Upbeat Economic Data Spurs Dollar

* Robust U.S. job data and PMI readings bolster the dollar to rebound.

* Dovish Expectations on BoE exerted pressure on the Pound Sterling.

* Gold prices eased by more than 1% amid the dollar strengthening.

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Fundamental Overview

Yesterday saw a notable rally in the dollar index (DXY), reversing the losses from the previous session and positioning the dollar to surpass its previous resistance level at $104.15. This resurgence was supported by positive economic indicators, including strong job market data and PMI figures that surpassed expectations. The sustained strength of the U.S. economy may prompt the Federal Reserve to reconsider its planned rate reduction strategy for 2024.

Meanwhile, the Bank of England (BoE) adhered to market expectations by maintaining its current interest rate stance. However, with the UK’s CPI decelerating more than anticipated, the central bank appears inclined towards a more dovish approach to monetary policy. This shift was underscored by a pivot towards dovishness from two previously hawkish officials.

The recalibration of expectations surrounding the Fed’s monetary policy has bolstered the dollar significantly. However, this strength in the dollar has exerted notable pressure on commodity markets. Gold prices retreated by nearly 1.50%, while oil prices experienced three consecutive days of declines, directly influenced by the robust performance of the dollar.

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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%)  

Market Overview

(MT4 System Time)

Source: MQL5 

Economic Calendar

(MT4 System Time)

Source: MQL5 

Market Movements

DOLLAR_INDX, H4

The Dollar Index, which tracks the greenback against a basket of major currencies, surged following the release of better-than-expected US economic data, boosting confidence in the Federal Reserve’s positive outlook. With US Initial Jobless Claims declining to 210,000, surpassing expectations, and Fed Chair Jerome Powell reaffirming the strength of the labor market, investor sentiment leaned towards the US Dollar. Additionally, rising US Treasury bond yields further bolstered the Dollar’s upward trajectory, signaling increased market confidence in the US economic outlook.

Currently, the Dollar Index is trading higher and testing the resistance level. The MACD indicator has shown increasing bullish momentum, while the RSI stands at 62, indicating that the index may extend its gains after the breakout, particularly since the RSI remains above the midline.

Resistance level: 104.00, 104.50

Support level: 103.20, 102.55

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XAU/USD, H4

Gold prices retreated from record highs as the US Dollar and US Treasury yields surged, driven by positive economic data releases and the Federal Reserve’s optimistic outlook. Despite the Fed’s upward revisions for GDP and the Core Personal Consumption Expenditure Price Index (PCE) for 2024, which bolstered the US Dollar, gold’s decline was cushioned by ongoing geopolitical tensions and persistent safe-haven demand.

Currently, gold prices are trading lower following the prior retracement from the resistance level. The MACD indicator has shown diminishing bullish momentum, while the RSI stands at 56, suggesting that the commodity may extend its losses, particularly since the RSI has retreated sharply from overbought territory.

Resistance level: 2240.00, 2315.00

Support level: 2185.00, 2150.00

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CL OIL, H4

Crude oil prices encountered downward pressure amidst weaker US gasoline demand data and reports of a United Nations draft resolution advocating for a ceasefire in Gaza. The latter development alleviated concerns regarding potential supply disruptions. Despite an unexpected decline in US crude inventories reported by the Energy Information Administration (EIA), gasoline product demand dipped below 9 million barrels, contributing to the prevailing bearish sentiment in the oil market. Geopolitical tensions further weighed on oil prices, as the US initiated a UN resolution aimed at facilitating a ceasefire, thereby tempering market apprehensions.

Currently, oil prices are trading lower while testing the support level. The MACD indicator has displayed increasing bearish momentum, while the RSI stands at 45, suggesting that the commodity may extend its losses, particularly since the RSI remains below the midline.

Resistance level: 82.75, 85.45

Support level: 80.45, 78.45

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