The dollar eased and the equity market surged last Friday after the release of key economic data. The U.S. ISM non-manufacturing PMI reading for February came at 55.1, lower than the January reading; a sign of a slowdown in economic activity and improving the belief of a soft-landing by the Fed. Testimony from Fed Chair Jerome Powell covering the economic outlook and recent monetary policy actions will be the key catalyst for market movement especially the dollar and the equity markets this month. On the other hand, Saudi Aramco raised its official crude oil selling price, signalling its confidence in the oil demand outlook; however, China’s modest GDP growth target perhaps hindered the oil prices from trading higher. 

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Look Out For

Current rate hike bets on 22nd March Fed interest rate decision: 

25 bps (70.8%) VS 50 bps (29.2%)

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Market Overview

Economic Calendar

Market Movements

DXY

The Dollar Index, which tracks the Greenback’s performance against a basket of six major currencies, has retreated from its two-month high at the beginning of the week as market participants remain uncertain about the Federal Reserve’s future monetary policy path. Atlanta Federal Reserve President Raphael Bostic has cautioned against aggressive rate hikes that could potentially trigger economic disruption, instead favouring a “slow and steady” approach. However, recent robust economic data releases, including elevated inflation levels, have pared losses experienced by the US Dollar.

The Dollar Index is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 43, suggesting the index might extend its losses after breakout since the RSI stays below the midline.

Resistance level: 105.32, 107.12

Support level: 104.61, 103.85

XAU/USD

Gold prices have been experiencing an upward trend over the past few months, predominantly driven by the devaluation of the US Dollar. However, in recent events, the Greenback has retreated from its peak of two months, compelling investors to reassess their gold positions as a reliable hedge. Amidst the current climate of ambiguity concerning the Federal Reserve’s monetary policy trajectory, market participants remain divided on the appropriate course of action. Notably, Atlanta Federal Reserve President Raphael Bostic has urged prudence, cautioning against aggressive rate hikes that could spark economic turbulence. Instead, Bostic advocates for a methodical and deliberate approach to monetary policy that prioritises stability and sustainable growth.

Gold prices are trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 70, suggesting the commodity might enter the overbought territory.

Resistance level: 1860.00, 1905.00

Support level: 1845.00, 1820.00

EUR/USD 

Last Friday, the euro was bullish against the dollar with a surge of more than 0.5%. The relatively strong inflation-related economic data backed the hawkish ECB comments, bolstering the euro to trade higher. An ECB governing council member commented last week to increase the rate by 50 bps in this month and will not be the last one. On the other hand, the U.S. non-manufacturing PMI reading in February was lower than in January and the market perceived the Fed may be more lenient in a rate hike in March. All eyes will be on Jerome Powell’s testimony tomorrow and the Fed’s chair is expecting to give a clearer picture on the Fed’s recent monetary policy action. 

On the technical front, the indicators give a bullish-bias signal with the RSI having rebounded from near the 50-level while the MACD is building momentum to rebound from the zero line. 

Resistance level: 1.0698, 1.0822

Support level: 1.0613, 1.0540

BTC/USD

Silvergate Capital took the spotlight in the crypto market as the crypto-friendly bank fallout and big names in the crypto market like Coinbase global, galaxy digital and Paxos have terminated their partnership with Silvergate. The bank failed to file its annual report and revealed doubts about its viability and potentially went bankrupt. Another turmoil implanted in the crypto market after the infamous FTX hammered BTC by more than 6% last Friday and the trading volume has been miserable since then. The volatility of BTC is expected to be low before everything about Silvergate Capital unfolds. 

On the technical front, RSI showed BTC was able to hold up before entering to the oversold zone and rebound slightly from there while the MACD showed a sign of breaking above the zero line, suggesting the selling pressure is easing for BTC.

Resistance level: 22816, 23713

Support level: 22183,  21540

USDJPY

The Japanese Yen, known for its sensitivity to US-Japan long-term rate disparities, appeared set to break its six-week losing streak against the greenback, bolstered by a retreat in 10-year US yields that had come dangerously close to reaching a four-month high of 4.1%. While Tokyo’s inflation data for February exceeded the Bank of Japan’s (BoJ) target for the ninth consecutive month, the core measure did demonstrate a deceleration from a 42-year high. Against this backdrop, investors remain on tenterhooks ahead of the BoJ’s forthcoming decisions following the retirement of Governor Haruhiko Kuroda next month.

USD/JPY is lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 45, suggesting the pair might extend its losses since the RSI stays below the midline. 

Resistance level: 137.20, 139.60

Support level: 134.80, 132.90

GBP/USD 

On Friday, the Pound Sterling lacked market catalysts, leaving the bullish momentum for GBPUSD primarily attributable to the US Dollar’s depreciation. However, investors are closely scrutinising the UK’s GDP data, scheduled for publication on Friday. This crucial data will shed light on the country’s economic performance in January, particularly after narrowly avoiding a recession in the final quarter of 2022. According to industry experts, Gross Domestic Product (GDP) from the UK region is projected to have grown by a mere 0.10% in January, as compared to the previous month.

GBPUSD is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 63, suggesting the pair might enter overbought territory. 

Resistance level: 1.2040, 1.2125

Support level: 1.1925, 1.1845

Dow Jones

The end of a turbulent week saw Wall Street rallying on Friday, with the Dow Jones Industrial Average posting its first weekly gain since late January. This boost in market sentiment was propelled by US Treasury yields receding from their recent highs. However, the prospect of further market volatility looms ahead of the Federal Reserve’s March meeting. Meanwhile, as the fourth-quarter earnings season draws to a close, Refinitiv data indicates that 68% of companies in the S&P 500 have surpassed consensus estimates, instilling positive prospects for the future of the US equity market.

Dow Jones is trading higher following the prior rebound from its crucial support level. MACD has illustrated increasing bullish momentum, while RSI is at 55, suggesting the index might extend its gains as the RSI stays above the midline. 

Resistance level: 34310.00, 35640.00

Support level: 32530.00, 30945.00

CL OIL

State-controlled Saudi Aramco has signalled its confidence in oil demand growth in Asia and Europe by raising the most official selling prices for crude shipments to these regions in April. According to Bloomberg, the company lifted its main Arab Light grade price to $2.50 a barrel above the regional benchmark for Asia, 50 cents more than the level for March. As China’s economy recovers after lifting Covid-19 lockdowns and inflation in other major economies decelerates, investors expect robust oil demand in the future. The reopening means that Chinese oil consumption is poised to hit a record high this year. According to the median estimate of consultants surveyed by Bloomberg, analysts expected the daily demand would reach an all-time high of 16 million barrels a day after contracting in 2022.

Oil prices are trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 60, suggesting the commodity might enter the overbought territory.   

Resistance level: 79.85, 82.10

Support level: 78.15, 76.15