Eye On Today’s BoE’s Interest Rate Decision

* U.S. treasury yield rebounded from its lowest level in 2024, which may catalyse the dollar.

* Jerome Powell rules out near-term rate cuts rock the boat in the equity markets.

* Poor Euro’s economic data, including German CPI and German retail sales, weigh down the Euro’s strength.

Fundamental Overview

The Federal Reserve’s recent interest rate decision, in line with market expectations, revealed a nuanced approach to monetary policy. Chair Jerome Powell’s post-decision statements conveyed a measured stance, emphasising a cautious approach to potential rate cuts in the near term. Powell highlighted the need for additional data to instil confidence in any significant policy shifts. While the dollar stabilised around the 103.50 level, the equity market experienced a substantial downturn in response to the Fed’s unexpectedly hawkish tone. The Nasdaq, in particular, faced a decline exceeding 300 points.

Within the commodities sector, both gold and oil prices encountered negative implications due to the Federal Reserve’s more hawkish posture. Oil prices, in addition to grappling with the impact of the Fed’s stance, also contended with a dim outlook for demand.

Looking ahead, all eyes are on the Bank of England’s imminent interest rate decision, poised to be announced today. Anticipated to exert a direct influence on the strength of the Pound Sterling, this decision adds an additional layer of significance to the evolving financial landscape.

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

Source: CME Fedwatch Tool

0 bps (65%) VS -25 bps (35%)   

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Economic Calendar

(MT4 System Time)

Source: MQL5  

Market Movements

DOLLAR_INDX, H4

The U.S. dollar continues to consolidate within a price range after experiencing wide fluctuations yesterday. On one hand, the drop in U.S. Treasury yields to below 4% is putting pressure on the dollar’s strength. On the other hand, the hawkish statement made by the Federal Reserve is contributing to the dollar’s strength. All eyes will be on Friday’s Non-Farm Payrolls (NFP) report to gain insights into the upcoming movement of the dollar. The conflicting factors are keeping the market watchful for further developments.

The Dollar Index’s latest candlestick suggests a bearish bias with a solid bearish candlestick attempt to break below its near support level. The RSI has been easing and flowing below the 50 level while the MACD is on the brink of breaking below the zero line suggesting a bearish momentum might be forming. 

Resistance level: 103.90, 104.65

Support level: 103.15, 102.20

GOLD，H4

Gold prices experienced a sharp decline as the strength of the dollar was bolstered by the hawkish statement made by the Fed’s chair. The precious metal faced rejection at the robust resistance level around $2050, all while geopolitical tensions in the Middle East heightened. The combined impact of a strengthening dollar and the resistance at a key level contributed to the pronounced downturn in gold prices.

Gold prices plunged with a solid bearish candlestick but quickly erased the losses amid heightened tension in the Middle East. The RSI remains elevated and is breaking into the overbought zone. Meanwhile, the MACD continues to flow higher, suggesting the bullish momentum remains strong.

Resistance level: 2050.00, 2069.00

Support level: 2035.00,  2020.50

CL OIL, H4

Crude oil prices declined by more than 2.5% on the first day of February, following its first monthly gain since last September. The unexpected build-up in U.S. crude oil inventories, as indicated by the weekly data, exerted pressure on oil prices. Compounding the situation, the hawkish statement made by the Fed after the interest rate decision further impeded the bullish trend in oil prices. These factors collectively contributed to the decline observed in crude oil prices.

Oil prices continue to slide after trading to its highest level since December and has formed a lower high price pattern. The RSI declined sharply while the MACD is on the brink of breaking below the zero line, suggesting a bearish momentum is forming. 

Resistance level: 78.65, 81.20

Support level: 72.00, 70.30