Soft CPI Lead to DXY crashes

The Dollar index took a substantial hit, plummeting over 1.5% in the wake of the U.S. Consumer Price Index (CPI) release. The data indicated a softening of inflationary pressures, leading the market to reassess the likelihood of further interest rate hikes in the U.S., suggesting that the peak in interest rates may have been reached. In a counterintuitive move, equity markets responded positively to the subdued CPI figures, closing higher. All eyes are now focused on the upcoming meeting between Chinese and U.S. leaders in San Francisco, with expectations of potential market implications. Meanwhile, oil prices are uncertain, as the International Energy Agency revises down the demand outlook for this quarter. The dampened demand forecast comes amidst surprising production growth from the U.S. and Brazil, surpassing earlier projections.

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Market Movements

 DOLLAR INDEX

The US Dollar faced a significant downturn following a disappointing inflation report, fueling speculation that the Federal Reserve could halt its tightening monetary policy. The US Consumer Price Index (CPI) for the last month registered a decline from 0.4% to 0.0%, falling below market expectations of 0.1%. This prompted a more than 1% drop in the dollar index against major currencies, as US Treasury yields plunge on easing rate hike expectations.

The Dollar Index is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum. However, RSI is at 18, suggesting the index might enter oversold territory. 

Resistance level: 104.80, 105.40

Support level: 104.05, 103.30

XAU/USD

The sharp depreciation of the US Dollar led to a surge in demand for dollar-denominated gold, resulting in an extension of gold prices’ upward trajectory. Investors are closely watching the upcoming US-China meeting for potential impacts on market dynamics, as any positive developments in the relationship might redirect funds to riskier assets, impacting gold’s appeal.

Gold prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 59, suggesting the commodity might extend its gains since the RSI stays above the midline. 

Resistance level: 1965.00, 1985.00

Support level: 1940.00, 1915.00

 CL OIL

Oil prices maintained stability amid mixed fundamentals, with the International Energy Agency (IEA) revising its demand growth forecasts upward. The US Dollar’s fall, influenced by the lacklustre inflation report, provided some support. However, uncertainties loom as investors await the US Energy Information Administration’s (EIA) oil inventory report delayed by a recent system upgrade.

Oil prices are trading flat while currently testing the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 51, suggesting the commodity might trade lower as technical correction, since the RSI retreated sharply from overbought territory. 

Resistance level: 78.80, 80.75

Support level: 75.35, 73.35