Markets are now in a wait-and-see mood leading up to Friday’s all-important Nonfarm Payrolls data

The Fed Chair softened his tone as compared to the Hawkish tone he gave on the 1st day of his testimony. Jerome Powell said no decision had been made, and the U.S. central bank is waiting for fresh job data as well as inflation data before making an interest rate decision. The dollar index poised above $105.5 while the equity markets muted before investors digested the information from Powell’s 2-day testimony. On the other hand, the Bank of Canada decided to stop raising interest rates and the Canadian dollar lost its ground further against the strengthened U.S. dollar and sent the Canadian dollar trading to its lowest since last October. In the Crypto market, Silvergate Capital willingly winds down its operation and liquidates its assets in order to repay all deposits. The crypto-friendly bank has been struggling for months as one of its major customers, FTX, went bankrupt. 

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Look Out For

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

25 bps (23.6%) VS 50 bps (76.4%) 

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Market Overview

Economic Calendar

Market Movements

DXY

The US Dollar extends its gains in the wake of a series of robust economic data from the US region, bolstering aggressive rate hike expectations from the Federal Reserve. In an unprecedented turn of events, Fed Funds’ future traders are now speculating a 70% probability of a 50-basis point rate hike at the highly anticipated March 21-22 meeting, a significant jump from the previous odds, which hovered around 22% before Powell’s recent comments. The ADP National Employment report released yesterday has confirmed that private employment increased by a staggering 242,000 jobs in the previous month. Additionally, other data has shown that US job openings fell less than anticipated in January, further affirming the already optimistic outlook for the US economy.

The Dollar Index is trading higher while currently testing the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 58, suggesting the index might extend its gains after breakout since the RSI stays above the midline.   

Resistance level: 105.80, 106.25

Support level: 105.05, 104.25

XAU/USD

Gold prices dropped because of the appreciating US dollar, fuelled by a series of positive economic data releases, and increasing expectations of aggressive interest rate hikes from the Federal Reserve. Traders in Fed Funds futures markets now predict a 70% probability of a 50-basis point rate hike at the upcoming March 21-22 meeting, up significantly from the previous odds of 22%. This shift in sentiment was largely driven by recent comments from Fed Chair Jerome Powell, who expressed a more hawkish outlook for the US economy. In addition, better-than-expected economic readings, such as the ADP National Employment report, further reinforced investor confidence in the US economy, resulting in upward momentum for the US dollar and downward pressure on gold prices.

Gold prices are trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 44, suggesting the commodity might trade lower since the RSI stays below the midline.    

Resistance level: 1820.00, 1830.00

Support level: 1805.00, 1790.00

EUR/USD 

The euro traded sideways on its crucial support level at 1.0545 last night as the market is digesting the information gathered in Powell’s 2-day testimony. Powell has softened his tone regarding the upcoming monetary policy decision, which will be released later this month. The Fed’s chair said no decision had been made before the fresh job data as well as the inflation data is released. The ADP payroll data shows that the job market in the U.S. is still hot, although the market has to wait until the official Non-farm Payroll is released this Friday; a higher-than-expected ADP payroll increases the chance that the Fed may go for a bigger rate hike in March. 

On the technical front, indicators suggest that the selling power of the pair has been easing as the RSI has rebounded before entering into the oversold zone while the MACD has stopped moving downward, signalling that the bearish momentum is easing. 

Resistance level: 1.0613, 1.0698

Support level: 1.0463, 1.0386

BTC/USD

BTC traded sideways last night after it plunged below its price consolidation range. Just like other asset classes, the market is muted while investors digest the comment Jerome Powell gave in his 2-day testimony. The Fed’s chair calms the market, saying no decision has been made before the job data and the inflation data are released. On the other hand, Silvergate capital is winding down its operation and is willing to liquidate its assets to ensure all deposits are repaid. The crypto-friendly bank has been struggling after one of its major customers FTX, filed for bankruptcy. Investors may pay attention to the NFP data which is releasing tomorrow (10th March), to gauge for the U.S. dollar movement and BTC prices. 

Indicators gave a relatively neutral signal after BTC plunged more than 2% the day before. The RSI has been hovering near the oversold zone while the MACD is flowing flat below the zero line. 

Resistance level: 22183, 22816

Support level: 21540,  20620

USD/CAD

The Canadian dollar stumbled to a four-month low on Wednesday after the Bank of Canada held its key overnight interest rate steady at 4.50%, as widely expected. However, what sets this decision apart is that it makes the Bank of Canada the first major central bank to pause its monetary tightening efforts, even as inflationary pressures continue to mount. Despite some strong economic indicators, such as a robust January jobs report, the country’s gross domestic product hit a stumbling block in the final quarter of 2022, coming in well below the BoC’s forecast of 1.3% annualised growth. In its official statement, the central bank acknowledged that Q4 growth was weaker than expected, signalling a more cautious approach towards monetary policy.

USDCAD is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 81, suggesting the pair is entering overbought territory.

Resistance level: 1.3810, 1.3900

Support level: 1.3670, 1.3560

GBP/USD 

On Wednesday, the pound edged up a little by 0.18% to $1.1842 against the dollar. Fed Chair Jerome Powell’s congressional testimony on Tuesday was remarkable, driving up the U.S. dollar and prompting the pound to drop further. On the British side, inflation fell to 10.1% in January, edging further away from the 11.1% peak it reached in October 2022, but is still more than five times the BoE’s 2% target.   Traders are now fully pricing in a 25 basis-point increase from the Bank of England later this month. If so, the pair’s movement would likely enter into neutral-bearish momentum in the short term. All eyes are on the U.S. nonfarm payroll data, which will be released on Friday. 

The pound has a slight technical rebound after it broke its two support levels in a row on Wednesday. The overall trend remains subdued, and MACD has illustrated increasing bearish momentum ahead. RSI is at 35, indicating a bearish momentum ahead. 

Resistance level: 1.1845, 1.1926

Support level: 1.1634, 1.1447

Dow Jones

The Dow Jones Index dropped 0.18% to 32,798 points on Wednesday. On the second day of Powell’s testimony, he repeated his hawkish message that key interest rates could be raised higher than previously anticipated, but he stressed the central bank’s policy decision remains data-dependent. Therefore, most investors are awaiting Friday’s nonfarm payroll and next week’s CPI data to be released. Robust economic data could embolden the central bank to keep the Fed Funds target rate higher for longer, which might impact the stock market. 

Dow Jones is rebounding after it almost touches its support level of 32531 points. MACD has illustrated diminishing bullish momentum. RSI is at 42, indicating the index is in a decisive movement in the near term. 

Resistance level: 34308, 35639

Support level: 32531, 30945

CL OIL

Oil prices tumbled on Wednesday as investors grappled with concerns over the possibility of more aggressive interest rate hikes in the United States. Despite a larger-than-anticipated reduction in US crude stockpiles, market sentiment was dampened by the previous day’s sharp decline of over 3% in oil prices. The hawkish comments made by Jerome Powell compounded the bearish outlook for the commodity. In addition, the surging dollar continued to weigh heavily on oil prices, adding to the prevailing negative sentiment. Despite the bearish outlook, the losses experienced by oil prices were mitigated by the release of upbeat inventory data. The Energy Information Administration (EIA) revealed that US crude oil inventories fell by 1.70 million barrels last week, significantly lower than the analyst estimations of 395,000.

Oil prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 38, suggesting the commodity might extend its losses after breakout since the RSI stays below the midline.     

Resistance level: 78.40, 80.55

Support level: 76.60, 75.10