The global equity market, specifically the U.S. markets, seesawed this week while investors are grappling with the impact of a hawkish Fed’s monetary policy and gauging the intensity of the rate hike; both treasury yields and dollar gains as investors recalibrate for a higher peak in Fed rates. On the other side, Australia’s economy expanded slower than expected, perhaps due to a rapid rate hike from the RBA. Investors lowered the chance of an aggressive rate hike from the Australian central bank with a backdrop of wobbly economic performance. In addition, China’s February Manufacturing PMI reading was recorded at 52.6, the highest since 2012; the reading shows promising data after China shifted from its previous Covid-zero policy and has excited oil prices to edge higher last night. 

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Look Out For

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

25 bps (76.7%) VS 50 bps (23.3%)

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Market Overview

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Economic Calendar

Market Movements

DXY

The Dollar Index edges higher to $105.88 on Tuesday, set for the first monthly gain since September. Data showed that U.S. consumer confidence unexpectedly decreased to 102.9 in February, as rising prices and deepening concerns about the outlook outweighed the near-term strength of the labour market. The decline in confidence reflects more pessimistic views on jobs, incomes and business conditions in the next six months. Inflation is proving to be stickier than many anticipated, and the Federal Reserve is expected to raise interest rates higher. Higher prices erode Americans’ purchasing power, and aggressive Fed policy risks tipping the economy into recession. On the basis of the recession fear increase, dragging down the appeal of the equities market, three major US stocks index dropped on Tuesday. 

In addition, MACD has illustrated neutral-bullish momentum ahead. Moreover, RSI is trading at 60, indicating a neutral-bullish momentum in the near term. 

Resistance level: 105.54, 107.12

Support level: 104.61, 103.85

XAU/USD

Gold prices spiked to $1823 on Tuesday as data showed that U.S. consumer confidence unexpectedly decreased to 102.9 in February, reflecting more pessimistic views on jobs, incomes and business conditions in the next six months. Inflation is proving to be stickier than many anticipated, and market participants expect the Federal Reserve might raise more interest rates. Higher prices erode Americans’ purchasing power, and aggressive Fed policy risks tipping the economy into recession. Investors will likely shift their money from risky assets to safe-haven gold when they think a recession is coming. Therefore,  the demand for gold may increase during a recession, which can drive up its price.

As we can see, gold prices successfully trade above the previous resistance level of $1820. Investors are advised to keep monitoring the sustainability of the prices to stay above $1820. If it can move higher, we expect a neutral-bullish momentum to be in. MACD has illustrated diminishing bearish momentum, while RSI is at 53, suggesting the commodity might start to change direction. 

Resistance level:  1842, 1862

Support level: 1820, 1792

EUR/USD 

The EURUSD pair ended the month of February with a drop of 2.63% due to the strengthening dollar in the expectation that the Fed may raise the rate aggressively this year to tame stubborn inflation. As investors are still gauging the Fed’s next monetary policy moves, the dollar gained by nearly 0.5% last night which hammered the euro to trade below 1.0600. The euro may gain some strength after the Spanish and French recorded a hotter-than-expected inflation figure; it fueled the speculation that the ECB may continue hiking rates till early next year. In addition, the Euro CPI and the U.S NFP set to be released later this week may affect the pair’s price movement. 

The indicators show a chance for the pair to consolidate in the range between 1.0533 to 1.06230. The RSI and the MACD have given a reversal signal from the bearish trend, where the RSI is hovering near the 50-level while the MACD is flowing close to the zero line. 

Resistance level: 1.0613, 1.0698

Support level: 1.0540, 1.0463

BTC/USD

BTC prices were dragged down by risk-off sentiment in the market while investors are gauging the Fed’s next move, given better-than-expected economic data that was released last month. BTC prices closed flat with less than 0.5% changes in February amid high uncertainties in the market. Factors such as an aggressive rate hike from the Fed and the escalating tension between Ukraine and Russia will pressure BTC prices to trade higher. Crypto investors may refer to the U.S. PMI and NFP data to gauge for Fed’s next move. 

