Markets have turned risk-off with equities trading sideways and gold rebounding from a 3-week low.

Top diplomats from the U.S. and China met in Germany for the 1st time after the “balloon” event. Representatives from both countries are pointing fingers at each other on not just the balloon shooting, but also on issues including the Russia-Ukraine war and the North Korea missile launch, which intensified the already tense relationship between these two countries. As a result, the equity markets went sideways over uncertainty and gold prices rebounded slightly after they plunged by more than 6% since mid-January as demand for safe-haven assets increased. In addition, the DXY remains bullish as the latest U.S. economic data, including the NFP and PPI, have been relatively Hawkish, prompting similarly-toned comments from Fed officials. Elsewhere, the rising prospect of further tightening by the Fed and high U.S. crude inventories has weighed down the oil prices over the week.

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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 US Dollar edged lower against major currencies on Friday as market participants readjusted their portfolios while profit-taking ahead of the long weekend. As for now, they are still waiting for clues on how the Federal Reserve can tame the skyrocketed inflation rate. Recently, several Federal Reserve officials had signalled that the US central bank would still likely maintain its aggressive tightening policy to ensure the inflation rate reached its desired level. Those hawkish tones, combined with better-than-expected economic data last week, have prompted some banks and economists to forecast three additional rate hikes in 2023.

The Dollar Index is trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 55, suggesting the index might trade lower as technical correction since the RSI rebounded from the midline.     

Resistance level: 104.85, 105.75

Support level: 103.95, 102.55

XAU/USD

Gold prices posted their third weekly loss, hovering at the support level around $1820 due to mixed market sentiment. With the rising tensions between US-China after the US military shot down a high-altitude Chinese balloon on 4th February, some investors shifted their portfolio to gold as safe-haven protection. Meanwhile, others could view it as a liability if the Federal Reserve increased its rate further, boosting the market demand for the US Dollar. The tug-of-war between the two sides could be one of the reasons that cause the gold prices to continue hovering  around the key support level.

Gold prices are trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 47, suggesting the commodity might extend its gains as the RSI rebounded sharply from the overbought territory.     

Resistance level: 1860.00, 1905.00

Support level: 1820.00, 1766.35

EUR/USD 

Despite a rebound last week after the pair traded to its monthly low at 1.0613, the euro could break through its psychological resistance level at 1.0700. The upbeat U.S. economic data, including the NFP and the PPI, has led the market to expect a more significant rate hike from the Fed. It is a battle between the ECB and the Fed on interest rates as the ECB also comments to increase the rate by 50 bps next round and keep rates as high as necessary for a longer period. This week, the release of the FOMC meeting minute and the Eurozone CPI may fluctuate the prices of the pair. 

On the technical front, both indicators depict a reversal signal for the pair from its current bearish trend. The RSI pulled back before entering the oversold zone while the MACD stayed flat and flowed closely to the zero line. 

Resistance level: 1.0760, 1.0866

Support level: 1.0583, 1.0458

BTC/USD

The intervention by regulators toward regulating the crypto market has hindered the bullish trend of BTC. since last week; the U.S. SEC introduced regulations which limit the financial institution to invest funds in cryptocurrencies. The SEC has also proposed measures on stablecoin and penalised several crypto exchanges which deter crypto investors at the moment before everything is clear. On the bright side, CleanSpark, a Bitcoin mining company, announced to invest $32.3 million to acquire 20,000 new mining rigs that show confidence in Bitcoin. 

Indicators suggest a slowdown in bullish momentum for BTC after the BTC prices seesawed last week. The RSI is not able to break above the overbought zone while the MACD line and the Signal line converge above the zero line suggesting a reversal of the trend. 

Resistance level: 25085, 26250

Support level: 23713, 22816

DOW JONES

The Dow Jones Index rose 0.39% to 33,826 points on Friday. The index was lifted by Merck & Company Inc (MRK), which rose 2.83%, and UnitedHealth Group Incorporated (UNH) was up 2.41% in late trade. Moreover, adding to recent worries about the interest rate hike, the Fed Governor Michelle Bowman said the central bank would need to keep raising interest rates until it makes much more progress in taming inflation. If so, the index might have a negative impact soon. Investors are suggested to trade cautiously ahead of March’s meeting. Lastly, the U.S. stock markets will be closed on Monday, Presidents’ Day. 

The overall trend remains sideway-bullish. MACD is trading sideway above the zero line, indicating a neutral-bullish momentum. At the same time, RSI is trading at 47, which indicates a neutral-bullish momentum ahead. Investors should focus on the upcoming economic data for further trading signals. 

Resistance level: 34392, 35320

Support level: 32619, 31166

GBP/USD 

The pound rose 0.67% to $1.2023 against the dollar on Friday as the UK retail sales data showed a better-than-market-expected reading. On Friday, retail sales data showed British consumers unexpectedly increased their shopping in January, as sales volume rose by 5%, which is higher than the market expectation of -3%. It is considered good news for the economy as it suggests a headwind pushing against the recession risks. On the other hand, the BoE said the demand is giving more challenges to bring down inflation. The market is currently pricing in an almost 75% chance of a 25 basis point from the BoE at the March meeting, prompting the pound rise. 

In the short term, the pair is still trading from 1.1936 to 1.2130. As you can see, the price rebounded after it touched the support level. It might be a short-term technical rebound because the trend still seems weak. However, MACD is suggesting a bearish momentum. While RSI is at 47, indicating a bearish momentum ahead. 

Resistance level: 1.2130, 1.2431

Support level: 1.1936, 1.1649

USDJPY

USD/JPY surged to its highest level two months after the Fed officials unleashed a hawkish tone, and a slew of upbeat US data boosted demand for the higher-yielding Dollar. Meanwhile, market participants expected the Federal Reserve might move toward another 50 basis point rate hikes, weighing on the yield divergence between Japan and the United States. The question now lingers on where the Bank of Japan’s (BoJ) monetary policy will head after the appointment of the new Governor of the Bank of Japan (BoJ), Kazuo Ueda. Investors should scrutinise the latest updates regarding the monetary plan from BoJ for further trading signals.  

USDJPY is trading higher while currently testing the resistance level. However, MACD has illustrated increasing bearish momentum, while RSI is at 60, suggesting the pair might trade lower as the RSI retreated sharply from the overbought territory. 

Resistance level: 134.80, 138.00

Support level: 132.90, 129.90

CL OIL

Oil prices finished its week sharply lower, down roughly by 4%, weighed by higher Treasury yields with aggressive rate hikes expectations. Rising inflation fears and a restrictive monetary policy environment could continue jeopardising global economic growth and dent commodities. Nonetheless, China’s reopening decisions should create a supportive backdrop for oil prices later in the year. The International Energy Agency and the Organization of the Petroleum Exporting Countries raised their forecasts for global oil demand growth this year, respectively.

Oil prices are trading lower while currently testing the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 39, suggesting the commodity might extend its losses as the RSI stays below the midline.    

Resistance level: 77.35, 78.50

Support level: 76.15, 74.65