While the U.S. labour market continues to be robust, stocks have rallied after dovish comments from the Atlanta Fed President

U.S. stocks rallied and treasury yields fell yesterday although Initial Jobless Claims showed the labour market is still hot in the U.S. Atlanta Fed president, Raphael Bostic has commented that he prefers a “slow and steady” pace of tightening, favouring a quarter-point hike at the upcoming decision. The relatively dovish stance from the Fed officials has encouraged risk-taking in the markets. In Japan, almost two-thirds of BoJ watchers expect a monetary policy change by June, while the BoJ is monitoring the impact of recent tweaks to its stimulus program. A tighter monetary policy imposed by the BoJ will bolster the Japanese Yen’s strength. WTI crude oil traded nearly $78 per barrel with a gain of more than 2% this week as optimism over China’s recovery backed by data from Saudi Aramco, which described Chinese consumption as “very strong”.

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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

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Economic Calendar

Market Movements

DXY

The Dollar Index rose by 0.56% to $104.96 on Thursday as U.S. job data shows the labour market remains tight, and inflation remains high, increasing concerns that the Federal Reserve may raise more rates. On Thursday, the U.S. initial jobless claims data showed a decline of 5,000 to 190,000 claims last week, better than the expectation of 195,000 claims, pointing to a still strong jobs market, adding market fears that the Federal Reserve could keep increasing interest rates for longer. Meanwhile, labour costs increased to 3.2%, much higher than the previously estimated 1.6% in the fourth quarter. It indicates the labour market remains tight despite the rising risks of a recession, contributing to keeping inflation elevated via solid wage gains. Both data prompted a rise in the U.S. dollar.

In addition, MACD has illustrated an increasing bullish momentum in the short term. And RSI is trading at 57, indicating a bullish momentum ahead. The overall trend might move higher as long as most Fed officials are recently in a hawkish stance. 

Resistance level: 105.32, 107.12

Support level: 104.61, 103.85

XAU/USD

Gold prices edge a little higher at $1838 against the dollar on Thursday. Data showed that U.S. initial jobless claims decreased to 190,000 claims last week, indicating the labour market remains tight and hinted the Federal Reserve might raise more rates. The market now was flooded with a hawkish tone concerning the Fed may keep raising rates, increasing worries of recession risk and helping to drive up the gold prices. Furthermore, the market is pricing in a peak Fed policy rate of 5.5% in September, and some traders even bet that the benchmark interest rate could reach 6%. Investors should trade carefully while waiting for more economic data next week. 

As we can see, gold prices continued moving toward the next resistance level of $1842. In the short term, it could break above the $1842 level. If so, we expect the price to enter another region from $1842 to $1862. Furthermore, MACD has illustrated increasing bullish momentum, while RSI is at 64, suggesting the commodity might start to enter into bullish momentum.

Resistance level: 1842, 1862

Support level: 1820, 1792

EUR/USD 

The Eurozone CPI released yesterday came at 8.5% hotter than the market consensus of 8.2%; however, the data failed to excite the euro to rally, where the euro traded lower against the dollar last night. The U.S. initial jobless claims which were also released yesterday, showed that the labour market is still hot, which increases the expectation of investors that the Fed may be more aggressive in upcoming rate hikes. On the other hand, the Atlanta Fed president has commented that he is keen to have a “slow and steady” rate hike and the relatively dovish comment from the Fed official hindered the dollar from trading higher. Investors are advised to monitor the NFP data, which will be released later today to gauge the dollar price movement. 

The indicators are given a neutral signal for the pair where the RSI hovers near 50-level and the MACD flow closely to the zero line. 

Resistance level: 1.0613, 1.0698

Support level: 1.0540, 1.0463

BTC/USD

BTC prices plunged by nearly 5% in the Asian market opening hour with a cryptocurrency market rocking boat news reported. Bitcoin traded to its 2 week low after acknowledging that the crypto-friendly U.S. bank Silvergate Capital Corp, is ditched by big names in the crypto market, such as Coinbase Inc and Galaxy Digital. The troubled Silvergate had been reeling from the fallout of the FTX’s collapse last year. Crypto stakeholders await further detail of Silvergate’s woes as the bank has delayed its annual 10-k financial report filling. 

On the technical front,  the RSI dropped near the oversold zone after Bitcoin plunged by nearly 5% in the Asia morning session. Bitcoin topple also suppressed the MACD to crossing above the zero line. 

Resistance level: 23713, 25085

Support level: 22183,  21540

USDJPY

The bullish trend of USD/JPY persists, driven by the growing yield divergence between the United States and Japan, which has eroded the appeal of the Japanese Yen. Despite the global trend of hawkish monetary policies, the Bank of Japan has maintained its accommodative stance, continuing its easing monetary policy to support the nation’s economic recovery from the pandemic-induced slump. Meanwhile, the benchmark 10-year Treasury note’s yield has surged to 4% for the first time since November, as investors offload US bonds amid growing concerns of sustained inflation and rising interest rates.

USD/JPY is trading higher while currently testing the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 58, suggesting the pair might extend its gains since the RSI stayed above the midline. 

Resistance level: 137.75, 142.05

Support level: 134.95, 130.75

GBP/USD 

The pound dropped by 0.25% to $1.1959 against the strengthened dollar on Thursday as initial jobless claims data shows a better-than-expected reading. Data showed a decline to 190K claims, indicating the inflation might continue to stay higher, increasing concern the Federal Reserve may raise more rates, prompt a rise in the dollar, and the pound drop. The investor awaits the UK construction PMI data for further trading signals next Monday. 

As we can see, the pound is still trading in the region from $1.1915 to $1.2022. It might trade within the zone in the near term until further economic data is released. MACD has illustrated neutral-bearish momentum, while RSI is at 42, suggesting the pair is in a weak movement sentiment. 

Resistance level: 1.2022, 1.2126

Support level: 1.1915, 1.1634

Dow Jones

The Dow staged a remarkable comeback, erasing its early losses, after the Treasury yields retreated from earlier highs on the back of dovish comments from Atlanta Federal Reserve President Raphael Bostic. Making a case for quarter-point hikes, Bostic advocated for a “slow and steady” approach for the Fed, arguing that higher interest rates’ impact may only be felt in the spring. Nonetheless, market watchers will be keeping a close eye on the US economy and any further developments from the central bank, as they seek to discern the potential trajectory of the US equity market in the coming months.

Dow Jones is trading higher following the prior rebound from its crucial support level. MACD has illustrated diminishing bearish momentum, while RSI is at 45, suggesting the index might extend its gains toward resistance level. 

Resistance level: 34310.00, 35640.00

Support level: 32530.00, 30945.00

CL OIL

Oil prices are being fuelled by expectations of a vigorous demand rebound in China, the second-largest crude consumer globally. An optimistic surprise in China’s PMI serves as further evidence of a robust recovery and bolsters confidence in positive prospects for oil demand. Chinese refiners are taking advantage of the low prices of Russian oil, resulting in a record-high in seaborne imports of the commodity. According to Reuters, China’s crude oil purchases from Russia are expected to hit approximately 43 million barrels in March, up from the previous reading of 42.48 million barrels recorded in June 2020. Despite the upward momentum in oil prices, they face pressure from a strengthening US dollar. This hike in the US Dollar could bear down on oil prices, as the US currency tends to rise against other currencies, making oil more expensive for buyers holding alternative currencies.

Oil prices are trading flat while currently hovering near the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 54, suggesting the commodity might trade higher as the RSI stays above the midline.  

Resistance level: 78.80, 80.00

Support level: 77.70, 76.70