What You Need To Know

The Fed’s decision came as no surprise to the markets as it raised interest rates by a quarter basis point, bringing the target range from 4.5% to 4.75%. Despite several signs of slowing inflation in the U.S, chairman Jerome Powell stated that the Fed will still focus on taming inflation and will deliver a couple more interest rate hikes before any substantial evidence to prove inflation is under control. On the other hand, oil prices plunged by more than 4% last night after the release of the U.S. crude inventories data. The crude oil inventories increased significantly by 4.14 million barrels compared to the previous reading of 0.53 million barrels increment. Elsewhere, Bitcoin touched the $24000 level for the first time since last August, mainly due to the risk-off sentiment after the FOMC statement was released. 

Look Out For

The week’s major US economic focus after the FOMC meeting will be the US jobs report for January on Friday. The Nonfarm Payrolls is expected to indicate that the employers added 185,000 jobs during the month, while the US unemployment rate might come in at 3.6%. Investors are advised to continue monitoring further economic data from the US region to gauge the likely trends for the US Dollar. 

Market Overview

Economic Calendar

Market Movements

DXY

The Dollar Index, which trades its value against a basket of six major currencies, dipped to a nine-month low as investors shook off a 25-basis points rate hike from the Federal Reserve and digested dovish tones from the Federal Reserve. Jerome Powell, speaking in a news conference after the Fed announced its rate hikes decisions, claimed that the tightening monetary policy had shown some progress on disinflation while reiterating that the central bank will continue to monitor further economic data and make decisions on a meeting-by-meeting basis.

The Dollar Index is trading lower following the prior breakout below the previous support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 30, suggesting the index is entering the oversold territory. 

Resistance level: 103.45, 105.70

Support level: 99.30, 97.25

XAU/USD

Gold prices skyrocketed following the Federal Reserve noting on disinflationary pressure, prompting the commodity to break above the crucial resistance level at $1950 for the first time in almost a year. Yesterday, Federal Reserve Chair Jerome Powell claimed that the tightening monetary policy had shown some progress on disinflation while reiterating that the central bank will continue to monitor further economic data and make decisions on a meeting-by-meeting basis. Investors are advised to focus on Friday’s jobs data from the US region for further trading signals.

Gold prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 67, suggesting the commodity might extend its gains after successfully breakout as the RSI stays above the midline. 

Resistance level: 1960.00, 2000.00

Support level: 1915.00, 1870.00

EUR/USD 

The Euro surged significantly following the United States slowing down its aggressiveness of rate hikes decisions. Yesterday, Fed Chair Jerome Powell claimed that there had been some encouraging signs that the price pressures were easing, though the policymakers will require more evidence to be confident that inflation is on a sustained downward shift. By contrast, the European Central Bank is expected to increase rates by 50 basis points on Thursday.

EUR/USD is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 72, suggesting the pair is entering overbought territory. 

Resistance level: 1.1000, 1.1315

Support level: 1.0685, 1.0295

BTC/USD

Bitcoin held steady following the Federal Reserve’s slowdown in its pace for its rate hike path, increasing the benchmark interest rates by only 25 basis points. The move, which aligned with the market expectations, had stoked a shift in sentiment toward risky assets, and the cryptocurrency continues to stand on its ground. Bitcoin, the biggest cryptocurrency by market cap, surged by 4.40% as of writing.

BTC/USD is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, However, RSI is at 70, suggesting the asset is entering the overbought territory. 

Resistance level: 24260.00, 25070.00

Support level: 23315.00, 22505.00

DOW JONES

The Dow surged, buoyed by positive sentiment from the US equity market after the Federal Reserve increased the interest rates by 25 basis points. The Fed’s latest rate hike indicated a slowing compared to its half-point increase in December, spurring hopes that the central bank would ease its aggressive tightening policy. US Treasury yields were falling across the curve after the Fed’s announcement, boosting the appeal for the equity market.

The Dow is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 57, indicating that the index might extend its gains after successfully breakout as the RSI stays above the midline. 

Resistance level: 34390.00, 35640.00

Support level: 32730.00, 30945.00

GBP/USD 

Pound Sterling rallied following the Fed’s monetary decisions. The Federal Reserve increased its interest rates for the eighth time in a year but slowed its pace to 25 basis points in a nod to an easing inflation prospect. On the other hand, the Bank of England is expected to increase their interest rates for the 10th time during the central bank meeting today. Market participants expect a 50-basis points rate hike, raising its benchmark interest rate to 4%, the highest level since the 2008 financial crisis.  

GBP/USD is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 60, suggesting the pair might trade lower as technical correction as the RSI is entering the overbought territory.  

Resistance level: 1.2420, 1.2835

Support level: 1.2000, 1.1485

USDJPY

USD/JPY edged into negative territory for the second consecutive day, with investors bracing for dovish tones from the Federal Reserve and the downbeat economic data from the US region. According to the ADP Research Institute, the US ADP Nonfarm Employment Change came in at 106K, which is also far less than the market expectations of 178K. Such data indicated that the US labour market grew at the slowest pace in two years, dialling down further market optimism toward the economic progression in the United States. On the other hand, the Japanese Yen received bullish momentum from speculation that a spiking inflation rate may prompt the Bank of Japan to tilt toward hawkish stances later this year.

USD/JPY is trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 39, suggesting the pair might extend its losses toward support level as the RSI stays below the midline. 

Resistance level: 130.70, 134.45

Support level: 126.75, 123.90

CL OIL

Oil prices slumped by more than 3% yesterday as investors braced for rising US stockpiles and OPEC+’s decision to leave production levels unchanged. According to the Energy Information Administration (EIA), US Crude Oil Inventories surged by 4.14M barrels during the week ended 27th January, much higher than the market expectations of 0.376M. The EIA has reported a total crude increment of 34.5 million barrels over the past six weeks, while the current crude stockpiles were at their highest level since June 2021. On the other hand, OPEC+ had decided to maintain its current output targets agreed upon in December, maintaining its production target by 2 million barrels per day (bpd). Investors should continue to monitor the Chinese demand and the global economy’s performance for further trading signals on the oil market.

Oil prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum while RRSI is at 39, suggesting the commodity might extend its losses after it successfully breakout below the support level as the RSI stays below the midline. 

Resistance level: 78.10, 79.95

Support level: 76.35, 73.75