U.S. PCE Reading Boost Dollar Strength

• U.S. PCE reading meets market expectations; hope for a June rate cut is fading.
• Gold prices trade to their one-month high on the last day of February.
• Upbeat Chinese PMI readings boost oil prices and Chinese proxy currencies, such as the Australian dollar.

Market Summary

The much-anticipated U.S. PCE reading, the Federal Reserve's preferred inflation gauge, was released yesterday, meeting market expectations at 2.4%. As the market awaits comments from Federal Reserve officials regarding the PCE inflation gauge, gold prices have surged to their highest levels in February. The initial encouragement seen in the U.S. dollar following the PCE reading has later retraced. U.S. equity markets are yet to find a clear direction as they digest the latest inflation data, with a perceived reduction in the likelihood of a June rate cut by the Fed. In contrast, the Japanese Yen lost steam after Bank of Japan (BoJ) Governor Kazuo Ueda mentioned that the country is still not in a position to raise interest rates until a sustainable and stable inflation target is achieved. In the oil market, OPEC+ is expected to decide early this month whether to extend supply cuts into the next quarter, and oil prices are currently hovering at their highest levels in February.

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 Dollar Index maintains a steady position as the US Core PCE Price Index registers a decline to 2.4% on a yearly basis in January, in line with market projections. Despite the dip, the impact on the Dollar's performance against other currencies is limited, as attention turns to additional economic indicators, including disappointing Initial Jobless Claims and Chicago PMI figures.

The Dollar Index is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 61, suggesting the index might extend its gains since the RSI stays above the midline. 

Resistance level: 104.50, 104.95

Support level: 103.70, 102.90

XAU/USD, H4

Gold prices stage a rebound as downbeat US economic data prompts investors to seek refuge in dollar-denominated gold. The focus shifts from subdued US inflation expectations to escalating geopolitical tensions in the Middle East, rekindling the safe-haven appeal of the precious metal.

Gold prices are trading higher following the prior breakout above the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 60, suggesting the commodity might extend its gains since the RSI stays above the midline. 

Resistance level: 2055.00, 2080.00

Support level: 2035.00, 2015.00

GBP/USD，H4

The GBP/USD currency pair has wiped out all the gains it made from the previous session's rebound, indicating that it is currently exhibiting bearish momentum. The U.S. Personal Consumption Expenditures (PCE) index, meeting market expectations at 2.4%, signals that inflation remains persistent in the country. Concurrently, the broader market sentiment has shifted to largely discount the possibility of a rate hike in June, which has subsequently bolstered the strength of the dollar. Furthermore, traders are closely watching the release of the UK's Manufacturing Purchasing Managers' Index (PMI) due today, as it is anticipated to provide insights into the Sterling's economic strength and potentially influence the currency pair's movement.

The GBP/USD pair declined and erased all its previous gain, suggesting a bearish bias for the pair. The RSI is gradually moving lower while the MACD is on the brink of breaking below the zero line, suggesting the pair is trading with bearish momentum. 

Resistance level:1.2635, 1.2710

Support level: 1.2530, 1.2437

EUR/USD，H4

The EUR/USD pair has pulled back from its technical rebound observed in the previous session but found support at the 1.0800 level. The U.S. dollar strengthened following the release of the U.S. Personal Consumption Expenditures (PCE) index, which aligned with market expectations, hinting that a Federal Reserve rate cut might not be imminent. This outcome has influenced the dollar's resurgence. Concurrently, market participants are now keenly awaiting the release of the Eurozone's Consumer Price Index (CPI) data scheduled for today.

EUR/USD declined but is currently supported at above 1.0800 levels, given a neutral signal for the pair. The RSI has been hovering in the lower region while the MACD is on the brink of breaking below the zero line, suggesting the bearish momentum has overwhelmed the bullish momentum. 

Resistance level: 1.0865, 1.0954

Support level: 1.0775, 1.0770

AUD/USD，H4

The Australian dollar recently faced a notable decline, breaking a bearish pattern due to a strengthening U.S. dollar. However, a positive turn occurred with the release of better-than-expected Chinese PMI data, indicating an improved economic performance in China. This positive news provided support for the Australian dollar, allowing it to recover during the Friday trading session in the Asia market.

The AUD/USD pair has declined from its symmetric triangle pattern but has found support at above 0.6485 levels. The RSI remains hovering in the lower region while the MACD crosses below the zero line, suggesting the bearish momentum is easing. 

Resistance level: 0.6535, 0.6617

Support level: 0.6484, 0.6410

USD/JPY, H4

The Japanese yen experiences initial surges in Asian trading hours following indications from Bank of Japan policymakers hinting at an eventual exit from ultra-easy policies. The central bank sets its sights on achieving the long-sought 2% inflation goal, contemplating a shift in its easing monetary policy later this year. However, market scepticism prevails as investors await concrete actions to match verbal commitments.

USD/JPY is trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 46, suggesting the pair might extend its gains toward resistance level since the RSI rebounded sharply from oversold territory. 

Resistance level: 150.80, 151.70

Support level: 149.40, 147.60

CL OIL, H4

Oil prices face resistance and fail to break above crucial levels due to a lack of market catalysts amid global economic uncertainties. Downbeat economic data from both the US and Eurozone contribute to a dimmed global economic outlook. Additionally, Eurozone inflation dips further, adding to the prevailing uncertainties in the oil market.

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

Resistance level: 78.65, 81.20

Support level: 75.20, 71.35