Dollar Rebounds Over Inflationary Pressures

* Dollar Index Surges on Inflation Data, Treasury Yields Rebound

* Crude Oil Prices Extend Gains on Supply Deficit Projection

* Gold Prices Consolidate Amid Profit-Taking, Fed Rate Expectations

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Fundamental Overview

Amidst a flurry of economic data releases and speculation, the Dollar Index surged, propelled by stronger-than-expected inflation figures. The robust data fueled expectations of imminent interest rate hikes, subsequently bolstering US Treasury yields. In parallel, crude oil prices sustained their upward trajectory, supported by the International Energy Agency’s forecast of a supply deficit for 2024. This projection, driven by improved economic performance and growing global demand, underpinned the continued momentum in oil markets.

In contrast, gold prices experienced losses and underwent consolidation near support levels. This downturn was attributed to profit-taking strategies among investors awaiting further market catalysts. Concurrently, US equity markets faced retreats amid surging bond yields, driven by mounting concerns over inflation. The shifting focus to the Japanese yen garnered attention, with speculation swirling around potential policy shifts by the Bank of Japan. Anticipation grew for a potential rate hike in April, adding an additional layer of complexity to global financial markets.

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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 

Economic Calendar

(MT4 System Time)

N/A

Source: MQL5 

Market Movements

DOLLAR_INDX, H4

The Dollar Index, which gauges the performance of the US dollar against a basket of major currencies, saw a notable rebound driven by upbeat inflation data. According to recent data from the US Bureau of Labor Statistics, the Producer Price Index (PPI) for the previous month witnessed a significant uptick from 0.30% to 0.60%, surpassing market projections. Additionally, the Department of Labor’s report on Initial Jobless Claims revealed a figure of 209K, outperforming the anticipated 218K, indicating ongoing strength in the labor market.

The Dollar Index has shown an upward trend since breaking above the previous resistance level. The Moving Average Convergence Divergence (MACD) indicator has depicted increasing bullish momentum. However, the Relative Strength Index (RSI) currently stands at 70, suggesting a potential entry into overbought territory. 

Resistance level: 103.75, 104.50

Support level:103.05, 102.40

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XAU/USD, H4

Gold prices have encountered a setback, retracing from their recent record highs as investors engaged in profit-taking maneuvers and awaited further market catalysts. The decision to book profits comes amidst improved inflation data, which has heightened expectations for the Federal Reserve to postpone any potential rate cut policies. This anticipation, in turn, could impact non-yielding commodities like gold, prompting investors to reassess their positions.

Currently, gold prices are trading lower following the retracement from the resistance level. The Moving Average Convergence Divergence (MACD) indicator indicates diminishing bullish momentum, suggesting a potential shift in sentiment. Meanwhile, the Relative Strength Index (RSI) stands at 71, indicating a possibility of entering overbought territory. 

Resistance level: 2175.00, 2265.00

Support level: 2100.00, 2050.00

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CL OIL, H4

Crude oil prices have maintained their upward momentum, buoyed by bullish forecasts from the International Energy Agency (IEA) projecting a supply deficit for the year 2024. The IEA’s outlook highlights factors such as improved economic performance, particularly in the United States, and increased bunkering activity, contributing to a stronger-than-expected rise in global oil demand. Additionally, expectations of a decline in world oil production due to weather-related shut-ins and ongoing OPEC+ curbs further bolstered market sentiment.

Currently, oil prices are trading higher as they test the resistance level. However, there are indications of diminishing bullish momentum, as reflected by the Moving Average Convergence Divergence (MACD) indicator. Furthermore, the Relative Strength Index (RSI) stands at 70, signalling that the commodity may be entering overbought territory, potentially prompting a technical correction in the near term. 

Resistance level: 81.20, 85.45

Support level: 78.45, 75.80

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