Meanwhile, bond markets have also increased on bets that the Fed will remain relatively hawkish even as the markets await the CPI data today

U.S. major equity market indexes went up by more than 1% before the CPI release later today, with investors betting the CPI will prove the inflation in the U.S. is moderating. However, in the bonds market, the U.S. 2-year short-term bond yield has increased by more than 30 bps after investors digested the Fed’s hawkish message ahead of CPI and speculate the Fed may be more aggressive in the upcoming rate hike. For the black commodity, the oil prices see-sawed as they gained after Russia announced an oil supply cut a day earlier and the U.S. reported to release its strategic reserve to counter the supply cut, which suppressed oil prices later on. In Japan, the country will announce its new governor to take over the office in April; a new governor may stand a chance to end its decades-long monetary stimulus program and may spur the Japanese Yen to surge if the BoJ plans to raise interest rates.

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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 traded flat, hovering near a five-week high as investors are keenly waiting for US inflation data, which could affect the monetary policy decision of the Federal Reserve. Economists expected the latest US Consumer Price Index (CPI) to tick slightly in January, as the easing Covid-19 restrictions from China could boost global economic momentum. A strong inflation report could force markets to speculate that the Fed will maintain its aggressive rate hike decisions this year, particularly following the release of optimistic jobs reports earlier in the month. With robust economic data due out this week, including retail sales and industrial production data, market volatilities could remain high. Investors are advised to continue monitoring further economic development to gauge the likelihood of movement for the US Dollar.

The Dollar Index is lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 47, suggesting the index might extend its losses toward support level. 

Resistance level: 103.70, 104.85

Support level: 102.55, 101.80

XAU/USD

Gold prices continue to hover in negative territory as investors brace for the January US Consumer Price Index (CPI). In addition, several Federal Reserve (Fed) officials continue to defend the rate hikes policy and are far from suggesting the policy pivot. According to Reuters, Fed Governor Michelle Bowman and Philadelphia Federal Reserve President Patrick vowed that the Fed will still require raising interest rates to ensure the rates are high enough to tame inflation to the central bank’s 2% target rate.

Gold prices are trading lower following the prior breakout below the previous support level. MACD has illustrated increasing bearish momentum, while RSI is at 39, indicating the commodity might trade lower as the RSI stays below the midline.  

Resistance level: 1860.00, 1905.00

Support level: 1820.00, 1766.35

EUR/USD 

The Euro rallied following the European Commission upgrading its economic forecasts for the EU earlier Monday, reiterating that a milder-than-expected energy shock gradually reduced the cost-of-living pressures. Meanwhile, they forecast the economic growth for the 27 countries of the EU could increase by 0.80% in 2023, compared with the earlier projections of 0.30%, boosted by a better-than-expected performance in developed EU countries such as Germany.

EURUSD is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, RSI is at 52, suggesting the pair might extend its gains as the RSI rebounded sharply from the oversold territory. 

Resistance level: 1.0775, 1.0920

Support level: 1.0685, 1.0585

BTC/USD

BTC couldn’t ride along the investor risk-on sentiment as the major equity market indexes in the U.S. rose more than 1% before the announcement of CPI ; investors are betting that the CPI reading will be in line or lower than the market expected and the Fed may be more dovish in upcoming monetary policy moves. The cryptocurrency market stays flat and quiet as the SEC announces multiple enforcement actions toward the crypto market. 

Despite gloomy sentiment surrounding the cryptocurrency market and BTC, indicators suggest that the bearish momentum has eased. The RSI has rebounded before getting into the oversold zone while the MACD is climbing toward the zero line from below. 

Resistance level: 22530  23765

Support level: 20723, 19782

DOW JONES

The Dow Jones increased by 1.11% to 34,245 points on Monday as investors awaited CPI data that is likely to hint at the Fed’s path of an interest rate hike. At the same time, the index was mostly driven up by company earning reports. Investors will likely focus on January inflation data due on Tuesday to reassess their bets on the central bank’s monetary policy path. However, volume on U.S. exchanges was relatively light, with 9.5 billion shares traded, compared to an average of 11.9 billion shares over the previous 20 sessions. Investors could keep an eye on the upcoming earnings report from major companies and the U.S. CPI data due today. 

The overall dow jones index’s movement keeps testing its resistance level, and it is a crucial point to focus on. Whether it can break through the resistance depends on today’s inflation data. The MACD has illustrated neutral-bullish momentum. RSI is trading at the midline of 58, suggesting a neutral-bullish momentum as well. 

Resistance level: 34390.00, 35640.00

Support level: 32730.00, 30945.00

GBP/USD 

The pound rose 0.89% to $1.2140 on Monday as the market awaits the U.S. CPI data due today. The dollar dropped lead to pound gains because market participants may expect a decline in inflation data today. Therefore, traders speculate on the dollar index while buying other national currencies. Investors are suggested to focus on U.K. employment data due today for further pound movement. 

The outlook for the overall pound movement is neutral-bullish in the near term. The MACD has illustrated a diminishing bearish momentum ahead. While RSI is at 40, it also indicates a diminishing bearish momentum in the short term. 

Resistance level: 1.2426, 1.2670

Support level: 1.2105, 1.1928, 

USDJPY

The dollar has fallen slightly as investors betting that the CPI reading which is set to be released later today will be favourable toward the risky assets. Markets predict that the Fed will be lenient in upcoming monetary policy moves if the CPI shows that the inflation rate in the U.S. is diminishing. However, the Japanese Yen did not take advantage of the weakened dollar to trade higher. In addition, Japan will welcome a new governor to take over the office. A new governor may bring changes to the BoJ monetary policy where there is a chance that the BoJ may end its decades long monetary stimulus program and start to raise interest rates. If this is the case, the Japanese Yen will appreciate against other currencies as a result. 

USDJPY lost its bullish momentum and couldn’t break above its near resistance level at 133 . Both indicators illustrated a neutral signal where the RSI flowing near the 50-level and the MACD stayed flat above the zero line. 

Resistance level: 133.05, 134.50

Support level: 131.02, 128.83

CL OIL

Oil prices retreated from their highest level in two weeks as investors profit-taking and selling-off risky assets ahead of the major inflation report, which is due to be released later today. The rising interest rate expectations could be sparking concerns of slowing economic activity and demand for oil in future. On the other hand, EIA reported that US crude oil and natural gas supply from the seven biggest shale basins is expected to increase to record highs in March. The crude production will increase by about 75,000 barrels per day (bpd) to a record 9.36 million barrels per day (bps) in March. 

Oil prices are trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 47, suggesting the commodity might extend its losses as the RSI retreated sharply from the overbought territory.

Resistance level: 80.20, 81.70

Support level: 78.50, 77.35