JPY extended its advance above 157.00.

Spot gold declined 0.6% to $4,349.94 an ounce at 2:30 a.m. ET, after briefly falling more than 1% to $4,322.19. US gold futures settled 0.9% lower at $4,383.90. A firmer US dollar and expectations of further Fed tightening weighed on the precious metal. 

Markets will now focus on weekly US ADP employment data and speeches from Fed officials Williams, Jefferson and Barkin. Attention will also turn to developments in the Middle East and potential diplomatic engagement between the US and Iran.

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DXY:

Key takeaway:

• DXY held above 100.00 as expectations of further Fed tightening supported the dollar.
• The dollar regained ground after two consecutive sessions of losses.

Technical Outlook:

• Daily Bias: Bullish
• Support: 100.00
• Resistance: 100.56

Gold:

Key takeaway:

• Gold remained under pressure as a firmer dollar and higher-rate expectations reduced demand.
• Spot gold briefly fell below $4,330 before recovering from the session low.

Technical Outlook:

• Daily Bias: Bearish
• Support: 4,322 
• Resistance: 4,397

Oil:

Key takeaway:

• WTI and Brent extended their declines for a fourth consecutive session.
• Resilient Middle East oil flows eased some concerns over the scale of the supply disruption.

Technical Outlook:

• Daily Bias: Bearish
• Support: 91.22 
• Resistance: 98.00

Dow Jones:

Key takeaway:

• The Dow rebounded after its weakest weekly performance since March.
• The index gained 366.19 points as technology stocks led the broader Wall Street recovery.

Technical Outlook:

• Daily Bias: Bearish
• Support: 51,167
• Resistance: 52,274

Calendar Watch:

• US: ADP Employment Change - The latest private-sector employment data will provide a further indication of labour-market conditions.
• US: Fed officials Williams, Jefferson and Barkin - Markets will monitor their comments for further guidance on monetary policy.
• Eurozone: ECB official Buch's speech and preliminary Consumer Confidence - Investors will assess the latest comments from the ECB and the preliminary consumer-confidence reading.

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