All Eyes on Japan’s CPI

Market Summary

The robust U.S. stock markets, having reached record highs, paused for breath last Friday, reflecting a momentary halt in their bullish momentum. Conversely, the dollar index has maintained a subdued trajectory in recent sessions, but this calm is anticipated to be disrupted in the week ahead. The spotlight is on the upcoming release of the Federal Reserve's preferred inflation gauge, the PCE reading, scheduled for Thursday. Additionally, the week will feature appearances from numerous  Fed officials, with their remarks expected to provide insight into the central bank's future monetary policy direction and consequently impact the dollar's strength.

In contrast, the Japanese Yen, which has softened recently, faces challenges this week as the National Core CPI reading is slated for release tomorrow. Market observers keenly await this data, which needs to exceed market expectations to potentially bolster the weakened Yen.

Turning to commodities, gold prices have found support above the $2030 mark and remain sensitive to movements in the dollar's strength. Conversely, oil prices witnessed a sharp decline of over 2.20% last Friday, reflecting concerns surrounding sluggish demand and increasing supply in the market.

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

Source: CME Fedwatch Tool

0 bps (89.5%) VS -25 bps (10.5%)  

Market Movements 

DOLLAR_INDX, H4

The US Dollar remains range bound as market participants anticipate a potential delay in Federal Reserve rate cut decisions. The recalibration of rate cut expectations, now at 80 basis points compared to earlier projections of 150 basis points for early 2024, follows strong economic indicators, including the Consumer Prices Index (CPI), Producer Prices Index (PPI), and employment reports. 

The Dollar Index is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 48, suggesting the index might extend its gains since the RSI rebounded sharply from oversold territory. 

Resistance level: 104.60, 105.70

Support level: 103.85, 103.05

XAU/USD, H4

Gold prices experience a slight retreat in early Asian trading, influenced by climbing US Treasury yields and the expectation of delayed Fed rate cuts. Uncertainties surrounding the Fed's interest rate timeline prompt a wait-and-see approach, with investors closely monitoring the Core Personal Consumption Expenditures Price Index (PCE) on Thursday for potential trading signals. Despite the pressure, gold finds support from rising Middle East tensions, mitigating potential losses in the precious metal market.

Gold prices are trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 58, suggesting the commodity might extend its losses since the RSI retreated sharply from overbought territory.

Resistance level: 2035.00, 2060.00

Support level: 2015.00, 1985.0

GBP/USD，H4

Throughout the past week, the GBP/USD pair has exhibited an upward trend within a channel, with the U.S. dollar encountering persistent headwinds. The upcoming U.S. PCE index release and comments from Federal Reserve officials are poised to play a pivotal role in shaping expectations regarding future monetary policy decisions. These events are likely to influence the strength of the dollar. The Cable is anticipated to sustain its position above 1.2635 levels, enabling it to persist within the established uptrend channel.

GBP/USD remain trading in its uptrend channel, suggesting a bullish bias for the pair. The RSI remain in the upper region while the MACD has been moving up, suggesting the bullish momentum remains strong. 

Resistance level: 1.2710, 1.2785

Support level:1.2635, 1.2530

 EUR/USD，H4

Over the past week, the EUR/USD pair has experienced a climb of more than 1%, though the bullish momentum exhibited a slight deceleration in the last session. The release of the Federal Open Market Committee (FOMC) meeting minutes last week hinted that U.S. interest rates might have reached their zenith. In contrast, officials from the European Central Bank (ECB) have yet to deliberate on the timing of the initial rate cut. This divergence in monetary policy stance has injected bullish momentum into the currency pair, influencing its upward trajectory.

EUR/USD has eased from its bullish trend and is about to form a “Head-and-Shoulders” price pattern, suggesting a trend reversal for the pair. The MACD gradually moves downward while the RSI declines from near the overbought zone, suggesting the bullish momentum is easing. 

Resistance level: 1.0865, 1.0954

Support level: 1.0775, 1.0770

 Nasdaq，H4

The US equity market shows limited movement after a record-high run, with the AI-fueled tech sector rally displaying signs of slowing down as global investors engage in profit-taking. Lingering concerns over higher-for-longer interest rates, coupled with cautious statements from Fed members last week, contribute to the subdued gains. Rising US Treasury yields further dampen the potential for equity market upswings.

Nasdaq is trading lower following the prior retracement from the resistance level. However, MACD has illustrated increasing bullish momentum, while RSI is at 59, suggesting the index might experience technical correction since the RSI stays above the midline. 

Resistance level: 18150.00, 19255.00

Support level: 17280.00, 16670.00

 NZD/USD, H4

The New Zealand Dollar's bullish momentum has paused, with the currency experiencing a weakening at the week's outset. Market participants are recalibrating their positions in anticipation of the Reserve Bank of New Zealand's (RBNZ) rate decision, which is set for the upcoming Wednesday. The latest Producer Price Index (PPI) data indicates that while inflation in New Zealand continues to be persistent, the country's economic performance shows signs of softening. This creates a complex scenario for the RBNZ, presenting a challenging decision-making environment regarding its monetary policy direction.

The NZD/USD faced strong resistance levels at near 0.6202. The MACD has declined and is approaching the zero line while the RSI gradually moves downward, suggesting the bullish momentum is vanishing. 

Resistance level: 0.6205, 0.6250

Support level: 0.6150, 0.6094

USD/JPY, H4

The Japanese Yen is presently among the weakest currencies, trading above the 150 mark against a softening U.S. dollar. This situation has ignited speculation in the market about a potential intervention by the Bank of Japan (BoJ) at such levels. Meanwhile, the Yen faces an imminent challenge with the upcoming release of Japan's National Core Consumer Price Index (CPI) data. The BoJ will closely examine this inflation data to determine whether a shift in its monetary policy is warranted, making the reading a critical point of focus for both policymakers and market participants.

The USD/JPY pair has broken above its descending triangle pattern suggesting a potential bullish trend for the pair. The RSI is hovering closely to the overbought zone while the MACD has signs of rebounding from above the zero line, suggesting a fresh bullish momentum is forming.

Resistance level: 151.85, 154.80

Support level:149.50, 147.60

CL OIL, H4

Oil prices retreat from a formidable resistance level, registering a weekly decline, as indications from US central bank policymakers suggest potential delays in interest rate cuts. Fed Governor Christopher Waller's remarks emphasise a possible postponement by at least two more months. The tightening monetary policy outlook impacts economic growth, affecting the appeal of the black commodity. Investors keenly await China's PMI data to gauge the effectiveness of economic recovery measures, as China plays a pivotal role as a major global oil importer.

Oil prices are trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 38, suggesting the commodity might extend its losses toward support level. 

Resistance level: 78.65, 81.20

Support level: 75.20, 71.35