Yen Strengthen Ahead Of BoJ Interest Rate Decision

* The Euro’s CPI that is due today may be a catalyst for the euro.

* All eyes will be on the BoJ interest rate decision, expecting a first-ever rate hike from BoJ in decades.

* Gold prices continue to slide after trading to its all-time high.

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Fundamental Overview

The financial markets are entering a week of heightened anticipation as central banks, including the Bank of Japan (BoJ), the Federal Reserve (Fed), and the Bank of England (BoE), prepare to announce their monetary policy decisions. Of particular interest is the BoJ’s meeting, where speculation is rife regarding the potential for the first rate hike in decades. This anticipation has led to significant adjustments in trader positions, resulting in the Japanese Yen exhibiting notable strength against the dollar in recent sessions, despite the dollar’s recent gains spurred by robust inflation data released last week.

In the U.S., equity markets have displayed a subdued tone in the last session as investors eagerly await upcoming monetary policy cues from the Federal Open Market Committee (FOMC) statement scheduled for release this Wednesday. Meanwhile, in the commodities market, gold prices have experienced a slight retracement from their recent bullish momentum and are currently seeking support above the $2150 levels. Conversely, oil prices have shown resilience, inching closer to the $82 mark amid tightening oil supplies and persistent geopolitical risks.

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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)

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