Yen Flat, Focus Shift On Japan’s CPI

Fundamental Overview

The resilient U.S. stock markets, having achieved historic highs, took a breather last Friday, signaling a temporary pause in their upward momentum. Meanwhile, the dollar index has maintained a subdued trend in recent sessions, but this tranquility is expected to be disrupted in the upcoming week. All eyes are on the imminent release of the Federal Reserve’s preferred inflation gauge, the PCE reading, scheduled for Thursday. Furthermore, the week will feature appearances from various Fed officials, whose comments are anticipated to shed light on the central bank’s future monetary policy direction, influencing the strength of the dollar. 

In contrast, the Japanese Yen, which has experienced recent softening, faces challenges this week as the National Core CPI reading is set for release tomorrow. Market observers eagerly await this data, hoping for it to surpass market expectations and potentially bolster the weakened Yen. 

Shifting focus to commodities, gold prices have found support above the $2030 mark and continue to be responsive to changes in the dollar’s strength. On the flip side, oil prices saw a significant decline of over 2.20% last Friday, reflecting concerns about sluggish demand and an uptick in market supply.

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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 remains range bound as market participants anticipate a potential delay in Federal Reserve rate cut decisions. The recalibration of rate cut expectations, now at 80 basis points compared to earlier projections of 150 basis points for early 2024, follows strong economic indicators, including the Consumer Prices Index (CPI), Producer Prices Index (PPI), and employment reports. 

The Dollar Index is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 48, suggesting the index might extend its gains since the RSI rebounded sharply from oversold territory. 

Resistance level: 104.60, 105.70

Support level: 103.85, 103.05

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XAU/USD, H4

Gold prices experience a slight retreat in early Asian trading, influenced by climbing US Treasury yields and the expectation of delayed Fed rate cuts. Uncertainties surrounding the Fed’s interest rate timeline prompt a wait-and-see approach, with investors closely monitoring the Core Personal Consumption Expenditures Price Index (PCE) on Thursday for potential trading signals. Despite the pressure, gold finds support from rising Middle East tensions, mitigating potential losses in the precious metal market.

Gold prices are trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 58, suggesting the commodity might extend its losses since the RSI retreated sharply from overbought territory.

Resistance level: 2035.00, 2060.00

Support level: 2015.00, 1985.0

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CL OIL, H4

Oil prices retreat from a formidable resistance level, registering a weekly decline, as indications from US central bank policymakers suggest potential delays in interest rate cuts. Fed Governor Christopher Waller’s remarks emphasise a possible postponement by at least two more months. The tightening monetary policy outlook impacts economic growth, affecting the appeal of the black commodity. Investors keenly await China’s PMI data to gauge the effectiveness of economic recovery measures, as China plays a pivotal role as a major global oil importer.

Oil prices are trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 38, suggesting the commodity might extend its losses toward support level. 

Resistance level: 78.65, 81.20

Support level: 75.20, 71.35