Dollar Retreats On Profit-Taking, Eyes On FOMC Minutes

* The dollar is trading sideways after mixed economic data, awaiting FOMC meeting minutes for a direction.

* Gold prices soared on a softening dollar and escalating geopolitical uncertainties.

*Oil Markets Navigate Tensions: Surge in Crude Prices Despite Cautious Demand Outlook.

Fundamental Overview

The US Dollar experiences a notable retreat as profit-taking activities take hold, reversing recent gains driven by optimistic economic data, which suggested a delay in Federal Reserve interest rate cuts. Despite this pullback, the dollar maintains overall resilience, supported by a robust labour market and stronger-than-expected economic growth.

In the commodities market, gold prices surge above $2,000 per troy ounce. This upswing is propelled by geopolitical uncertainties in the Middle East and increased buying from investors seeking bargains. Crude oil prices surge amid heightened tensions in the Middle East. However, this bullish momentum is tempered by a cautious demand outlook from the International Energy Agency.

China’s equity market anticipates post-Lunar New Year positivity, reflecting positive travel and tourism data that signals a short-term revival. Meanwhile, Investors are exercising vigilance, awaiting signals from upcoming Federal Reserve meeting minutes and Nvidia’s earnings report, which will likely provide crucial insights for further market direction.

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

Source: CME Fedwatch Tool

0 bps (92%) VS -25 bps (8%)  

Economic Calendar

(MT4 System Time)

Source: MQL5  

Market Movements

DOLLAR_INDX, H4

The US Dollar is currently undergoing a technical correction, retracting from recent significant gains as investors engage in profit-taking. This adjustment comes in the wake of better-than-expected US economic data, particularly higher producer prices, which has fueled expectations for a delayed interest rate cut by the Federal Reserve, possibly until mid-year. Despite this healthy retracement, the overall trend for the US Dollar remains robust, supported by a resilient labour market and stronger-than-expected economic growth.

The Dollar Index’s bullish momentum has eased but has found support at above the $104 trajectory. The RSI has been declining while the MACD has broken below the zero line, suggesting a bearish momentum may be forming. 

Resistance level: 104.60, 105.70

Support level: 103.80, 103.00

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XAU/USD, H4

Gold prices are continuing their upward trajectory, extending gains by breaking above the psychologically significant level of $2,000 level for the second consecutive session. The overall bullish momentum is buoyed by bargain buying from global investors, even in the face of a less optimistic outlook for the dollar-denominated gold. Geopolitical uncertainties in the Middle East are contributing to gold’s status as a safe-haven asset, further enhancing its appeal to investors. As a result, market participants are closely monitoring developments in the Middle East and the minutes of forthcoming Federal Reserve meetings for signals that could influence gold prices.

Gold prices had a strong technical rebound but currently face a strong resistance level at $2020 levels. The RSI has been moving upward while the MACD has crossed and is approaching the zero line, suggesting the bullish momentum is strong. 

Resistance level: 2020.20,  2050.80

Support level: 1992.80, 1968.30

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CL OIL, H4

Crude oil prices are continuing their upward trajectory, supported by heightened geopolitical tensions in the Middle East. Recent incidents in the Red Sea, such as a missile strike on an India-bound tanker from Yemen, contribute to the uncertainties surrounding oil supply routes in the region. However, despite the geopolitical concerns driving optimism in oil markets, there is a tempering effect on sentiment due to a pessimistic demand forecast from the International Energy Agency (IEA). The IEA has trimmed its 2024 growth outlook, citing the potential loss of momentum in global oil demand.

Oil prices are trading at their recent high levels but kept below its strong resistance level at $78.65. The RSI has been flowing at elevated levels, while the MACD hovering above the zero line suggests the bullish momentum remains strong. 

Resistance level: 78.65,  81.20

Support level:75.20, 71.35