All Eye on the U.S. CPI

Market Summary

Market participants are keenly awaiting the U.S. Consumer Price Index (CPI) data set for release today, a crucial determinant of the Federal Reserve’s forthcoming monetary policy direction. In the lead-up, the Dollar Index (DXY) has experienced a downturn, struggling to stay above the critical 104.00 threshold. Concurrently, a decline in U.S. long-term treasury yields is applying additional downward pressure on the dollar.

On the commodities front, developments in the Middle East, particularly the optimistic tone from Israeli officials regarding cease-fire discussions with Hamas, have influenced market sentiment. This optimism has contributed to a softening in gold prices, which had previously been on a strong upward trajectory, and a decline in oil prices amid a lessened outlook for supply constraints.

Meanwhile, the Reserve Bank of New Zealand (RBNZ) has maintained its interest rate at 5.50%, in line with expectations, underscoring its commitment to reigning in inflation within the target range of 1% to 3% this year. The decision, notably devoid of any discussion on rate cuts, coupled with a hawkish stance in the monetary policy statement, has bolstered the New Zealand dollar.

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

Source: CME Fedwatch Tool

0 bps (85.5%) VS -25 bps (14.5%)  

Market Overview

Economic Calendar

(MT4 System Time)

Source: MQL5 

Market Movements

DOLLAR_INDX, H4

The Dollar Index persists in its lacklustre performance as markets brace for the impending release of the crucial U.S. Consumer Price Index (CPI) data later today. Concurrently, the U.S. long-term treasury yield has retreated from its five-month peak, potentially constraining the dollar’s vigour in the currency markets. Notably, recent upbeat economic indicators from the United States have infused a sense of optimism into the market landscape. In light of this, there exists the possibility that the CPI reading could surpass expectations, thereby bolstering the greenback. 

The Dollar Index has formed a double-bottom price pattern amid lacklustre trading performance, suggesting a potential trend reversal. The RSI remains below the 50 level, while the MACD flows flat below the zero line, suggesting that bearish momentum is overwhelmed. 

Resistance level: 104.60, 104.95

Support level:104.00, 103.65

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XAU/USD, H4

Gold prices experienced a modest pullback in the last trading session but continue to exhibit a robust bullish trend. The slight decline in gold prices came ahead of the highly anticipated U.S. Consumer Price Index (CPI) reading, due for release later today, suggesting traders are exercising caution. The market is bracing for potential high volatility in gold prices following the CPI announcement, a critical indicator of inflation that could influence the Federal Reserve’s monetary policy decisions. 

Gold prices remain trading with strong bullish momentum, as shown by the momentum indicators. The RSI has been constantly staying in the overbought zone, while the MACD has a higher high pattern above the zero line, suggesting that gold is trading with strong bullish momentum. 

Resistance level: 2370.00, 2400.00

Support level: 2330.00, 2300.00

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GBP/USD，H4

The GBP/USD pair witnessed a significant uptick yesterday, successfully breaking above the 1.2660 resistance level, an action that suggests a bullish outlook for the pair. This surge is largely attributed to the weakening of the dollar, which has exhibited lacklustre performance ahead of the highly anticipated Consumer Price Index (CPI) data release set for later today.

GBP/USD is currently trading in an uptrend channel, suggesting a bullish bias for the pair. The RSI has been hovering above the 50 level, while the MACD is flowing above the zero line, suggesting the pair remains trading with bullish momentum.  

Resistance level: 1.2760, 1.2850

Support level: 1.2540, 1.2440

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EUR/USD，H4

The EUR/USD pair recently traded above its resistance level at 1.0866, but it quickly retraced, indicating a potential lack of bullish momentum. This development occurs as the market anticipates the European Central Bank’s (ECB) interest rate decision, scheduled for tomorrow. Consensus widely expects the central bank to maintain rates at their current level. However, traders are advised to pay close attention to the accompanying ECB monetary policy statement. The nuances of the statement are crucial for understanding the central bank’s outlook on the eurozone economy and potential future monetary policy adjustments. These insights will be instrumental in assessing the ECB’s next moves and their implications for the euro’s strength.

EUR/USD broke above the resistance level but quickly retraced which formed a false breakout pattern. However, the MACD remains at above the zero line while the RSI remains at above 50 level suggesting the pair remain trading with bullish momentum. 

Resistance level: 1.0866, 1.0954

Support level: 1.0775, 1.0700

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USD/JPY，H4

The Japanese yen continues to trade within a consolidation range, hovering close to its critical level against the U.S. dollar for several weeks. This stability suggests a cautious market sentiment as traders await potential catalysts for directional movement.

Recent reports indicate that the Bank of Japan (BoJ) is contemplating raising its inflation target to above 2.4% by 2024. This proposed adjustment reflects the central bank’s confidence in the country’s pricing pressures. The prospect of a higher inflation target has contributed to bolstering the yen’s strength, as investors interpret it as a sign of positive economic prospects and further policy adjustments.

USD/JPY remain trading close to the 152.00 critical level. The RSI continues to be above the 50 level, and the MACD flowing flat above the zero line suggests the bullish momentum is overwhelming against the bearish momentum. 

Resistance level: 151.95, 153.10

Support level: 150.80, 149.35

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NZD/USD, H4

The NZD/USD pair surged above its resistance level at 0.6050 following the announcement of the Reserve Bank of New Zealand’s interest rate decision. As anticipated, the central bank opted to maintain the interest rate, expressing confidence in its ability to contain inflation within the target range of 1% to 3% for the year. With monetary policy diverging between the RBNZ and the Fed, the pair reached its highest level in a month.

The pair has broken above its resistance level at 0.6050 and traded to its monthly high, suggesting a bullish bias for the pair. The MACD has surged higher, while the RSI is on the brink of breaking into the overbought zone, suggesting the bullish momentum remains strong. 

Resistance level: 0.6100, 0.6150

Support level: 0.6050, 0.5950

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CL OIL, H4

Oil prices have found support near the critical liquidity zone around the 85.50 levels following a brief downturn in the previous session. The bullish trajectory of oil prices has been tempered by positive developments in Middle East tensions, which affect the global oil supply outlook. Expectations of a potential easing in the tightening oil supply dynamics stemming from the region have contributed to a subdued bullish sentiment in oil markets. Notably, ongoing cease-fire talks in Cairo, Egypt, between representatives from Israel and Hamas have garnered considerable attention from traders. The progression of these discussions remains closely monitored as market participants gauge their potential impact on regional stability and, consequently, oil supply dynamics.

Oil prices are supported at their crucial liquidity zone; a break below this level will be a solid trend reversal signal for oil. The RSI has declined from the overbought zone to below 50, while the MACD is approaching the zero line from above, suggesting the bullish momentum is drastically vanishing. 

Resistance level: 87.90, 90.80

Support level: 83.10, 80.20

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