Soft Retail Sales Hammers Dollar

* Retail Sales came short, hammering the dollar.

* Gold and Oil prices surge on the soft U.S. dollar.

*Today’s PPI is focused on gauging the strength of the dollar.

Fundamental Overview

The eagerly awaited U.S. Retail Sales figures failed to sustain the positive sentiment generated by the robust Consumer Price Index (CPI) reading disclosed last Tuesday. Despite a drop in Initial Jobless Claims to 212k from the previous 220k, the Retail Sales figure disappointed at -0.8%, marking its lowest point since January 2023. This has heightened expectations for a potential rate cut by the Federal Reserve in May. Investors are closely scrutinising today’s Producer Price Index (PPI) reading to glean insights into the potential direction of the U.S. dollar.

In the realm of commodities, both gold and oil prices experienced a noteworthy upswing, attributed to the weakened dollar. However, the International Energy Agency’s forecast of slowing demand growth for crude oil this year introduces a potential impediment to further surges in oil prices.

Against the backdrop of mixed U.S. economic data, the discernible surge in risk appetite is evident, exemplified by the ongoing rallies in both U.S. equity markets and the Nikkei, the Japanese stock index.

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Current rate hike bets on 20th March Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (92%) VS -25 bps (8%)  

Economic Calendar

(MT4 System Time)

Source: MQL5  

Market Movements

DOLLAR_INDX, H4

The Dollar Index continued to retreat after the U.S. released mixed economic data but showed signs of recovery in Friday’s Asia market session. The U.S. retail sales number came short which hammering the dollar index to near $104 mark despite the Initial Jobless Claims data came better than market expectation. traders are keeping a close eye on today’s PPI reading to gauge the direction of the dollar. 

The Dollar Index has found support near the $104 mark and rebounded from such levels. The RSI is hovering near the 50 level while the MACD continue to diverge and is approaching the zero line from above, suggesting the bullish momentum is easing. 

Resistance level: 104.60, 105.70

Support level: 103.80, 103.00

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XAU/USD, H4

Gold prices underwent a notable rebound after a significant decline earlier in the week. This rebound can be attributed primarily to the softening of the U.S. dollar, a trend that ensued after the release of lacklustre Retail Sales numbers. The softer economic data has fueled expectations for an early rate cut by the Federal Reserve, thereby supporting the appeal of gold as a safe-haven asset. Furthermore, traders are closely monitoring developments in the Middle East tension as it could impact the strength of gold as a safe haven.

Gold prices form a morning-star candlestick pattern and suggest a potential trend reversal for gold. The RSI rose sharply to above 50 level while the MACD crossed at the bottom and is approaching the zero line, suggesting a bullish momentum is forming. 

Resistance level: 2020.20,  2050.80

Support level: 1992.80, 1968.30

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CL OIL, H4

Oil prices demonstrated a sharp rebound, registering a gain of nearly 1% in the last session and trading above its liquidity zone. This suggests that the bullish momentum remains intact for oil prices. However, despite these gains, there is a shadow cast on the oil market as the International Energy Agency (IEA) has trimmed its 2024 oil demand growth forecast. This adjustment in demand forecasts adds an element of caution to the outlook for oil prices, notwithstanding the efforts made by the OPEC+ alliance to manage production levels.

Oil prices rebounded sharply and are approaching their strong resistance level at 78.65. The RSI remain at the upper region while the MACD flowing above the zero line suggests the bullish momentum remains intact with oil prices. 

Resistance level: 78.65,  81.20

Support level:75.20, 71.35