Hawkish Fed Meeting Minutes Boosts Dollar

The U.S. dollar strengthened, driven by the Hawkish narrative revealed in the meeting minutes.

U.S. equity markets registered a second consecutive decline following the release of the December Federal Reserve meeting minutes. The U.S. central bank signalled an intention to maintain interest rates at a restrictive level for an extended period until U.S. inflation reaches sustainably low levels. This led to a reduction in the risk-on sentiment, while the U.S. dollar strengthened, driven by the Hawkish narrative revealed in the meeting minutes. Despite the JOLTs job opening data shrinking to its lowest level since 2021, traders are eagerly anticipating Friday’s Nonfarm Payroll report to gather further evidence regarding the softening job market in the U.S. On another front, oil prices experienced a gain of over 3.5% yesterday due to supply disruptions in Libya and another vessel attack in the Red Sea by Houthi militants.

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Current rate hike bets on 31 January Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (85.0%) VS -25 bps (15.0%)  

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Market Overview

Economic Calendar

Market Movements

DOLLAR_INDX, H4

The greenback maintained its position close to a two-week high as investors adopted a cautious stance following mixed economic data from the US. A surprise rebound earlier in 2024, attributed to speculation around Federal Reserve interest rate decisions and a 4% surge in US Treasury yields, faced challenges as Federal Reserve meeting minutes revealed concerns about overly restrictive monetary policy. Despite the recent rally, the long-term outlook for the US Dollar remains bearish, driven by expectations of rate cuts in Q1 2024 and uncertainties tied to potential pessimistic economic data. Investors are closely eyeing the upcoming US jobs data, including Nonfarm Payrolls and the Unemployment Rate, for clearer signals

The Dollar Index is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 69, suggesting the index might enter overbought territory. 

Resistance level: 102.60, 103.45

Support level: 101.75, 101.30

XAU/USD, H4

The precious metal faced significant downward pressure amid a strengthening US Dollar yet found support around the $2030 level as investors sought bargains in the safe-haven asset. The gold market’s overall trajectory remains uncertain due to mixed economic signals from the US. Investors are advised to closely monitor the forthcoming US jobs report, including Nonfarm Payrolls and the Unemployment Rate, to gain insights into potential market movements.

Gold prices are trading lower following the prior breakout below the previous support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 39, suggesting the commodity might experience technical correction since the RSI rebounded sharply from oversold territory.

Resistance level: 2055.00, 2090.00

Support level: 2020.00,  1985.00

GBP/USD，H4

The GBP/USD pair demonstrated resilience against the strengthening U.S. dollar, successfully defending the 1.2630 level. The U.S. dollar continued to gain strength, particularly after the release of the December Federal Reserve meeting minutes. The minutes conveyed a Hawkish narrative, with Fed officials indicating an intention to maintain interest rates at a restrictive level for an extended period until inflation is sustainably below the favoured threshold.

The GBP/USD recorded a minor technical rebound at its crucial support level of 1.2630, which is also its uptrend support level. The RSI has a slight rebound, while the MACD is on the brink of crossing, suggesting the bearish momentum has eased. 

Resistance level: 1.2728, 1.2815

 Support level: 1.2528, 1.2437

EUR/USD，H4

The EUR/USD pair continues trading under significant downward pressure as the U.S. dollar maintains its strength. The recently released Fed meeting minutes provided crucial insights into the near-term monetary policy outlook. Fed officials emphasised the intention to keep interest rates at elevated levels, even though they hinted at the possibility of a rate cut later in the year. The U.S. dollar was encouraged by this Hawkish stance, resulting in a lacklustre performance from the euro.

The EUR/USD has broken below its uptrend channel and is trading with intense downward pressure. The MACD has broken below the zero line, while the RSI hovering closely to the oversold zone suggests the bearish momentum remains strong. 

Resistance level: 1.0954, 1.1041

Support level: 1.0866, 1.0775

USD/JPY，H4

The Japanese Yen faced depreciation as the USD/JPY pair successfully breached its long-term downtrend resistance level, which had been in place since mid-November. The U.S. dollar maintained its strengthening trend, driven in part by the Hawkish narrative conveyed in the December Federal Reserve meeting minutes released yesterday. Traders are closely monitoring the upcoming Tokyo Core CPI reading, scheduled for next Tuesday, to gather additional evidence regarding the sustainability of inflation in Japan and the potential for a shift in the Bank of Japan’s monetary policy.

USD/JPY broken above its long-term downtrend resistance level suggests a bullish bias for the pair. The RSI has been surging toward the overbought zone while the MACD has broken above the zero line and continues to move higher, suggesting that the bullish momentum is strong. 

Resistance level: 143.80, 145.35

Support level: 141.64, 138.87

Dow Jones, H4

The US equity market experienced a modest decline in the early sessions of the new year, with investors opting for profit-taking following a robust performance in 2023. The cautious sentiment stems from apprehensions surrounding the anticipated shift in the US central bank’s stance towards rate cuts in 2024 and the subsequent speed of implementation.

The Dow is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 54, suggesting the index might extend its losses since the RSi retreated sharply from overbought territory. 

Resistance level: 37850.00, 39275.00

Support level: 36735.00, 35950.00

CL OIL, H4

Crude oil prices witnessed a sharp rebound following a supply disruption at Libya’s top oilfield, raising concerns about potential disruptions to global oil supplies. OPEC member Libya experienced protests leading to the shutdown of the 300,000 bpd Sharara oilfield. The turmoil in the Middle East, coupled with supportive comments from Federal Reserve officials leaning towards a dovish monetary policy stance, contributed to the upward momentum in oil prices.

Oil prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 54, suggesting the commodity might extend its gains after breakout since the RSI stays above the midline.

Resistance level: 72.85, 78.65

Support level: 68.00, 64.85