Dovish Fed Bolsters Gold To All-Time High

* The Dollar plunged on poor economic data, Unemployment rate and Average Hourly Earnings both came short, while Nonfarm Payrolls beat market expectations.

* Gold prices reach new highs driven by a pessimistic US economic outlook, upcoming US inflation report is highly anticipated.

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Fundamental Overview

The US Dollar faces challenges as key employment indicators present a mixed picture, with a disappointing unemployment rate and hourly earnings figures contrasting with a robust non-farm payroll report. The US Unemployment rate and Average Hourly Earnings came in at 3.90% and 0.10%, respectively, both worse than the expected 3.70% and 0.2%. However, the US Nonfarm Payrolls showed significant improvement, rising from 229K to 275K, surpassing the market expectations of 198K. Gold prices are on the rise due to a weakening dollar and expectations of Fed interest rate cuts. Meanwhile, Crude oil experiences a slight dip amid concerns over soft Chinese demand and a conservative economic growth target, with attention shifting to potential rate cuts by major central banks to stimulate oil demand and foster economic growth.

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

Source: CME Fedwatch Tool

0 bps (95%) VS -25 bps (5%)  

Market Overview

(MT4 System Time)

Source: MQL5 

Market Movements

DOLLAR_INDX, H4

The US Dollar grapples with losses as key employment indicators present a mixed picture. The disappointing unemployment rate and hourly earnings figures contrast with a robust non-farm payroll report, leaving the greenback in a delicate position. Bloomberg reports reveal that Federal Reserve Chair Jerome Powell and colleagues are moving closer to revising their inflation strategy. Powell emphasises the need for “just a bit more evidence” before considering a shift in the central bank’s approach. 

The Dollar Index is trading lower following the prior breakout below the previous support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 28, suggesting the index might enter oversold territory.

Resistance levels: 103.70, 104.50

Support levels: 102.10, 101.35

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XAU/USD, H4

Gold prices enjoy continued gains, propelled by a weakening US Dollar. A series of lackluster US economic data, coupled with dovish statements from the Federal Reserve, diminish the appeal of the greenback. The focus shifts to forthcoming inflation reports, where a continued decline in US inflation may heighten expectations for Fed interest rate cuts, further supporting gold market demand.

Gold prices are trading higher following the prior breakout above the previous resistance level. The Moving Average Convergence Divergence (MACD) has illustrated increasing bullish momentum. However, the Relative Strength Index (RSI) is at 85, suggesting the commodity might enter overbought territory.

Resistance levels: 2235.00, 2350.00

Support levels: 2150.00, 2080.00

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CL OIL, H4

Crude oil prices experience a slight dip as apprehensions persist over soft Chinese demand. Despite OPEC+ extending supply cuts, China’s conservative economic growth target of around 5% for 2024 raises concerns. Analysts emphasize the challenging outlook without additional stimulus measures. Attention shifts to major central banks’ potential rate cuts, including the Federal Reserve and the ECB, as lower rates could stimulate oil demand by fostering economic growth.

Oil prices are trading lower following the prior breakout below the previous support level. The Moving Average Convergence Divergence (MACD) has illustrated increasing bearish momentum, while the Relative Strength Index (RSI) is at 38, suggesting the commodity might extend its losses since the RSI stays below the midline.

Resistance levels: 78.00, 80.20

Support levels: 75.95, 73.45

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