Market Focus

US equity market refreshed record high after the Federal Reserve continues to project low-interest rates at least through 2023 despite rising inflation concerns. The S&P reached the highest 3973 in history, consumer discretionary stocks and industrials stocks led the gain, whilst health care and utility shares fell behind. The yield on 10-year Treasury hit 1.69% on Wednesday.

Beijing plans to press Washington to reverse many of the policies targeting China during the Trump presidency. China prioritizes reversing limits on American sales to Chinese firms such as Huawei Technologies Co and chip maker SMIC Corp. However, a senior Biden administration official played down expectations that the Alaska meeting would lead to any agreement.

The Federal Reserve kept interest rate unchanged on Wednesday, and here are Bloomberg’s key takeaways from FOMC News Conference:

• Pledged to keep up its $230 billion-a-month asset purchase program.
• Powell repeatedly said the Fed’s dot-plot does not represent a committee consensus view.
• Revised its other economic projections, which show a slight pickup in inflation this year, with a return to 2% next year.
• The Fed won’t act on forecasts but will wait for actual data to confirm that the economy is on track to achieve its goals before tightening policy.
• The recent move in Treasury yields isn’t an indication of disorderly markets or persistent tightening in financial conditions.

Market Wrap

Main Pairs Movement

Forex market is dominated by dovish FOMC statement on Wednesday. The US dollar index plunged 0.52% upon Fed releasing its dot-plots. The Federal Reserve continues to forecast interest rates to stay put until 2023 via its dot plot. However, the market seemed to expect a sooner rate hike given rallying bond yields, hence the negative reaction for the dollar. Despite the market disappointment, the new dot plot is still more hawkish than the previous edition where three more members forecasting a hike in 2023.

Gold ramped up 0.85% after Fed’s dovish message. However, the surge is dwarfed by rising bond yield. The US 10-year treasury yield gained 1.42%. This synergy in Gold and bond yield has been odd since fading demand for a risk-free asset should also devalue the non-yielding metal. Perhaps the previous plummet in Gold ran ahead of itself, and sellers still await for a better entry.

Technical Analysis

XAUUSD (Daily Chart)

After established a Doji pattern yesterday, Gold is poised to decline from here. Price managed to revisit Bollinger mid-line, which acted as a dynamic resistance since late January. It is also facing stubborn resistance around 78.6% Fibonacci around $1740. We are yet to witness any convincing attempt to overcome this pressure point, which implies either speculators are indecisive or the bulls are dying. The latter looks more plausible given ongoing rising yields and inflation optimism. Bears are waiting for headlines to kick off their journey to the south, they would attack support of $1680, then possibly to $1600.

Resistance: 1765, 1839

Support: 1691, 1673, 1600

USDJPY (Weekly Chart)

USDJPY is extending its gains to the fifth consecutive week, approaching the highest price of 109.67 since last June. It is currently marching into a 5-year descending trendline. Moreover, weekly RSI is wondering at the edge of the overbought zone. These two trading signals could provide considerable resistance to the current bullish bias. However, we cannot rule out the possibility of the price reaching 109.67 before a major pullback takes place. On the downside, the correction would fall onto the first key horizontal support of 108, followed by 106.73.

Resistance: 109.67

Support: 108, 106.7, 104.9

GBPUSD (Daily Chart)

The cable was supported by a 1.38 handle for the third time in a month. This pair is still well within an ascending channel despite the recent pullbacks. It is constructing a double bottom pattern as shown on the daily chart. Now the bulls look to retake the driver seat, and eyes for February high of 1.4145. But they will need to overcome near-horizontal resistance of 1.4, which is also the neckline of a double bottom. Upward momentum could accelerate if they can find solid acceptance at 1.4.

Resistance: 1.4, 1.4145

Support: 1.38, 1.352