The Dollar Reverses Direction
Treasury rates and the US dollar both witnessed a minor decline, which provided an opportunity for other G10 currencies to gain ground. Gold thus saw a chance to shine on Tuesday morning. However, the market’s course in February may be affected by the effect of last Friday’s strong jobs report.
Rates are raised by the RBA
The Reserve Bank of Australia increased interest rates by 25 basis points, reaching a 10-year high and raising the cash rate to 3.35%. The move, which was anticipated, increased the AUDUSD exchange rate by more than 0.7%. Short-term growth may result from the weaker dollar; resistance is anticipated at 0.7000.
Focusing on Powell’s Upcoming Action
The market’s expectations on the Federal Reserve’s strategy for interest rates in 2023 have shifted as a result of last week’s surprisingly positive US employment report. The strong status of the US job market may prompt worries about long-term inflation, strengthening the position of Fed hawks. Jerome Powell’s next speech will be eagerly watched by the market, who will pay particular attention to his tone, content, and any updates on monetary policy for 2023. The currency and Treasury rates may increase if Powell asserts that forecasts of a rate drop were inaccurate.
Technical Evaluation of DXY
On the basis of daily charts, the DXY is still in a decline despite a recent spike over 103.00. Prices must increase over 105.00 in order for the outlook to change in the bulls’ favor. On the other side, a decline below 103.00 can start a sell-off that moves prices down to 101.20 or 101.00.
Pressure on EURUSD
Despite the latest interest rate increase by the European Central Bank to combat inflation, the EURUSD has been unable to close above the 1.0900 resistance level. Prices are now circling over 1.0700. There could be a chance for a rise towards 1.0900 if this level holds.
Golden Highlights
As investors got ready for Powell’s speech, a falling dollar and a little decline in Treasury rates helped gold. Gold prices may decline as the currency strengthens if Powell adopts a hawkish stance and says the Fed will keep raising rates. On the other side, a cautious Powell may strengthen gold and curtail losses. Technically, a decrease towards $1825 and $1800 might result from a dip below $1860. A surge beyond $1900, though, may test $1950 and $2000.