Markets Analysis

Fundamental Analysis

• Major U.S. indices sharply lower, sensitive to Fed chairman’s comments on accelerating pace of rate hikes
• The prospect of a 0.5% rate hike at the March FOMC meeting also increased, restraining the upward movement of equities
• Fed Chair Jerome Powell remains hawkish, and the U.S. dollar is trading higher across the board in the currency markets
• US employment data and economic indicators will determine whether the Fed will accelerate rate hikes.
• USD/JPY breaks into the JPY 137.00 level, above the recent high of JPY 137.090
• Eurodollar breaks below the Ichimoku Chart’s cloud cover, with USD 1.050 as a support band
• Bank of Australia raises policy rate by 0.25%, statement dovish
• Bank of Australia in its statement acknowledged that the peak of inflation has passed, suggesting a halt in interest rate hikes.
• The Australian dollar fell sharply as the dollar was in an all-around weakening/dollar strengthening configuration.
• Gold sharply lower, buying dollar on accelerating pace of rate hikes and extremely hawkish tone
• Gold is expected to test the recent low of USD 1,804
• Crude oil sharply lower, falling back at USD 80/bbl, aiming for USD 76.4/bbl support band

Technical Analysis

With the Bank of Canada’s policy rate, ADP employment data, and Fed Chair Jerome Powell’s second day of congressional testimony scheduled for today, we need to watch for increased volatility in the New York session. Each currency pair is experiencing breakouts that could trigger a trend, and the probability of a medium- to long-term trend is high.

US dollar/JPY (USDJPY)

The dollar rallied sharply following the Fed chairman’s hawkish comments on accelerating the pace of interest rate hikes and approval of large rate hikes, forming a range between JPY 135.40-136.90 and clearly breaking out of the range at the close.

Given the fundamental composition of the U.S. interest rate hike policy and continued monetary easing in Japan, the natural reaction is for the dollar/yen to rise.

There is a large resistance zone at JPY 137.80, and the focus will be on whether the pair can break into the JPY 138.00 level. Our trading policy is to buy at the push, and take profits in front of the JPY 138.00 level. If the price returns to within the range, flatten the position.

Canadian Dollar (USDCAD)

The Canadian policy rate will be announced. The market is glued to news about the U.S. today, so it may not react that much. The Canadian policy rate is expected to remain unchanged. The focus will be on the statement. If the statement is dovish, the difference in policy with the U.S. will be recognized and may spur USD buying.

The major resistance zone is CAD 1.378. If we apply the Elliott Wave concept to the 4-hour chart, this would be the 5th wave. It will be interesting to see how far it extends.

Gold (XAUUSD)

Gold is a sell from a fundamental perspective. There is a correlation between rising US interest rates and falling Gold. There are many factors to sell for Gold, such as an acceleration in the pace of interest rate hikes and the prospect of a large rate hike in March.

Our trading policy is to sell on the upside. We would like to see the price return to the USD 1,820 level.

We expect that profit-taking is likely to occur near USD 1,800. We would like to flatten the position once in front of that level.

Today’s Important Economic Indicators

*Trading advice in this article is not provided by Milton Markets, but by Shu Fujiyasu Jr., a certified technical analyst.