Dollar Surges Amid Strong Inflation Report

* Driven by robust economic indicators, the Dollar Index surges, supported by better-than-expected economic performance, with January’s inflation exceeding expectations at 0.30% monthly and 3.10% year-on-year.

* Market sentiments indicate a shift in Federal Reserve policy expectations, with no March rate cut, less than a 50% chance in May, and an 80% probability for a potential cut in June.

Fundamental Overview

The Dollar Index hits a three-month high, driven by robust economic indicators, including strong job reports, GDP figures and US inflation. January’s inflation exceeds expectations at 0.30% monthly and 3.10% year-on-year, reinforcing the Dollar’s strength. 

Market expectations for Federal Reserve policy shift, with no March rate cut, less than a 50% chance in May, and an 80% probability for a June cut. 

The Dollar’s ascendancy prompts a significant downturn in gold prices, while oil remains resilient, supported by optimistic OPEC projections and geopolitical tensions. In equities, a sharp retreat follows bullish momentum, influenced by rising US Treasury yields and revised expectations of sustained higher interest rates from the Federal Reserve

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

Source: CME Fedwatch Tool

 bps (92%) VS -25 bps (8%) 

Economic Calendar

(MT4 System Time)

Source: MQL5  

Market Movements

DOLLAR_INDX, H4

The Dollar Index has aggressively climbed to a three-month high, propelled by better-than-expected economic indicators. Positive data, including an optimistic jobs report and GDP figures, contributed to a January inflation increase surpassing expectations. The US Consumer Price Index (CPI) rose by 0.30% monthly and 3.10% year-on-year, exceeding economist estimates. 

The Dollar Index is trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 67, suggesting the index might extend its gains since the RSI stays above the midline. 

Resistance level: 105.70, 107.05

Support level: 103.85, 103.10

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XAU/USD, H4

Gold prices experienced a significant tumble due to the strengthening US Dollar. The series of upbeat economic data, coupled with rising Treasury yields, has led market participants to anticipate a delay in Fed rate cut policies, influencing demand for the dollar-denominated gold.

Gold prices are trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum. However, RSI is at 24, suggesting the commodity might enter oversold territory. 

Resistance level: 2015.00, 2035.00

Support level: 1985.00, 1970.00

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CL OIL, H4

Oil prices maintained their bullish trajectory despite a stronger US Dollar. Ongoing geopolitical tensions and an optimistic demand outlook counterbalanced the impact of the dollar surge. OPEC’s positive outlook, expecting a 2.2 million barrel per day rise in crude oil demand for the year, contributes to a supportive oil market, while geopolitical concerns, including Gaza ceasefire talks, remain on the radar.

Oil prices are trading higher following the prior breakout above the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 67, suggesting the commodity might experience technical correction since the RSI retreated sharply from overbought territory.

Resistance level: 78.65,  81.20

Support level: 75.20, 71.35

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