Gold Top $3000 Mark as Geopolitical Tension Arise

• Wall Street gained as U.S. retail sales saw improvement.

• The dollar slides ahead of the FOMC interest rate decision tomorrow.

• Gold extends gain as Red Sea geopolitical uncertainties arise.

Market Summary

The financial markets are on edge as investors await tomorrow‘s highly anticipated FOMC monetary policy decision, a pivotal event that could shape market sentiment in the coming weeks. The prevailing expectation is that the Federal Reserve will adopt a more dovish stance, aiming to shield the U.S. economy from slipping into a recession. This shift in tone would mark a significant departure from the Fed’s previous hawkish posture and could weigh on the dollar while potentially fueling a broader market rally.

Adding to the anticipation, the Bank of Japan is also set to announce its interest rate decision on the same day. The Japanese Yen has remained under pressure in recent sessions, with traders adjusting their expectations for a more accommodative stance from the BoJ. Given the heightened uncertainties in global financial markets, investors believe the Japanese central bank may opt to maintain its ultra-loose policy to stabilize economic conditions.

In equity markets, Wall Street extended its gains, with all three major indices closing higher in the last session. The optimism was fueled by U.S. Retail Sales data, which, while failing to meet market expectations, still came in stronger than the previous reading. This helped ease recession fears and provided a boost to risk appetite. Meanwhile, Chinese proxy currencies, including the Australian dollar and the New Zealand dollar, surged as sentiment improved following robust Chinese economic data. Additionally, reports of an imminent economic stimulus package from Beijing have further bolstered the outlook for both currencies.

In the commodities space, gold has surged past the $3,000 mark, underpinned by escalating geopolitical tensions in the Red Sea, where the U.S. military is engaged in a confrontation with Houthi rebel forces. The heightened uncertainty has also lent support to oil prices, keeping them elevated at recent highs as markets assess potential supply disruptions stemming from the ongoing conflict.

Current rate hike bets on 19th March Fed interest rate decision:

Source: CME Fedwatch Tool

0 bps (95%) VS -25 bps (5%)

Market Movements

DOLLAR_INDX, H4

The U.S. dollar extended its decline in the last session after the softer-than-expected Retail Sales data heightened concerns over the strength of the U.S. economy. With the FOMC interest rate decision due tomorrow, investors are increasingly betting that the Fed may adopt a more dovish stance to cushion recession risks. Despite the Retail Sales print coming in higher than the previous reading, it fell short of market expectations, reinforcing speculation that the Fed will maintain a cautious tone. As a result, the dollar index (DXY) slipped further.

The Dollar Index is now supporting above its critical level at near 103.35. A break below this level should be seen as a solid bearish signal for the index. The RSI remains below the 50 level while the MACD seemingly fails to break above the zero line, suggesting that the bearish momentum is overwhelming.

Resistance level: 105.65, 107.60

Support level: 101.70, 100.25

XAU/USD, H4

Gold prices surged back to the $3,000 mark, rebounding from an earlier technical retracement driven by profit-taking sentiment. The precious metal remains in a strong uptrend, supported by heightened risk-off sentiment amid escalating geopolitical and trade uncertainties. Investors continue to seek gold as a safe-haven asset, with demand further bolstered by increased geopolitical tensions in the Red Sea. The U.S. government's military response to Houthi rebel attacks on oil shipments has intensified concerns over potential disruptions in global trade and energy supply.

Gold prices have broken above the sideway range, suggesting a bullish bias for gold. The RSI remains in the overbought zone, while the MACD remains at the elevated level, suggesting that the bullish momentum remains solid.

Resistance level: 3031.00, 3075.00

Support level: 2988.00, 2935.00

USD/JPY, H4

The USD/JPY pair has broken above the critical resistance at 148.20 and is now firmly in a bullish trend, approaching the key psychological level of 150.00. The Japanese yen has turned bearish as market expectations for the Bank of Japan (BoJ) have shifted from hawkish to dovish, driven by heightened economic uncertainty. This shift has further pressured the yen, allowing the dollar to gain traction.

The pair is about to break above its immediate resistance level at the 149.50 mark, which should be a bullish signal for the pair. The RSI has been gradually moving upward, while the MACD has broken above the zero line and is diverging, suggesting that the bullish momentum is gaining.

Resistance level: 151.30, 154.00

Support level: 147.00, 143.80