Japanese Yen Weaken By BoJ Dovish Rate Hike

* The Japanese Yen plunged after the BoJ announced its first rate hike since 2007.

* All eyes will be on the FOMC interest rate decision due today.

* The Reserve Bank of Australia’s dovish tone after announcing its interest rate decision hammers the Australian dollar lower.

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Fundamental Overview

The Bank of Japan (BoJ) made a significant policy shift, marking its first rate hike since 2007 and ending its yield curve control (YCC) policy. Despite maintaining government bond purchases, this “dovish hike” weakened the Japanese Yen, making it the weakest among major currencies and driving it to its lowest level against the dollar since November.

Attention now turns to the Federal Open Market Committee (FOMC) and its upcoming interest rate decision. Market expectations lean towards a hawkish stance, particularly after last week’s higher-than-expected Producer Price Index (PPI) readings, indicating potential inflationary pressures.

In commodities, gold prices remain steady as investors await the FOMC’s decision. Oil prices are at recent highs, with investors also eyeing the Fed’s decision and the release of the weekly American Petroleum Institute (API) crude data later today.

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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

Amidst a yen selloff, investors turned to the safe-haven dollar, resulting in positive gains. As central bank decisions take center stage in currency markets, especially the Federal Reserve’s impending announcement, all eyes are on potential interest rate adjustments and monetary policy statements. Market expectations lean towards the Fed maintaining its current interest rate range of 5.25% to 5.50%, with close attention to the bank’s guidance for future actions.

The Dollar Index is currently trading higher after breaking above the previous resistance level. However, the MACD indicator shows diminishing bullish momentum, while the RSI stands at 72, indicating potential technical correction as it enters overbought territory.

Resistance level: 104.45, 104.95

Support level: 103.70, 103.05

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XAU/USD, H4

Better-than-expected inflation data from the US sparked expectations of a hawkish stance from the Federal Reserve in its upcoming interest rate decision. As a result, US Treasury yields rose alongside the dollar, leading to a selloff in non-yielding assets such as gold. However, gold prices may consolidate within a range ahead of significant events, prompting investors to stay vigilant for further trading signals, particularly from the Fed’s monetary policy decisions.

Gold prices are currently trading lower as they test the support level. The MACD indicator shows diminishing bullish momentum, while the RSI stands at 66, suggesting the commodity may extend its losses after breaking out, given the sharp retreat from overbought territory.

Resistance level: 2150.00, 2235.00

Support level: 2080.00, 2035.00

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CL OIL, H4

Crude oil prices continued their upward trajectory, surging to multi-month highs for the second consecutive session, driven by escalating geopolitical tensions. Recent attacks by Ukraine on Russian refineries heightened concerns over supply disruptions, particularly as the attacks targeted a significant portion of Russian refining capacity. This resulted in the shutdown of approximately 7% of daily refining output, amplifying fears of supply shortages and underlining the volatile nature of global oil markets.

Oil prices are currently trading higher as they test the resistance level. However, the MACD indicator shows diminishing bullish momentum, while the RSI stands at 67, suggesting the commodity may experience a technical correction given that the RSI has entered the overbought territory.

Resistance level: 82.85, 84.10

Support level: 80.20, 78.00