On the technical front,  both indicators suggest the BTC is building a bullish momentum with the RSI has been hovering close to 50 after rebound from above the oversold zone; the MACD is flowing upward about to break above the zero line. 

Resistance level: 23713, 25085

Support level: 22816, 22183

AUDUSD

China’s impressive economic performance has sparked market confidence in the global economy, particularly for the Australian Dollar, which is often seen as a proxy for the Chinese currency. The National Bureau of Statistics revealed that both the Manufacturing Purchasing Managers’ Index (PMI) and Non-manufacturing PMI exceeded expectations, with readings of 52.6 and 56.3, respectively. This data further solidifies the ongoing economic recovery in the world’s second-largest economy after easing its strict zero-Covid policy earlier this year. However, the Australian Dollar’s gains were capped by downbeat GDP data. The Australian Bureau of Statistics reported a lower-than-expected Gross Domestic Product (GDP) for the last quarter, with a reading of 0.50% compared to market expectations of 0.80%.

AUD/USD is trading lower while currently testing the support level. MACD has illustrated increasing bullish momentum, while RSI is at 46, suggesting the pair might extend its gains as the RSI rebounded sharply from the overbought territory. 

Resistance level: 0.6815, 0.6905

Support level: 0.6720, 0.6640

GBP/USD 

The Pound Sterling’s Brexit-inspired optimism took a hit, paring the biggest daily gain in a month, due to the US Dollar’s recovery fueled by recent upbeat data, including a blockbuster employment report for January. However, the UK and the European Union (EU) reached a breakthrough deal on the Northern Ireland Protocol, known as the “Windsor Framework,” which aims to resolve trade disputes between Northern Ireland and the EU. The deal is seen as a crucial first step towards repairing the damage caused by Brexit to the UK economy. Experts believe it will minimise risk of a UK-EU trade war, increase cooperation, boost business confidence, and potentially unlock investment. 

GBP/USD is trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 50, suggesting the pair might extend its losses as the RSI retreated sharply from the overbought territory. 

Resistance level: 1.2130, 1.2430

Support level: 1.1935, 1.1720

Dow Jones

The Dow remains in a state of flux as investors are weighing the possibility of extended high-interest rates. Despite a strong performance in January, a few hawkish comments from the US Federal Reserve have prompted market participants to reassess the likelihood of a rate hike in the future. As a result, traders have started to consider the possibility of a larger 50 basis-point rate hike in March, although the chances remain low at approximately 23% according to Fed fund futures. These futures also indicate that interest rates may peak at 5.4% by September, up from the current rate of 4.57%. Investors will continue to monitor the situation closely as they attempt to gauge the direction of the market and position themselves accordingly.

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 overbought territory. 

Resistance level: 34310.00, 35640.00

Support level: 32645.00, 30945.00

CL OIL

Oil prices rose to $76.53 per barrel on Tuesday as Russia has seen favouring India despite China’s Oil Demand Rebounds. India purchased almost no Russian oil a year ago, but it has become a crucial market after the U.S. and European Union imposed sanctions on Moscow. Moreover, Russia shipped 1.85 million barrels a day to India in February, according to commodity data firm Kpler. Moreover, according to JPMorgan’s oil analysts, oil prices are expected to rise above $90 a barrel toward the second half of 2023 as Chinese demand recovers and Russian output falls. Last month, Russia exported 2.3 million barrels a day of crude to China. The Asian giant’s oil demand is set to grow by about 900,000 barrels a day this year after travel restrictions imposed during the pandemic ended, the IEA estimates. 

Investors might await the U.S. crude oil inventories data for further trading signals, which will be released On Wednesday. However, MACD has illustrated diminishing bearish momentum, while RSI is at 53, suggesting the commodity might trade within a range as the RSI stays near the midline. 

Resistance level: 76.81, 82.09

Support level: 73.35, 70.19