Market Focus

The US equities market finally snapped a 3-day losing streak as technology stocks rebounded on Tuesday. The market was eyeing an important Federal Reserve monetary policy to be announced on Wednesday, in which the Fed is anticipated to raise rates for the first time since 2018. The Dow Jones Industrial Average jumped almost 600 points whilst the Nasdaq composite surged 2.9%. The S&P 500 cheered for its first gain in four days, climbing 2.1% to 4,262.45.

The coronavirus outbreak has worsened, covering more than 28 provinces in China. Dongguan city has ordered employees to work from home and factory centres to be locked down. Dongguan produced more than 24% of China’s exports in 2020 and is China’s fifth-largest GDP contributor, with $170.31 billion in output.

In response to the Russian invasion of Ukraine, major countries have imposed international sanctions on Russia. Due to the sanctions, a substantial portion of Russia’s foreign exchange reserves, which are mainly used to serve sovereign debt obligations, have been blocked off. On Wednesday, Russia is due to pay $117 million in interest on two Eurobonds. The market fears Russia might default on its debt, the first time in decades.

Main Pairs Movement

Gold dropped for the third consecutive day ahead of the FOMC meeting. Gold declined 1.68%, finishing with $1,719 on Tuesday. While the precious metal has rallied amid the Russia-Ukraine conflict and a combination of low economic growth and high inflation, it has erased most of its gains as the Russia-Ukraine situation eases while rate hikes are imminent.

EURUSD slid under the 1.1000 level as Wednesday’s FOMC meeting looms. It is expected that the Fed will announce rate hikes for the first time since 2018, increasing the market’s appetite for the US dollar.

WTI crude oil prices remained pressured, trading below $100 per barrel. At the same time, Brent crude is also trading at as low as $98.79 per barrel or 7.6% lower. The market has been rattled by a resurgence of the Covid-19 in China and the delegation of Russia and Ukraine.

Technical Analysis

GBPUSD (4-Hour Chart)

Cable traded upwards with fresh bullish sentiment after hitting our previously estimated support level at 1.3018. Better UK unemployment rates have helped boost the pound against the Greenback. On the economic docket, the U.S. is scheduled to release its core retail sales figures later today. A better-than-projected retail sales figure could be used as a last-minute gauge of the FOMC’s important interest rate decision on Thursday.

On the technical side, Cable was able to defend the 1.3018 support level but could not break through the 1.3096 barrier. RSI for Cable sits at 43.47 as of writing. On the 4 hour chart, Cable is trading below its 50, 100, and 200-day SMAs.

Resistance: 1.3185

Support: 1.2998, 1.2876

EURUSD (4-Hour Chart)

The Euro found strong buying support at our previously estimated support level of 1.0893. During the Asia and U.K. trading hours, the euro climbed against the Greenback. However, as the American trading session began, the EURUSD pair lost most of its early day gains due to rising U.S. treasury yields and a strong rebound from U.S. equity markets. The conflict between Russia and Ukraine continue to wreak havoc on European supply chains and continue to put pressure on inflation for the Eurozone.

On the technical side, EURUSD still faces strong resistance at the 1.10949 price region. Support levels for the pair also stand firm at 1.0893. RSI for the pair currently sits at 46.65. On the four hour chart, EURUSD is currently trading below its 50, 100, and 200-day SMAs.

Resistance: 1.1003

Support: 1.0893, 1.0845

XAUUSD (4-Hour Chart)

Gold continues to face strong selling pressure as market participants anticipate an agreement to be made between the Ukrainian government and the Kremlin, soon. Gold saw a more than $20 drop during the Asian trading hours and continued to fall throughout the U.K. trading session. Thursday’s key interest rate decision by the Federal Reserve will provide further volatility to the greenback and the precious metal.

On the technical side, our previously estimated support line at $1918 has provided a pause to XAUUSD’s steep decline. As of writing, RSI for XAUUSD sits at 34.41. On the four hour chart, XAUUSD is trading below its 50 and 100-day SMA but above its 200-day SMA.

Resistance: 1999

Support: 1918