U.S. stock markets dropped slightly after the release of FOMC meeting minutes, which showed that a majority of Fed officials agreed to raise the rate by 25 bps, while a few favoured a bigger rate hike of 50 bps. The minutes show the determination of the Fed to bring inflation down to its 2% target. Investors increased the expectation of a peak interest rate of 5.4% this year, much higher than the previous prediction of 4.9%. In addition, investors have been told by the Fed in the minutes that only when the inflation rate shows sustainable downward movement that the expectation of a dovish pivot is least likely to happen. Meanwhile, oil prices extended their losses minutes after the FOMC reinforced a hawkish outlook, which may tighten the energy demand due to the higher cost of borrowing.

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Look Out For

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

25 bps (76%) VS 50 bps (24%)

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Market Overview

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Economic Calendar

Market Movements

DXY

The US Dollar rallied following the release of the FOMC meeting minutes. The MPC reaffirmed their commitment to a quarter-point increase, with sustainable and slower rate hikes aimed at taming inflation to the target of 2% while maintaining economic momentum. However, some participants still preferred a larger 50 basis point increase at the meeting. Since the Fed’s decision, market participants expect another rate hike at the upcoming meetings in March and May. The Fed Watch Tool suggests that the Fed’s fund rate will reach 5.25% to 5.5% in June, higher than the previous projection of 5% to 5.25% in December.

The Dollar Index is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 63, suggesting the index might extend its gains after it successfully breakout since the RSI stays above the midline.  

Resistance level: 104.60, 105.55

Support level: 103.85, 102.85

XAU/USD

The recent surge in the US Dollar following the FOMC meeting had negatively impacted gold prices. The minutes showed that most of the MPC is committed to a quarter-point increase, with some participants advocating for a larger 50 basis point increase. However, rising tensions in geopolitical relations may limit the losses experienced by the safe-haven gold, and investors should closely monitor these tensions for further trading signals. Overall, the price of gold will likely remain volatile in the coming weeks as global financial markets respond to various economic, political, and social factors.

Gold prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 35, suggesting the commodity might extend its losses after breakout since the RSI below the midline.  

 Resistance level: 1845.00, 1860.00

Support level: 1820.00, 1795.00

EUR/USD 

The pair traded sluggishly and moved downward, especially after releasing the FOMC meeting minutes. The minutes reveal that the Fed may raise the rate by 50 bps as some fed officials supported the idea. The meeting minutes show a relatively hawkish tone, where it eliminates the market expectation of a dovish pivot from the Fed’s monetary approach; the Fed also reiterated the focus of the Fed in taming inflation. In addition, the Eurozone CPI is set to release later today (23rd Feb) where investors may refer to the economic data to gauge the pair price movement. Given that the ECB’s chair has been releasing Hawkish comments and it is almost certain that the ECB will raise the rate by 50 bps in March, a higher CPI reading may spur the euro higher in the expectation of a more aggressive monetary tightening approach from the ECB.

Although the pair is trading in a bearish momentum, the indicators suggest that this momentum is diminishing. The RSI is sustained from dropping below the oversold zone while the MACD stayed flat closely with the zero line. 

Resistance level: 1.0760, 1.0866

Support level: 1.0583, 1.0458

BTC/USD

Although BTC has rebounded slightly after it traded bearishly this week; BTC investors remain cautious and uncertain about the market, especially with the Fed monetary policy and SEC’s regulatory woes. U.S. equities markets had little impact, trading downward and oil prices slumped after the FOMC meeting minutes showed the Fed is determined to tame inflation and will raise rates further than expected. At the same time, the U.S. SEC has intervened in the crypto market more often than before, especially after the FTX scandals leave investors clueless about what may come next. 

Despite sluggish trading on BTC over the week, the indicators suggest a reversal signal for BTC. The RSI has rebounded before falling into the oversold zone and stayed above 50. The MACD has a sign of rebound at the zero line, although the MACD line and the signal line are yet to converge. 

Resistance level: 25085, 26250

Support level: 23713, 22816

Nasdaq

The Nasdaq composite increased by 0.13% to 11,507 points on Wednesday. According to the FOMC meeting yesterday, almost all Fed officials agreed to slow the pace of increases in interest rates to a quarter of a percentage point. Economists interpreted the meeting minutes to remain a large degree of uncertainty about where things are heading. The stock markets have fewer effects even after the minutes are released. Moreover, the Fed official James Bullard reiterated his view that the Fed policy rate in the range of 5.25 to 5.5% would be enough to tame the inflation rate to the target of 2%.

The bond market has already priced in more rate hikes, but the stock market still needs to be repriced to reflect the rate movement. Therefore, investors will probably await the upcoming GDP data and initial jobless claim data, which will be released on Thursday. At this point, the price has been lowered to the support level of 11997, and it’s a crucial level to focus on whether it can break down. Meanwhile, MACD has illustrated a diminishing bullish momentum. While RSI is trading at 40, indicating a neutral-bearish momentum ahead. 

Resistance level: 12808, 13778

Support level: 11997, 11445

GBP/USD 

The pound pulled back 0.36% to $1.2063 against the dollar on Wednesday. According to Reuters, money markets are seeing a 70% probability of the BoE raising its policy rate to 4.75% this summer, compared to 40% before last week’s soft UK inflation data. However, a slightly hawkish tone of interest rate hike decision from the FOMC meeting minutes helped the dollar hold its ground.in turn, the pound has struggled to extend its rally. Market participants will continue to determine whether policymakers seriously discussed the possibility of going back to more significant rate hikes depending on the inflation and labour market data. Therefore, investors can keep an eye on the upcoming GDP data and the US initial jobless claims data, which will be released on Thursday. 

GBPUSD is trading lower while currently testing the crucial support level of 1.20. Furthermore, the 1.20 level is an area where we had seen quite a bit of support previously, and investors are suggested to keep watching for the possibility of a breakout. Meanwhile, MACD has illustrated diminishing bullish momentum ahead. While RSI is at 49, indicating the pair is in neutral-bearish momentum in the near term. 

Resistance level: 1.2125, 1.2210

Support level: 1.2020, 1.1915

NZDUSD

The New Zealand Dollar remained resilient on a key support level following the Reserve Bank of New Zealand’s bold move to raise interest rates by 50 basis points, driving the benchmark borrowing rates to a 14-year high of 4.75%. The central bank has reiterated its commitment to pursue a tightening policy in the face of mounting inflationary pressures, underscoring the resolve to contain price pressures in the economy. The monetary policy statement (MPS) forecasted that the official cash rate (OCR) would reach 5.5% in 2023, representing the most aggressive tightening cycle since the OCR was introduced in 1999.

NZDUSD is trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 57, suggesting the pair might extend its gains as the RSI stays above the midline. 

Resistance level: 0.6260, 0.6305

Support level: 0.6200, 0.6155

CL OIL

Oil prices dipped by $2 per barrel to their lowest level in two weeks, triggered by mounting concerns among investors regarding the recent bullish data and hawkish tone from the Federal Reserve. Investors are worried that a more aggressive rate hike will pressure economic growth and cause dollar-denominated oil to become more expensive, leading to lower demand and price for the commodity. Moreover, US crude stockpiles unexpectedly increased by 9.9 million barrels last week, exceeding the economist forecast of 1.233 million barrels, according to the American Petroleum Institute (API) figures, which added further downward pressure on oil prices.

Oil prices are trading lower following the prior breakout below the previous support level. MACD has illustrated bearish momentum, while RSI is at 28, suggesting the commodity might extend its losses as the RSI stays below the midline.  

Resistance level: 74.65, 76.10

Support level: 73.35, 72.25