Markets were able to shrug off banking woes at least at the moment; equity markets climbed as well as the crypto market, implying risk-off sentiment has eased with investors. On top of that, the U.S. CPI came in line with the market consensus at 6%, a drop from the previous reading of 6.4%, with the markets betting the Fed will implement a more lenient rate hike in March since the CPI reading is reassuring with a backdrop of a potential financial crisis. As such, the dollar index continues to be sluggish and gold prices steadied at above $1900 as market jitters ease. On the other hand, oil prices traded to their lowest in this year with WTI trading below $73 per barrel. After being hammered by the prospect of a higher interest rate hike after Powell’s testimony, oil prices whipsawed due to the looming financial sector crisis; the API weekly report also showed a higher-than-expected crude stockpile, implying a drop in oil demand in the U.S. 

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Look Out For

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

25 bps (19.5%) VS 50 bps (80.5%) 

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Market Overview

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Economic Calendar

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Market Movements

DXY

The US Dollar continues to hover near its support level as investors await further catalysts from the FOMC meeting. The latest inflation data from the US Bureau of Labor Statistics reveals a mixed picture, with headline inflation slowing in February while core prices rising, driven by soaring housing rents. Specifically, the Consumer Price Index (CPI) rose by 0.40% in February, marking a slowdown from 0.50% in January. The annual rate of inflation fell to 6.0% from 6.4%. The figure was down by one-third from its peak of over 9% in June last year. Against this backdrop, market participants anticipated that the Fed would likely increase its rate less aggressively at its upcoming two-day policy meeting on 22nd March, dragging down the appeal for the US Dollar. 

The Dollar Index is breaking its support level of 103.63 and now trading at 103.44. However, MACD has illustrated a slightly increasing bullish momentum, while RSI is at 34,  suggesting the index to be traded higher in the short-term as a technical correction.      

Resistance level: 104.15, 105.10

Support level: 103.65, 102.85

XAU/USD

Amid a potent mix of factors, including a recent US inflation report and fears of a fresh financial crisis triggered by a spate of bank failures, safe-haven gold has been hovering at high resistance levels. As investors adopt a risk-off stance, gold’s value has remained buoyant, with many looking to it as a hedge against potential market turbulence. With adding uncertainty, the market eagerly anticipates the outcome of the Federal Reserve’s upcoming two-day policy meeting on 22nd March. With indications of economic weakness, many market participants expect the Fed to introduce a less aggressive 25 basis point rate hike to its key interest.

Gold prices were trading on the sideline yesterday. However, MACD has illustrated diminishing bullish momentum, while RSI is at 74, suggesting the commodity is entering the overbought territory and might have a slight retracement soon. 

Resistance level: 1920, 1962

Support level: 1878, 1802

EUR/USD 

Banking crisis woes are temporarily fended off and with U.S. authorities stepping in to prevent systemic risk from happening. The U.S. dollar continued its bearish momentum after the release of the CPI yesterday. The U.S. CPI came at 6%, which is in line with the market consensus and it has dropped from the previous reading of 6.4%. With the backdrop of a potential banking crisis, the market is betting the Fed may implement a modest rate hike in March rather than the previously predicted 50 bps. The euro climbed to its monthly high with the market almost certain of a 50 bps rate hike from the ECB. Investors are advised to monitor for the ECB interest rate decision, which will be disclosed on Thursday ( 16th March), to gauge the pair’s future price movement. 

On the technical front, the indicators show a mixed signal for the pair with the RSI is moving uptrend and breaking into the overbought zone while the MACD seems to lose its momentum and stays flat. 

Resistance level: 1.0797 1.0867

Support level: 1.0613, 1.0540

BTC/USD

BTC has rallied for more than 30% from below $20,000 since SVB and Signature bank collapsed and hit $26500 once yesterday. U.S. authorities announced a major backstop for the financial sector, vanishing the banking crisis woes and leading the crypto market surge alongside with the equity market. Prices of risky assets are inspired by a lower CPI reading which was released yesterday as well. CPI shows the U.S. inflation rate is slowing down which led the market to bet that the Fed may opt for a more lenient rate hike in March which hammered the dollar lower. A lower rate hike prediction encourages investors to go for riskier assets including BTC. 

