Dollar Fuels by U.S. PCE Reading

* U.S. PCE reading meets market expectations; hope for a June rate cut is fading.

*Gold prices trade to their one-month high on the last day of February.

*Upbeat Chinese PMI readings boost oil prices and Chinese proxy currencies, such as the Australian dollar.

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Fundamental Overview

The highly anticipated U.S. Personal Consumption Expenditures (PCE) reading, a key inflation indicator favored by the Federal Reserve, was unveiled yesterday, aligning with market expectations at 2.4%. As markets await commentary from Federal Reserve officials on the PCE inflation data, gold prices have surged, reaching their peak for February. The initial boost observed in the U.S. dollar post-PCE reading has retraced. U.S. equity markets are grappling with uncertainty as they assimilate the latest inflation figures, with a perceived reduction in the probability of a June interest rate cut by the Fed. Conversely, the Japanese Yen faced a downturn after Bank of Japan (BoJ) Governor Kazuo Ueda indicated that the country is not yet ready to raise interest rates until a sustainable and stable inflation target is attained. In the oil sector, OPEC+ is slated to make a decision early this month on whether to extend supply cuts into the next quarter, while oil prices are currently hovering at their highest levels in February.

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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 holds a stable position as the US Core PCE Price Index records a decline to 2.4% on a yearly basis in January, aligning with market expectations. Despite the decrease, the influence on the Dollar’s performance against other currencies remains limited, with focus shifting to supplementary economic indicators, including disappointing Initial Jobless Claims and Chicago PMI figures.

Currently, the Dollar Index is trading higher, having rebounded from the support level. Notably, the Moving Average Convergence Divergence (MACD) signals increasing bullish momentum, and the Relative Strength Index (RSI) is at 61. This suggests the possibility of the index extending its gains, particularly as the RSI remains above the midline.

Resistance level: 104.50, 104.95

Support level: 103.70, 102.90

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XAU/USD, H4

Gold prices have staged a rebound as disappointing US economic data prompts investors to seek refuge in dollar-denominated gold. The focus has shifted from subdued US inflation expectations to escalating geopolitical tensions in the Middle East, reigniting the safe-haven appeal of the precious metal. 

At present, gold prices are trading higher, having broken out above the resistance level. Notably, the Moving Average Convergence Divergence (MACD) indicates increasing bullish momentum, and the Relative Strength Index (RSI) is at 60. This suggests the possibility of the commodity extending its gains, particularly as the RSI remains above the midline.

Resistance level: 2035.00, 2060.00

Support level: 2015.00, 1985.00

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CL OIL, H4

Oil prices encounter resistance and struggle to surpass crucial levels, hampered by a scarcity of market catalysts amidst global economic uncertainties. Downbeat economic data from both the US and Eurozone further contribute to a subdued global economic outlook. Additionally, Eurozone inflation experiences a dip, intensifying the prevailing uncertainties in the oil market.

At present, oil prices are trading lower, having retraced from the resistance level. Notably, the Moving Average Convergence Divergence (MACD) signals diminishing bullish momentum, and the Relative Strength Index (RSI) stands at 52. This suggests the possibility of the commodity extending its losses, especially as the RSI has sharply retreated from overbought territory.

Resistance level: 78.65, 81.20

Support level: 75.20, 71.35