More higher-than-expected inflation readings have turned the markets risk-off again

The U.S. PPI reading came at 0.7%, higher than the market consensus of 0.4% and much higher than the previous reading of -0.2%. At the news, major US indices plunged by more than 1% and the dollar index gained and traded above 104.  Several Fed officials have commented on the high PPI and given some Hawkish statements including another 50 bps rate hike that will be discussed in the next Fed meeting and possibly bring the Fed’s policy rate up to 5.375% from the current 4.75%. After the PPI release, oil and gold prices turned muted as a high-interest rate environment makes the commodities less attractive. In addition, BTC tumbled by more than 5% last night with the regulatory woe. The SEC charged the founder of TerraUSD, a crypto stablecoin accused of misleading investors and fraud with a scheme that wiped out at least $40 billion worth of market value. 

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 Look Out For

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

25 bps (90.8%) VS 50 bps (9.2%)  

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Market Overview

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Economic Calendar

Market Movements

DXY

The Greenback extended its bullish momentum on Thursday, buoyed by higher-than-expected producer prices and diminishing jobless claims, signalling that the Federal Reserve would maintain its hawkish policies in future. The US Producer Price Index (PPI) yesterday bounced to 0.70% in January, after declining from the previous reading of 0.20% in December, higher than the market expectation of 0.40%. In addition, the Department of Labor reported that the US Initial Jobless Claims unexpectedly dropped to 194,000, compared to the market expectations of 200,000 claims.

The Dollar Index is trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 65, suggesting the index might extend its gains since the RSI stays above the midline.    

Resistance level: 104.85, 105.75

Support level: 103.95, 102.55

XAU/USD

Sustained solid labour and inflation figures are sparking hopes that the US Federal Reserve will maintain its tightening monetary policy for a more extended period, increasing the appeal for the US Dollar while weighing on the dollar-denominated gold. The US Producer Price Index (PPI) yesterday bounced to 0.70% in January, after declining from the previous reading of 0.20% in December, beating the market expectation of 0.40%. In addition, the Department of Labor reported that the US Initial Jobless Claims unexpectedly dropped to 194,000, which also fared better than market expectations of 200,000 claims.

Gold prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 37, suggesting the commodity might extend its losses as the RSI stays below the midline.    

Resistance level: 1860.00, 1905.00

Support level: 1820.00, 1766.35

EUR/USD 

U.S. PPI released last night has spurred the dollar index to rally to trade above $104 for the 1st time in a month. A higher-than-expected PPI reading led to several Hawkish statements from the Fed, which see it possible that the Fed will return to a more significant rate hike. Fed officials hinted at a 50 bps increase for the next rate hike and may bring the Fed’s policy rate up to 5.375%. Besides, a lower-than-expected initial jobless claim also showed that the labour market in the U.S. is still tight which makes the situation worse in terms of curbing inflation. A strong dollar hammered the euro to trade to its monthly low and broke its near-support level. 

On the technical front, both indicators depict a neutral bearish-bias signal for the pair. The RSI is moving toward the oversold zone where the MACD flows flat below the zero line. 

Resistance level: 1.0775, 1.0920

Support level: 1.0685, 1.0585

BTC/USD

The regulatory woe is not done just yet after SEC settled with Kraken on staking program and Paxos from minted its own stablecoin. BTC plunged by more than 5% last night with another SEC move against the crypto market. The SEC has sued TerraUSD stablecoin issuer, Terraform Labs with a fraud that wiped out at least $40 billion worth of market value and misled investors to invest in the stablecoin. Besides, Hawkish statements from the Fed after the release of the high PPI reading which led to a stronger dollar has also suppressed BTC prices. 

Indicators suggest a slowdown in bullish momentum for BTC after a big jump of nearly 10% on Wednesday. The RSI has fallen from the overbought zone but is still staying above 50 while the MACD line has stopped climbing but is yet to converge against the signal line. 

Resistance level: 24720, 26280

Support level: 23148, 22480

DOW JONES

The US equity market edged lower yesterday as hot inflation data continues to boost rate hike expectations. According to the US Bureau of Labor Statistics, the US Producer Price Index (PPI) yesterday came in at 0.70% in January, after declining from the previous reading of 0.20% in December, while beating the market expectation of 0.40%. US Treasury yields continued their bullish momentum, which diminished the appeal of the equity market. The higher interest rate will reduce the present value of future earnings for stocks while decreasing the profit margins with higher borrowing costs. When this occurs, stock prices might face further pressure

The Dow Jones is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 43, suggesting the index might extend its losses as the RSi stays below the midline. 

Resistance level: 34310.00, 35640.00

Support level: 32730.00, 30945.00

GBP/USD 

The pound slid 0.84% to $1.1951 against the dollar on Thursday. Inflation data released on Wednesday showed a drop in the UK inflation in January, suggesting a slightly cool down in inflationary pressure. It raises expectations the Bank of England may end its interest rate hike cycle soon. Therefore, lower expectations of more rate hikes lead to a price drop. In addition, the risk of a sharp recession may have lessened, and the easing in price pressures may persuade the Bank of England to take a slightly less hawkish approach at the upcoming meeting. Investors are suggested to keep an eye on retail sales data, which will be released later today for further trading signals. 

The pair has recently been trading in a bearish momentum as a less hawkish tone surrounded the market. The price is currently moving toward its support level of $1.1936, and investors can keep monitoring for the breakout. However, MACD has illustrated bearish momentum, while RSI is at 33, trading near the oversold zone, suggesting that it might have a technical rebound after it breaks through the oversold zone. 

Resistance level: 1.2130, 1.2431

Support level: 1.1936, 1.1649

NASDAQ

The Nasdaq dropped 1.78% to 11,855 points on Thursday after unexpectedly strong inflation data and a drop in weekly jobless claims added pressure on the Federal Reserve to keep raising rates to tame inflation. The report showed the highest rise in producer prices in seven months in January as the cost of energy products surged. Moreover, jobless claims data showed an unexpectedly fell last week, indicating that the labour market remains tight. Economists predicted a high possibility of a 50 basis point rate hike at the next meeting. On the other hand, Tesla Inc (TSLA.O) slid 5.7% as the electric vehicle maker said it recalled 362,000 U.S. vehicles and fixed them via an over-the-air software update after the U.S. auto regulator said it’s Full Self-Driving Beta software may cause a crash. 

The overall trend remains sideways from 11559 points to 12312 points. MACD  is suggesting a diminishing bullish momentum ahead. While RSI is trading at 52, indicating a neutral-bullish momentum in the short term. 

Resistance level: 12312, 13187

Support level: 11559, 10219

CL OIL

Oil prices retreated slightly on Thursday as fears of tightening monetary policy and rising US crude stockpiles outweighed the positive prospects for a Chinese demand recovery. The recent data suggested that the US jobs market remained robust while inflation remained sticky. US Treasury yields, meanwhile, continue to hover in a positive trajectory with greater rate hikes expectations, which act as a headwind for oil prices. Nonetheless, with expectations that China’s economy would rebound sharply after the easing of Covid-19 restrictions, several energy agencies have raised their demand forecast on the black-commodity. Investors are advised to monitor further economic development and US oil supply decisions for further trading signals.

 Oil prices are trading lower following the prior breakout below the previous support level. MACD has illustrated increasing bearish momentum, while RSI is at 39, suggesting the commodity might trade lower as the RSI stays below the midline.   

Resistance level: 78.50, 80.20

Support level: 77.35, 76.15