Article by: ETO Markets
As Federal Reserve Chair Jerome Powell ruled out a rate drop at the upcoming March meeting, the US dollar gained momentum. Considering that the Fed decided to keep interest rates at their current levels, this result was mostly expected. Chairman Powell underscored the continued high level of inflation and the strong pace of economic expansion, suggesting that rate decreases are not as likely as they once were. The direction of the Federal Reserve's easing cycle and market mood are expected to be significantly impacted by the upcoming jobs and inflation reports.
The manufacturing sector in China appeared to be growing steadily in January, as indicated by the fact that the Caixin Manufacturing Purchasing Managers Index stayed at 50.8. The market anticipated a reading of 50.6. The US dollar's increase was tempered by the further boost to risk sentiment in Asia, which encouraged gold purchasers to take back control. Furthermore, the non-yielding gold price is gaining ground because to the ongoing weakening in US Treasury bond yields across the curve.
Now, all eyes are on Friday's US Nonfarm Payrolls data, which should confirm the Fed's decision to postpone lowering interest rates until May. For new trading momentum in the gold price ahead of time, traders will be examining the US Jobless Claims, Unit Labor Cost, and the ISM Manufacturing PMI data. The market's expectations for the dovish Fed tilt may be reassessed in light of the impending data.
German CPI inflation eased earlier than anticipated on Wednesday, following an early decline in German retail sales. Retail sales in Germany fell 1.6% MoM in December, which was worse than expected. However, the country's January unemployment rate decreased to 5.8% from 5.9% in December. These developments contributed to investor optimism in the middle of the week on the European Central Bank's potential to accelerate rate cuts.
The EUR/USD pair has a negative bias. On the daily chart, the pair is swaying around a flat 200-SMA, but the 20-SMA is still bearish above the present level and offers dynamic resistance near ...
The 4-hour chart indicates that the EUR/USD pair is neutral in the short run. Even though the longer moving averages are heading much below the present level, the pair is now developing around a flat 20-SMA. While this was going on, technical indicators started to swing higher but are now having difficulty breaking through their midlines, which is restricting the bullish potential.
The USD/JPY pair is being undermined by a number of factors, including Retail Sales and Industrial Production, which were released this Wednesday. Aside from this, the USD/JPY pair benefits from the beginning of some US Dollar purchasing, which is encouraged by the decreasing likelihood of a more aggressive Fed policy easing in 2024. The Bank of Japan's hawkish stance, ongoing concerns about a further escalation of geopolitical tensions in the Middle East, and China's economic difficulties, however, counteract the supporting factor and provide some support for the safe-haven JPY.
For the last two weeks or so, the USD/JPY pair has been moving in a well-known range around the 100-DMA. This suggests that traders may be undecided about the course of the following leg of a directional move, and prudence is advised. Meanwhile, the … level may be able to halt the current decline, and any further decline is probably going to find strong support close to the swing low from last week, which is located in the … area.
Conversely, any further advance is more likely to run into strong resistance at … and stay capped near ... The next significant obstacle is estimated to be in the … range, close to the monthly top.
