“Interest rate would need to rise to between 5% and 5.25% and then remain there until well into 2024” said Atlanta Fed president Raphael Bostic. Other Fed officials also sounded Hawkish, sending the U.S. 10 yield to rise above 4% from 3.35% a month ago. Yields on Australian and New Zealand bonds rose with the expectation of a higher rate in the future as well. The risk-off sentiment is growing in the market which muted the equity markets but bolstered the dollar on the other hand. In addition, oil prices sustained above $77 per barrel as optimism over China’s economic performance despite U.S. PMI released last night showing the country’s manufacturing industry contracted for 4 months in a row.

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Look Out For

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

25 bps (69.4%) VS 50 bps (30.6%)

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Market Overview

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Economic Calendar

Market Movements

DXY

The Dollar Index edges lower to $104.37 on Wednesday, weighed down by firmer commodity currencies that benefited from China’s strong manufacturing activity data. China’s economy is recovering strongly as its PMI data shows a stronger-than-expected reading of 52.6, much higher than the market expectation of 50.5. On the other hand, U.S. manufacturing data shows a decline to 47.3, which failed to meet the market expectation of 47.8, adding pressure to the dollar index. On Wednesday, yields moved higher as Fed officials reinforced their hawkish stance, but market participants might already be priced in. Federal Reserve officials said interest rates would need to increase further and stay elevated into next year to curb U.S. inflation showing few signs of abating. 

In addition, MACD has illustrated bullish momentum ahead. Moreover, RSI is trading at 43, indicating a neutral-bullish momentum in the near term. 

Resistance level: 104.61, 105.32 

Support level: 103.85, 102.84

XAU/USD

Gold prices spiked to $1837 against the weakened dollar on Wednesday. Data showed that U.S. manufacturing data decreased to 47.3 in February, failed to meet the expectation of 47.8, the prompt dollar dropped, and gold went up. On Wednesday, aggressive Fed comments also added risks of tipping the economy into recession. As the possibility of an economic recession looms, investors tend to adopt a risk-averse strategy by reallocating their investments from volatile or high-risk assets to safe-haven assets such as gold, thereby increasing the demand for gold and potentially driving up its price.

As we can see, gold prices successfully traded above the previous resistance level of $1820 and continued moving upward. In the short term, the price could range from $1820 to $1842. MACD has illustrated increasing bullish momentum, while RSI is at 63, suggesting the commodity might start to enter into bullish momentum.

Resistance level: 1842, 1862

Support level: 1820, 1792

EUR/USD 

The euro is strengthened by the EZ inflation data topping with the freshly released German CPI showing the country’s inflation rate is higher than the market expected. The pair rebounded by more than 1.2% this week, but the bullish momentum seized due to the strengthened dollar. Several Fed officials have given Hawkish comments supporting the idea of raising the Fed’s rate to above 5% and will last at least till 2024. The Hawkish comment boosted the dollar as well as the U.S. treasuries yields but risk-off sentiment escalated at the same time as well. The Eurozone CPI and the NFP which will be released today and tomorrow respectively, may be crucial for investors to gauge future price movement. 

The indicators show that the bullish momentum is in forming where the RSI has been moving upward and stayed above 50 while the MACD has broken above the zero line. 

Resistance level: 1.0613, 1.0698

Support level: 1.0540, 1.0463

BTC/USD

BTC prices ranged between 22815 and 23870 over the past week with no catalyst to push the king of coin to trade toward either side of the trend. The hawkish stance from Fed officials with the market expecting for higher Fed rate for a more extended period to tame the stubborn inflation. Risk-off sentiment has been growing where the equity market is suppressed by the selling pressure as well as the cryptocurrency market. Investors are advised to monitor the NFP report, which will be released on Friday (3rd March), to gauge BTC’s future price movement. 

On the technical front,  both indicators suggest the BTC might be consolidating in a narrow price range with the RSI moving closely near 50 and the MACD flowing along the zero line. 

Resistance level: 23713, 25085

Support level: 22816, 22183

USDJPY

The Japanese Yen continued its downward trend as Japanese bond yields remained low, with the Bank of Japan maintaining its dovish stance. The incoming Governor of the Bank of Japan, Kazuo Ueda, has hinted that the central bank is not considering abandoning its current policies in light of the prevailing economic conditions. This indicates that the institution is likely to continue with its massive quantitative easing program without making significant changes to its yield curve control scheme. As a result, monetary policy is expected to pose a persistent challenge for the Japanese Yen.

USD/JPY is trading higher while currently testing the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 57, suggesting the pair might extend its gains since the RSI stayed above the midline. 

Resistance level: 136.75, 139.30

Support level: 132.50, 128.40

GBP/USD 

The pound dropped by 0.47% to $1.2008 against the dollar on Wednesday. The Bank of England Governor Andrew Bailey said nothing had been decided regarding whether interest rates would need to rise again. Due to no direction being pointed, led the pound remained subdued. His comments prompted traders to slightly trim their bets on the likelihood of a 25 bps rate increase when the BoE meets on March 23 for its next policy meeting, although this is still seen as the most likely outcome. 

As we can see, the pound dropped to another 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 diminishing bullish momentum, while RSI is at 46, suggesting the pair is decisive in moving towards a lucid direction. 

Resistance level: 1.2022, 1.2126

Support level: 1.1915, 1.1634

Dow Jones

The Dow’s closing performance was lackluster today, as Treasury yields maintained their upward trajectory on indications of persistent inflation risk. The trend is raising speculation that the Federal Reserve’s interest rate hikes could be more aggressive than initially anticipated. The benchmark 10-year Treasury yield surged past the 4% threshold, marking its first climb since November. This development has kept tech stocks under intense pressure and prolonged the downturn witnessed in February.

Dow Jones is trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 34, suggesting the index is entering the oversold territory. 

Resistance level: 34310.00, 35640.00

Support level: 32530.00, 30945.00

CL OIL

Oil prices surged for the second consecutive day as record high US crude exports helped alleviate concerns over a weekly build in stockpiles. The Energy Information Administration’s report showed that US crude exports hit a new peak of 5.629 million barrels last week, providing some support to the market. Moreover, bullish economic data from China added to the positive sentiment in the oil industry. The country’s manufacturing numbers exceeded expectations, signalling that China’s economic rebound remained robust following the easing of Covid-19 restrictions. However, the bullish momentum for oil prices was limited by the inventories report, as US crude inventories rose by 1.165 million barrels for the week ended 24th Feb, surpassing market forecasts of 0.457 million barrels.

Oil prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 58, suggesting the commodity might extend its gains after it successfully breakout above the resistance level. 

Resistance level: 77.70, 78.80

Support level: 76.70, 75.15