Dollar Surges on CPI Beat, Gold Pressured

Key highlights

• Strong inflation data sparked a sharp rebound in the Dollar Index.
• Gold prices, pressured by the strong US Dollar, received some support from rumours of ongoing central bank purchases.
• Eye on US PPI data, and ECB’s monetary policy decisions.

Market Summary

The Dollar Index surged on the back of robust inflation data, surprising investors and challenging expectations of an imminent rate cut. US Consumer Price Index (CPI) figures outpaced forecasts for the fourth consecutive month, reaching 3.5% over the 12 months to March. This unexpected inflationary pressure prompted a reevaluation of market sentiments regarding Federal Reserve policy moves.

Gold prices faced downward pressure amidst a strengthening US Dollar, dampening the appeal of the precious metal as a hedge against inflation. However, rumours of sustained gold purchases by major central banks, particularly in Asia and emerging markets, provided some respite amid growing concerns of an economic slowdown looming on the horizon. 

As attention shifts, investors are eagerly awaiting Thursday's producer prices report for deeper insights into March inflationary trends. 

Current rate hike bets on 1st May Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (97%) VS -25 bps (3%)  

Market Movements 

DOLLAR_INDX, H4

The Dollar Index exhibited a sharp rebound as investors reacted to better-than-expected inflation figures, challenging previous expectations of a June rate cut. US CPI data surpassed forecasts for the fourth consecutive month, rising to 3.5% over the 12 months to March, driven by increased costs in fuel, housing, dining, and clothing.

The Dollar Index is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 71, suggesting the index might enter overbought territory. 

Resistance level: 105.40, 106.00

Support level:104.95, 104.45

XAU/USD, H4Despite initial resilience, gold prices faced downward pressure as the strengthening US Dollar diminished the appeal of the dollar-denominated commodity. However, rumors of continued gold purchases by major central banks, including those in Asia and emerging markets, provided some support amidst growing fears of an economic slowdown later in the year.

Gold prices are trading flat while currently testing the support level. Nonetheless, MACD has illustrated diminishing bearish momentum, while RSI is at 49, suggesting the commodity might experience technical corrections and edged higher since the RSI rebounded sharply from oversold territory. 

Resistance level: 2350.00, 2370.00

Support level: 2335.00, 2320.00

GBP/USD，H4The bearish momentum in GBP/USD was primarily driven by the appreciation of the US Dollar, fueled by upbeat inflation data indicating that US inflation levels continue to exceed the Federal Reserve's 2% target, reducing the likelihood of interest rate cuts.

GBP/USD is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 34, suggesting the pair might extend its losses after breakout since the RSI stays below the midline. 

Resistance level: 1.2610, 1.2710

Support level: 1.2530, 1.2435

EUR/USD，H4

EUR/USD edged lower as the unexpected rise in US CPI inflation data for March propelled the US Dollar to yearly highs, exerting downward pressure on the major currency pair. Investors are closely monitoring the ECB interest rate decision and press conference, as well as the release of the US Producer Price Index report, for further market insights.

EUR/USD is trading lower following the prior breakout below the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 32, suggesting the pair might enter oversold territory. 

Resistance level: 1.0775, 1.0870

Support level: 1.0710, 1.0655

USD/JPY，H4

USD/JPY hovered around multi-decade highs supported by robust US CPI data, which tempered expectations of US interest rate cuts. However, concerns over potential Japanese intervention in the foreign exchange market to support the yen may limit further upside in the pair.

USD/JPY is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 69, suggesting the pair might enter overbought territory. 

Resistance level: 153.10, 154.75

Support level: 151.95, 150.80

Dow Jones, H4

Following the release of hotter-than-expected inflation data, the US equity market experienced a sharp decline, erasing hopes of an early rate cut by the Federal Reserve. Major stock indexes, including the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite, ended in negative territory, with real estate shares witnessing the steepest decline.

The Dow is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 37, suggesting the index might extend its losses since the RSI stays below the midline. 

Resistance level: 39150.00, 39855.00

Support level: 37700.00, 36560.00

USD/CAD, H4

The Bank of Canada opted to maintain its target for the overnight rate at 5%, signalling its commitment to quantitative tightening policies aimed at stabilising inflation rates. Despite this hawkish approach, the Canadian dollar failed to gain traction against the US dollar, as the US economy continues to outperform global expectations.

USD/CAD is trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 69, suggesting the pair might experience technical correction since the RSI entered overbought territory.  

Resistance level: 1.3740, 1.3890

Support level: 1.3625, 1.3540

CL OIL, H4

Fuelled by worries of a protracted conflict in the Middle East, crude oil prices continue their upward climb. Rising geopolitical tensions were exacerbated after an Israeli airstrike killed three sons of a Hamas leader, casting a shadow over fragile ceasefire talks. The potential for a wider conflict involving Iran, a key OPEC member, has stoked fears of supply disruptions, pushing oil prices higher

Oil prices are trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 57, suggesting the commodity might extend its gains since the RSI stays above the midline. 

Resistance level: 87.90, 90.80

Support level: 85.35, 83.05