Optimism In The Markets Has Seen The US Dollar Index And Equities Rising In Tandem

The Dollar Index surged, buoyed by upbeat economic data, and the optimism surrounding a potential deal to raise the US debt ceiling. Prominent Republican Kevin McCarthy expressed confidence in passing a bill to increase the debt ceiling, surpassing previous progress. Encouraging figures, including a decline in US Initial Jobless Claims and an improved Philadelphia Fed Manufacturing Index, instilled further confidence in the US economy. Meanwhile, oil prices dipped due to the strengthening US Dollar, while the equity market surged on risk-on sentiment, with Walmart Inc standing out. Gold prices experienced a bearish trend in response to the strong Dollar.

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Current rate hike bets on 14th June Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (63%) VS 25 bps (37%) 

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Market Overview

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Economic Calendar

Market Movements

DOLLAR_INDX, H4

The Dollar Index has shown remarkable strength, continuing its bullish momentum amid a series of positive economic indicators and additional boost from the optimistic outlook surrounding a potential deal to raise the US debt ceiling and avoid a catastrophic default. Prominent US congressional Republican Kevin McCarthy expressed his confidence in the passage of a bill to increase the government’s $31.4 trillion debt ceiling on the House floor in the coming week. McCarthy emphasised that negotiations have progressed significantly, surpassing the previous week’s status.

The Dollar Index is trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 74, suggesting the index might enter overbought territory. 

Resistance level: 104.20, 105.20

Support level: 103.30, 102.40

XAU/USD, H4

Gold prices experienced bearish momentum as the US Dollar strengthened, propelled by a series of positive economic indicators and the optimistic outlook surrounding a potential deal to raise the US debt ceiling and avert a catastrophic default. Congressional Republican Kevin McCarthy’s confidence in the passage of a bill to increase the government’s debt ceiling further bolstered market sentiment. The Department of Labor’s release of encouraging data revealing a decline in US Initial Jobless Claims. Furthermore, the US Philadelphia Fed Manufacturing Index exhibited significant improvement, surpassing economists’ forecasts and indicating a robust performance in the manufacturing sector. 

Gold prices are trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 24, suggesting the commodity might enter oversold territory. 

Resistance level: 1980.00, 2005.00

Support level: 1950.00, 1905.00

EUR/USD，H4

On Thursday, ECB Vice President Luis de Guindos emphasized that they must continue raising interest rates to restore inflation to its mid-term target of 2%. Despite having implemented the majority of tightening measures, further actions are necessary. Earlier this month, the ECB opted for a more gradual approach by slowing the pace of interest rate increases, implementing a modest 25-basis-point raise. However, the central bank conveyed that additional tightening measures are on the horizon. In recent developments, the euro experienced a decline in value. This drop can be attributed to factors, including the anticipation of heightened interest rates and market sentiment influenced by the debt ceiling deal. 

The euro is experiencing bearish momentum, as the MACD and the RSI indicated. The euro price is approaching a key support level, and if it breaks below that level, it is likely to continue its downward trend. However, if the euro rebounds from this support level, we can expect it to trade within a range without a clear directional bias. 

Resistance level: 1.0914, 1.0958

Support level: 1.0765, 1.0681

Nasdaq，H4

The Nasdaq Composite index made significant gains, adding 188.27 points or 1.51%, closing at 12,688.84 on Thursday. Investors remained focused on the ongoing debt ceiling negotiations in Washington, closely monitoring any progress between Democrats and Republicans towards reaching a deal. Among the three major U.S. stock indexes, the strength in the technology sector primarily propelled the Nasdaq to achieve the largest increase. Throughout the day, optimism surrounding the debt ceiling talks fluctuated, with moments of hope for a potential agreement that would prevent a disastrous default.

As anticipated, the overall trend of the Nasdaq Composite index aligns with our previous expectations, as it enters into a bullish momentum at the moment. The recent positive outlook surrounding the debt ceiling incident is a contributing factor. If this trend continues, the Nasdaq will likely sustain its upward momentum. Market participants are advised to closely monitor the evolving situation and its potential impact on the index.

Resistance level: 13163, 14163

Support level: 12287, 11488

GBP/USD, H4

Sterling faced downward pressure, approaching a three-week low against the dollar, as investors maintained caution due to the recent rally in the pound amidst a stagnating economy and a weakening labour market. The release of data revealing a rise in Britain’s jobless rate to 3.9% in the three months leading up to March, coupled with a 6.7% increase in basic pay, further contributed to the concerns. Economists pointed out the persistently high core inflation, sluggish economic growth, and a softening labour market as contributing factors to the current downward trend in sterling. These factors further eroded confidence in the currency and increased apprehension among investors. 

The price movement in the pound is shifting towards a bearish momentum, as indicated by both the MACD and the RSI. Market participants should exercise caution and closely monitor the evolving market conditions.

Resistance level: 1.2540, 1.2680

Support level: 1.2345, 1.2145

Dow Jones, H4

The Dow continued to showcase its strength, extending the ongoing bull run. The optimism surrounding negotiations to raise the nation’s debt ceiling played a pivotal role in boosting investor confidence and instigating a shift in sentiment towards riskier assets. Adding to these positive developments, Walmart Inc emerged as a standout performer, with its shares registering a 1.30% increase. The retail giant’s impressive first-quarter sales growth of 8.0%, predominantly driven by robust grocery sales, contributed to the positive sentiment surrounding the company’s performance

The Dow is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 53, suggesting the index to extend its gains toward resistance level. 

Resistance level: 34210, 35450

Support level: 32950, 31660

CL OIL, H4

Oil prices experienced a modest decline, retracing slightly from the earlier week’s rally, largely due to the strengthening of the US Dollar, which exerted pressure on the commodity. The anticipation of higher interest rates in the future, spurred by the release of positive economic indicators, further bolstered the Dollar’s position.

Oil prices are trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 49, suggesting the commodity might trade higher as technical correction since the RSI rebound sharply from oversold territory. 

Resistance level: 74.05, 76.60

Support level: 71.55, 69.45