Dollar Gains on Hawkish Fed Outlook

• DXY edged higher after the market digested the Hawkish statement made by Jerome Powell on Wednesday. 
• BoJ’s interest rate decision is due today and may directly impact the Yen. 
• BTC faces strong selling pressure as BTC miners offload BTC due to low revenue and high costs.

Market Summary

After digesting Jerome Powell's comments following the FOMC interest rate decision on Wednesday, the dollar erased all its losses from the soft CPI reading, continuing its upward trajectory. The hawkish outlook from the Fed stimulated dollar strength against its peers, while the bullish momentum in equity markets was hindered by the prospect of prolonged high interest rates.

Meanwhile, all eyes are on today's Bank of Japan (BoJ) interest rate decision. The Japanese yen remains lacklustre among its peers, with the market cautious about potential intervention from Japanese authorities as the yen enters critical territory.

In the crypto realm, Bitcoin (BTC) is under strong selling pressure, particularly in the post-halving period. Miners face high costs and low revenue, triggering a selling sentiment. However, a bullish catalyst may emerge as MicroStrategy, an American listed company, reportedly plans to raise another $500 million to buy more BTC, potentially providing support for BTC in the near term.

Current rate hike bets on 12nd June Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (99.4%) VS -25 bps (0.6%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index, which tracks the greenback against a basket of six major currencies, rebounded slightly due to technical correction and dip-buying. However, the long-term outlook for the US Dollar remains uncertain, given the downbeat US economic indicators and the possibility of rate cuts in 2024. The US Department of Labor reported Initial Jobless Claims at 242K, worse than the expected 225K. Additionally, the Producer Price Index (PPI) fell significantly from 0.50% to -0.20%, below the expected 0.10%. These disappointing economic data points have raised investor concerns, complicating the trend for the US Dollar.

The Dollar Index is trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 59, suggesting the dollar might extend its gains since the RSI stays above the midline.

Resistance level: 105.65, 106.35

Support level: 105.15, 104.45

XAU/USD, H4

Gold prices retreated and continue to consolidate amid mixed market sentiment. On the bullish side, potential downbeat economic performance from the US and expectations of Fed rate cuts are likely to support gold prices. However, the recent rebound in the Dollar has sparked some selloff in dollar-denominated gold. The overall trend for gold remains flat as investors await further economic data and monetary policy decisions to gauge future movements.

Gold prices are trading lower while currently near the support level. MACD has illustrated increasing bearish momentum, while RSI is at 41, suggesting the commodity might extend its losses after breakout since the RSI stays below the midline. 

Resistance level: 2330.00, 2360.00

Support level: 2295.00, 2265.00

GBP/USD，H4

The GBP/USD pair experienced a sharp decline after reaching its recent high of 1.2850, primarily influenced by factors affecting the U.S. dollar. The Pound Sterling, lacking a significant catalyst, has been overshadowed by the strengthening dollar. This dollar strength was reinforced as the market digested Federal Reserve Chair Jerome Powell's speech last Wednesday, which suggested that only one interest rate cut is likely this year. As a result, the Pound Sterling traders are now focusing on next week's UK CPI data and the Bank of England's interest rate decision to gauge the currency's strength.

The GBP/USD pair was rejected at the 1.2850 level and declined but is currently supported at its previous resistance level, near 1.2760. The RSI's decline from the overbought zone, while the MACD has crossed and is moving toward the zero line from above, suggests the bullish momentum has eased.

Resistance level: 1.2850, 1.2940

Support level: 1.2660, 1.2600

EUR/USD，H4

The EUR/USD pair has erased its previous gains and dropped to its recent low of 1.0730. Not only facing headwinds from French political uncertainty, the pair is under significant pressure due to the disparity in monetary policies between the European Central Bank (ECB) and the Federal Reserve (Fed). While the ECB has initiated its monetary easing policy, the Fed remains concerned about a potential resurgence of inflation in the U.S. and will maintain its current monetary tightening stance. This divergence continues to exert downward pressure on the euro against the dollar.

EUR/USD pairs dropped to their support level at 1.0730, followed by a technical rebound. The RSI is once again approaching the oversold zone, while the MACD failed to break above the zero line, suggesting a lack of bullish momentum for the pair. 

Resistance level:  1.0805, 1.0864

Support level: 1.0730, 1.0660

Nasdaq，H4

The US equity market continues to hover around record highs, driven by the enthusiasm for Artificial Intelligence. Tech stocks such as Apple, Oracle, and Broadcom have surged aggressively as investor confidence in AI and tech remains strong. The recent downbeat US inflation report could provide the Fed with more room to ease monetary policy, potentially boosting the equity market further.

Nasdaq is trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum. However, RSI is at 77, suggesting the index might experience technical correction since the RSI entered overbought territory.

Resistance level: 19790.00, 20000.00

Support level: 19205.00, 18745.00

USD/JPY, H4

The USD/JPY pair has once again reached its critical level at 157.00 and is currently facing strong selling pressure. A break above this level would suggest a solid bullish signal for the pair. The Bank of Japan's (BoJ) interest rate decision is due later today, with the market widely expecting that the BoJ will maintain its current interest rate level unchanged. However, Japanese Yen traders should remain cautious of a potential intervention from the Japanese authorities, as the Yen has traded to its critical level.

The USD/JPY pair is currently facing a strong resistance level near 157.00. The RSI is gaining while the MACD has signs of rebounding from above the zero line, suggesting a potential gain in bullish momentum for the pair.

Resistance level: 158.45, 159.50

Support level: 156.15, 155.20

CL OIL, H4

Oil prices retreated slightly due to profit-taking, but the long-term trend remains positive. Support comes from OPEC's forecast for demand growth and potential rate cuts from major central banks. OPEC expects oil demand to grow to 116 million barrels a day by 2024, with OPEC Secretary General Haitham Al Ghais suggesting it could go even higher. Despite some investor scepticism due to the rise of ESG initiatives and electric cars, monitoring central bank policies and OPEC forecasts will be crucial for predicting oil price movements.

Oil prices are trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum,while RSI is at 52, suggesting the commodity might extend its losses since the RSI retreated sharply from overbought territory. 

Resistance level: 79.80, 83.95

Support level: 76.15, 72.90