What You Need To Know

Investors are awaiting Jerome Powell’s speech later today after a robust jobs report and a record-low unemployment rate to gauge future U.S. monetary policy. The dollar index jumped by more than 2% after the release of the NFP and unemployment reports, which have caused investors to gauge that the strong job data may push the Fed to go for a higher and longer rate hike cycle to tame inflation. In addition, the markets expect the Reserve Bank of Australia (RBA) to extend its monetary tightening campaign and raise its interest rate by another quarter of point; an announcement will be made after the meeting later today. Elsewhere, oil prices rose more than 2% in 2 days after an earthquake in Turkey disrupted oil supplies, as well as on brighter demand outlook from China. 

Look Out For

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

50 bps (95.2%) VS 75 bps (4.8%)  

Market Overview

Economic Calendar

Market Movements

DXY

The US Dollar extends its bullish momentum as investors continue to bet that the US Federal Reserve may maintain its tightening monetary policy to tame the inflation rate long-term. Investors are advised to keep a close eye on speeches by several Fed officials this week, including Fed Chair Jerome Powell on Tuesday. After the data last week indicated services activity and job growth remained resilient in January, investors reassessed the monetary outlook. The US 10-year Treasury yield extended its gains to a four-week high. Meanwhile, money markets are now predicting the benchmark interest rate will increase to its peak at 5.1% by July, in line with most policymakers’ expectations

The Dollar Index is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 70, suggesting the index is entering the oversold territory. 

Resistance level: 103.70, 104.85

Support level: 102.55, 101.80

XAU/USD

Gold prices traded flat near one month low at $1868 on Monday amid continued pressure from the strengthened dollar and Treasury Yields. Investors are awaiting the upcoming speech by the Federal Reserve Jerome Powell later today. Higher-than-expected U.S. Jobs data are increasing the Fed’s expectations for interest rate hikes. In view of the fact that strong job data may keep inflation elevated, strengthen the US dollar, and weakening commodity prices. Investors are suggested to trade cautiously due to the fears of a global recession that have also weighed heavily on the commodities market. 

As we can see, gold prices are trading flat as market participants continue digesting Friday’s higher-than-expected NFP data. MACD has illustrated increasing bearish momentum, while RSI drops to 32, indicating the commodity is trading in a bearish momentum ahead. 

Resistance level: 1904, 1960

Support level: 1810, 1766

EUR/USD 

The dollar index extended its gain and stayed bullish after the release of the NFP data. A stronger-than-expected job market and a record low unemployment rate in the U.S. fend off the recession fear in the market and, thus, the market gauge that the Fed may continue its Hawkish monetary policy for a longer and higher rate hike cycle. Jerome Powell, the Fed’s Chair, is giving a speech later today; the market predicts that it is least likely the Fed will end the rate hike campaign this year, not to mention cutting the rate later in the year. On the other hand, pessimistic economic data in the Eurozone put pressure on the ECB to continue its monetary tightening campaign in fear of economic recession. 

EUR/USD has dropped significantly and broke its crucial support level at 1.0781. The RSI dropped to near the oversold zone however, its rebound from above the 30 suggests the selling pressure is temporarily at ease. The MACD depicts that the bearish momentum is gaining with the MACD and the signal lines diverge from below the zero line. 

Resistance level: 1.0785, 1.0915

Support level: 1.0615, 1.0350

BTC/USD

Although the dollar is trading strong after the robust job data is released and a record low unemployment rate is announced. BTC had a minor impact, dropping slightly more than 800 points since last Friday and is still trading above its crucial support level at 22530. However, there is still a net inflow for the 4th consecutive week, according to CoinShares data which suggests that the investor’s risk appetite toward the cryptocurrency market is high. The Fed’s chair is giving his speech later today; his Hawkish stance may pressure BTC prices to trade higher. 

Despite the strong US job data hitting stock and crypto prices hard, the BTC is still able to trade within its consolidating price range defending its support level. From our technical perspective, the RSI hovering just above the oversold zone and the MACD flowing flat just below the zero line with both indicators giving a neutral but bearish bias signal for BTC.

Resistance level: 23765,  24878

Support level: 22530, 21767

DOW JONES

The Dow edged lower yesterday as rising tensions between US-China had sparked risk-off sentiment, dragging down the appeal for high-risk assets. According to Reuters, a Chinese surveillance balloon was shot down by the United States, prompting a planned meeting between Secretary of State Antony Blinken and President Xi Jinping to be cancelled. Investors are advised to keep a close eye on speeches by several Fed officials this week, including Fed Chair Jerome Powell on Tuesday.

The Dow is trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 52, suggesting the index might trade within a range between the resistance level and support level as the RSI nears the midline. 

Resistance level: 34388, 35639

Support level: 32731, 30945

GBP/USD 

The pound extended its losses to $1.2051 on Monday as investors continued to digest the higher-than-expected job data. Growth data and BoE speakers will be the two domestic catalysts for the pound this week. British economic growth numbers will be released on Friday and are expected to show the economy is likely to avoid the second quarter of contraction. In addition, investors are also advised to focus on Federal Reserve Jerome Powell speaks later today for further trading signals. 

The overall trend for the pound remains bearish in the short term. While RSI is trading at 32, indicating a weak movement ahead. Meanwhile, MACD also shows the pair has entered into bearish momentum. 

Resistance level: 1.2130, 1.2426

Support level: 1.1926, 1.1743

USDJPY

The Japanese Yen fell significantly against the US Dollar as market participants focused on the central bank personnel changes, triggering further uncertainty in Japan’s economic prospects. The recent rumours signalled that the Bank of Japan Deputy Governor Masayoshi Amamiya was being sounded out to be the next governor. Market demand for the Japanese Yen remained weak on speculation that Japan’s ultra-easy monetary policy would persist if Amamiya, who has been instrumental in formulating the ultra-quantitative easing program, became the next BoJ Governor.    

USDJPY is trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 67, suggesting the pair is entering the overbought territory.  

Resistance level: 134.46, 137.74

Support level: 130.71, 126.73

CL OIL

Oil prices rebounded from their lowest level in a month amid speculation on a solid rebound in Chinese demand. Markets are now scrutinising any more signs of an economic recovery in China, starting with inflation readings for January, which are due to be released later this week. Meanwhile, the International Energy Agency (IEA) claimed that China would increase global crude oil demand to record highs this year and reiterated that the early signs of economic recovery in China remained optimistic. On the supply side, the US Baker Hughes oil rig count continues to decline in nine weeks, indicating signs of a slowdown in the US oil supply. In addition, the Baku-Tbilisi Ceyhan pipeline, the second-longest oil pipeline in the former Soviet Union, had closed as a precaution following a massive earthquake that killed thousands of people in Turkey and Syria.

Oil prices are trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish  momentum, while RSI is at 41, suggesting the commodity might extend its gains since the RSI rebound sharply from the oversold territory. 

Resistance level: 76.05, 78.10

Support level: 73.70, 70.25