The indicators show BTC’s bullish momentum is easing with the RSI falling below the overbought zone while the gap between the MACD and Signal lines is narrowed. 

Resistance level: 26248, 27396

Support level: 23713,  22816

USD/JPY

The Japanese yen retreated after the Bank of Japan struck a dovish tone in its meeting minutes. While acknowledging Japan’s expected economic recovery, the Monetary Policy Committee (MPC) warned about persistent uncertainties stemming from the intensifying geopolitical tensions between Russia and Ukraine and the global economic outlook. Additionally, the MPC projected a slowdown in Japan’s inflation rate towards the latter part of the upcoming fiscal year. These discussions suggest that the Bank of Japan may maintain its accommodating stance to fortify the country’s economic revival, especially amidst the heightened contagion risks following the SVP collapse.

The pair has rebounded to 134.12 as of writing. In the short term, we expect the pair to trade within the range of 132.87 to 134.82. MACD has illustrated a diminishing bullish momentum. RSI is at 43, slightly correcting after it touched its oversold zone, indicating a neutral-bearish momentum ahead. 

Resistance level: 134.82, 137.19

Support level: 132.87, 129.89

GBP/USD 

Pound Sterling held firm in the currency markets, propelled by optimistic economic prospects following the release of recent data indicating that the UK job market has remained robust. According to official statistics, unemployment claims in the United Kingdom decreased by a notable 11.2K in February, marking a nearly 50K drop over the past three months, thereby underscoring a sustained period of economic stabilization. In the interim, the UK unemployment rate remained stable at 3.70%, which is considerably better than market expectations of 3.80%. 

The pound halted its strong rally and is trading on the sideline at $1.2176 as of writing. MACD has illustrated a neutral-bullish momentum ahead. RSI is at 67 and trading near the overbought zone, indicating the pair might have a slight retracement soon. 

Resistance level: 1.2211, 1.2300

Support level: 1.2126, 1.2044

Dow Jones

The Dow rebounded despite initial fears of contagion risk after Swiss hedge fund SVP’s collapse. The latest US Bureau of Labor Statistics figures show a mixed picture, with headline inflation slowing in February while core prices continued to climb due to increased housing rents. February’s Consumer Price Index (CPI) increased by 0.40%, lower than January’s 0.50%, and the annual inflation rate decreased to 6.0% from 6.4%, down one-third from its peak of over 9% in June 2021. Investor demand for US equities has surged, with the Federal Reserve potentially displaying a more conservative stance on interest rate hikes. However, market volatility persists, and market participants should monitor closely the US government and Federal Reserve’s efforts to resolve the recent banking crisis for promising trading signals.

The index rose by 1.06% to 32,155 points on Tuesday. In the short term, the index would trade within the range of 30945 to 32531. MACD has illustrated a neutral-bearish momentum. RSI is at 38, seeing a technical rebound from it touching the oversold zone, indicating a neutral-bearish momentum as well. 

Resistance level: 32530.00, 34310.00

Support level: 30945.00, 28760.00

CL OIL

Oil prices tumbled to a three-month low on Tuesday, battered by a combination of factors, including a US inflation report and fears of a fresh financial crisis triggered by recent bank failures. Silicon Valley Bank’s collapse sent shockwaves through the market, igniting concerns about the financial health of other lenders. Despite reassurances from US President Joe Biden and other global policymakers, investors remain wary, driving significant volatility in the oil market. Adding to the bearish sentiment, a bearish inventory report by the American Petroleum Institute (API) showed US API Weekly Crude Oil Stock at 1.155M, higher than market expectations of 0.555M. The news further fuelled concerns about future oil demand, causing prices to plummet.

Oil prices have broken their support level of $73.35 per barrel and are now trading at $72.25 per barrel. It has dropped to another region and might trade from $70.19 to $73.35 in the short term. However, MACD has illustrated a bearish momentum. RSI is at 33, indicating a weak momentum ahead. 

Resistance level: 73.35, 76.13

Support level: 70.19, 67.69