Dovish Powell’s Testimony Hammers Dollar

* The dollar index traded to its one-month low after a Dovish Testimony by Jerome Powell.

* The soft dollar has pushed the gold to break its all-time high levels with strong bullish momentum in sight.

* BTC rebounded and is back to $67000 territory.

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Fundamental Overview

The Powell testimony that began yesterday brought an unexpected statement from the Fed’s chief, putting pressure on the dollar. Powell signalled the likelihood of the U.S. central bank cutting rates this year, although without specifying when and by how much. Consequently, the dollar index plummeted nearly 0.5%, reaching its lowest levels in a month. This shift in the currency market influenced commodities positively, with gold prices hitting an all-time high above $2150, while oil prices rebounded, supported by favorable U.S. crude oil data as well. Additionally, insight from the largest Japanese bank, positioning itself for a potential BoJ monetary policy shift in March, led to a robust Japanese Yen, resulting in a nearly 0.8% drop in the USD/JPY pair.

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

Source: CME Fedwatch Tool

0 bps (95%) VS -25 bps (5%) 

Economic Calendar

(MT4 System Time)

Source: MQL5 

Market Movements

DOLLAR_INDX, H4

The Dollar Index has descended to its lowest point in a month, currently trading below 103.50 levels. The dollar faced significant downward pressure primarily due to the dovish stance communicated in Powell’s testimony that began yesterday. Powell indicated an expectation that the U.S. central bank will initiate rate cuts this year. Traders are closely monitoring the upcoming Non-Farm Payrolls (NFP) report scheduled for Friday, as it may offer insights into the potential timing of the Federal Reserve’s rate-cutting actions.

The dollar index traded eased from its crucial liquidity zone and plunged to its one-month high, suggesting a bearish bias for the dollar. The Relative Strength Index (RSI) is on the brink of breaking into the oversold zone, while the Moving Average Convergence Divergence (MACD) continues to decline and diverge, suggesting that bearish momentum is gaining.

Resistance levels: 103.70, 104.50

Support levels: 102.90, 102.00

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XAU/USD, H4

Gold prices have surged to their all-time high levels and are currently testing the possibility of breaking above this threshold. The bullish momentum observed in gold throughout March can be attributed to the market sentiment indicating that the Federal Reserve may be considering a pivot from its current monetary policy. Simultaneously, the Bank of Japan (BoJ) is also potentially contemplating a shift in its monetary policy, raising concerns about a reduction in global liquidity. In such an environment, gold emerges as a favored safe-haven asset for investors looking to position themselves amidst uncertainties in central bank policies.

Gold prices have risen and are attempting to break beyond their all-time highs. The Relative Strength Index (RSI) remains flowing in the overbought zone, while the Moving Average Convergence Divergence (MACD) remains at an elevated level, suggesting that the bullish momentum remains strong.

Resistance levels: 2155.00, 2170.00

Support levels: 2140.00, 2117.90

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CL OIL, H4

Oil prices have rebounded from their liquidity zone and maintained their previous high levels, forming a double top price pattern. The dovish stance from the Fed’s testimony has provided support for higher oil prices. Additionally, the weekly U.S. oil reports falling short of expectations suggest an improvement in oil demand in the U.S., contributing to the positive momentum in the oil market.

Oil prices have rebounded but formed a double-top price pattern, suggesting a potential trend reversal for oil prices. The Relative Strength Index (RSI) has been flowing in the upper territory while the Moving Average Convergence Divergence (MACD) hovering close to the zero line suggests the oil prices remain trading with bullish momentum.

Resistance levels: 81.20, 84.10

Support levels: 78.65, 75.20

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