Yen Buoys By Upbeat CPI Reading

Fundamental Overview

The momentum behind the rally in U.S. equity markets is showing signs of moderation, with indices trading relatively flat as investors await the forthcoming U.S. Personal Consumption Expenditures (PCE) data. This key inflation indicator is critically observed for insights into the Federal Reserve’s future monetary policy moves, significantly influencing market risk appetite. Meanwhile, U.S. long-term Treasury yields have stabilised around the 4.3% level, reflecting a cautious stance among bond traders. Similarly, the Dollar Index (DXY) is experiencing subdued activity as market participants adjust their positions in anticipation of the PCE data release on Thursday.

In international markets, Japan’s latest Core Consumer Price Index (CPI) data, reporting a 2% increase, surpassed expectations and lent support to the Japanese Yen, bolstering its value against other major currencies. This uptick in inflation could prompt speculation about potential monetary policy adjustments by the Bank of Japan.

In the cryptocurrency sphere, Bitcoin (BTC) has surged to its highest level in two years, crossing the $56,000 mark. This rally was sparked by news that MicroStrategy, a prominent software company, has expanded its Bitcoin holdings by an additional 3,000 units. This significant purchase has fueled bullish sentiment in the cryptocurrency market, attracting increased buying interest in Bitcoin.

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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 Dollar Index faces headwinds, experiencing a bearish trend due to lacklustre economic data, notably the disappointing US New Home Sales figure of 661K, falling short of the expected 680K. This unexpected result raises concerns among investors. Eyes are now keenly set on crucial economic indicators, with January’s release of the Personal Consumption Expenditures Price Index (PCE) taking centre stage as a critical metric for the Federal Reserve. The impending unveiling of US GDP data later in the week adds a layer of complexity to the evolving market narrative.

The Dollar Index is currently trading lower, testing a key support level. The Moving Average Convergence Divergence (MACD) indicates an increasing bearish momentum, while the Relative Strength Index (RSI) stands at 43, suggesting a likelihood of further losses, particularly after the RSI breached below the midline.

Resistance level: 104.50, 104.95

Support level: 103.85, 103.05

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XAU/USD, H4

Gold prices have seen a modest uptick, benefiting from a softening US Dollar following disappointing home sales figures. This positive shift offers a glimmer of optimism, yet the short-term outlook for gold remains uncertain. Investors are treading carefully, with their attention riveted on forthcoming pivotal US economic data releases, including the GDP and Core PCE report, to gauge future market directions.

Gold is currently trading higher, touching upon a critical resistance level. The Moving Average Convergence Divergence (MACD) shows a reduction in bearish momentum, while the Relative Strength Index (RSI) at 56 indicates potential for further gains, especially as the RSI remains above the neutral 50 mark, suggesting that gold prices may continue to climb if they successfully breach the current resistance level.

Resistance level: 2035.00, 2060.00

Support level: 2015.00, 1985.0

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CL OIL, H4

Oil prices have experienced a significant rebound, propelled by ongoing shipping disruptions, particularly in the Red Sea due to the actions of Iran-aligned Houthi rebels. The geopolitical strife in the Middle East continues to stoke concerns, casting a shadow of volatility over the oil markets. Despite efforts toward ceasefire talks, the absence of meaningful progress exacerbates fears of potential supply chain disruptions, exerting upward pressure on oil prices.

From a technical analysis perspective, oil is currently trading higher, having recently bounced back from a critical support level. The Moving Average Convergence Divergence (MACD) indicates a strengthening in bullish momentum, while the Relative Strength Index (RSI) at 53 suggests that oil prices may continue their upward trajectory following the breakout, as the RSI remains above the neutral threshold.

Resistance level: 78.65, 81.20

Support level: 75.20, 71.35