Dollar Spurs By Upbeat NFP

* Last Friday, NFP came strong, bolstering the U.S. dollar.

* The Japanese wage growth slide led the yen trade to a critical level against the dollar.

* Oil prices decline as the Middle East tension eases.

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Fundamental Overview

The U.S. labor market’s vigorous expansion, with the Non-Farm Payroll (NFP) report disclosing an impressive 303,000 job additions that exceeded both previous results and projections, accentuated the U.S. economy’s resilience and amplified concerns over enduring high inflation. Consequently, the Dollar Index (DXY) experienced a resurgence as forecasts about the Federal Reserve’s proclivity for sustaining high-interest rates for a prolonged duration gained traction. This economic buoyancy was mirrored in the U.S. stock market, with all major indexes marking advances at Friday’s close.

Globally, financial markets are now setting their sights on New Zealand, where the Reserve Bank of New Zealand (RBNZ) is slated to make its interest rate decision on Wednesday. The prevailing market sentiment suggests that the RBNZ will hold the official cash rate steady at 5.5%, tempering earlier speculations of a potential rate decrease.

In the realm of commodities, gold reached a new peak before witnessing a pullback amid a reduction in Middle Eastern geopolitical tensions. Meanwhile, the onset of the week saw oil prices dropping more than 1% following news of an Israeli military downsizing in the Gaza Strip, indicating a partial troop withdrawal.

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Current rate hike bets on 1st May Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (85.5%) VS -25 bps (14.5%)  

Market Overview

Economic Calendar

N/A

Market Movements

DOLLAR_INDX, H4

The Dollar Index displayed strong bullish momentum, driven by the impressive US Nonfarm Payrolls report released by the Bureau of Labor Statistics. Nonfarm Payrolls surpassed expectations, surging to 303K from the previous 270K, well above projections of 212K. Simultaneously, the US Unemployment Rate posted a favorable figure of 3.80%, surpassing forecasts of 3.90%. This resulted in a swift shift in market sentiment, with the CME FedWatch Tool indicating reduced expectations of rate cuts in June, plunging to 54.5%. The heightened confidence in the US economy fueled demand for the greenback, further supported by a surge in US Treasury yields.

Currently, the Dollar Index is trading higher after rebounding from the support level. The Moving Average Convergence Divergence (MACD) has demonstrated increasing bullish momentum, while the Relative Strength Index (RSI) is at 51, indicating the possibility of the index extending its gains since the RSI rebounded sharply from oversold territory

Resistance level: 104.60, 104.95

Support level:104.00, 103.65

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XAU/USD, H4

Gold prices witnessed a significant decline as investors redirected their investments towards the US Dollar following the positive jobs report, which diminished expectations of Federal Reserve rate cuts. The strengthened dollar diminished the attractiveness of the precious metal, leading to downward pressure on prices. However, persistent uncertainties prompted some investors to seek shelter in gold, mitigating the losses. The focus now shifts to the upcoming release of March’s consumer price inflation figures, with analysts anticipating a modest decrease in core inflation to 3.70% year-over-year.

Currently, gold prices are trading lower while testing the support level. The Moving Average Convergence Divergence (MACD) has indicated increasing bearish momentum, while the Relative Strength Index (RSI) is at 51, suggesting that the commodity might extend its losses following the breakout since the RSI retreated sharply from overbought territory.

Resistance level: 2325.00, 2350.00

Support level: 230500, 2295.00

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CL OIL, H4

Initially, oil prices surged on the back of heightened geopolitical tensions in the Middle East and concerns over supply constraints, coupled with optimistic demand forecasts. Escalating conflict between Iran and Israel raised apprehensions of potential supply disruptions, bolstering oil prices. However, gains were short-lived as the resurgent US Dollar dampened demand for the dollar-denominated commodity, causing prices to retreat. Market focus remains on geopolitical developments and their impact on global supply dynamics.

Currently, oil prices are trading lower following the retracement from the resistance level. The Moving Average Convergence Divergence (MACD) has indicated increasing bearish momentum, while the Relative Strength Index (RSI) is at 45, suggesting that the commodity might extend its losses since the RSI breakout below the midline.

Resistance level: 85.75, 87.90

Support level: 83.05, 80.20