US Equity Markets Volatile Despite Fed Reassurances, Jobs Data Awaited on Friday

March 9, 2023

On Wednesday, the US equity market experienced volatility despite the reassurance from Fed chief Jerome Powell that the central bank is not seeking to cause a recession and that no decision has been made on the size of a rate increase in March. Powell’s testimony to American lawmakers increased bets that the Federal Reserve will remain hawkish in the coming months, particularly after the release of another round of hot jobs figures. Powell reiterated that officials are likely to raise rates higher than previously anticipated and could move at a faster pace if necessary. Policymakers will closely scrutinize Friday’s jobs report for three key indicators: payrolls, wage gains, and the unemployment rate.

In terms of performance, the S&P500 and Nasdaq100 edged higher on a daily basis with gains of 0.14% and 0.5%, respectively. Seven out of eleven sectors in the S&P500 stayed positive, with the Real Estate sector performing the best with a daily gain of over 1%. However, the Dow Jones Industrial Average fell 0.2%, and the MSCI world index edged lower by 0.1% for the day.

Main Pairs Movement

On Wednesday, the US dollar remained steady but was down from its three-month highs reached earlier in the day. This followed Federal Reserve Chairman Jerome Powell’s second day of testimony before Congress, which offered no major surprises. Investors are now waiting for Friday’s jobs data. The DXY index traded in a range between 105.4 and 105.8, with a daily low of 105.36 during Powell’s speech.

The GBPUSD edged higher with a 0.13% gain for the day, remaining sideways within a narrow range from 1.8000 to 1.8500. The EURUSD was little changed down as investors also waited for jobs data on Friday.

Gold was little changed up with a 0.02% daily gain, as investors looked for more clues amid concerns about the hawkish Federal Reserve and recession woes. XAUUSD surged above $1820 during the early American trading session but lost bullish momentum and fell back to around the $1814 region.

Technical Analysis

EURUSD (4-Hour Chart)

According to the 4-hour chart analysis, the EUR/USD pair was little changed on Wednesday, recovering slightly from a two-month low and holding onto modest daily gains above the 1.0540 level. The pair is currently trading at 1.0546, posting a 0.02% loss on a daily basis. The market has priced in Powell’s hawkishness from Tuesday, and the pair stayed in positive territory amid renewed US dollar weakness.

The RSI indicator is currently at 35, suggesting that the downside is more favored as it is stable near the oversold territory. However, the price rebounded from the lower Bollinger Band, indicating some upside movements can be expected. If the 1.0531 support line holds, the market is expected to be slightly bullish. However, a steeper decline could be expected on a break below the 1.0531 level.

The resistance levels for the EUR/USD pair are at 1.0631, 1.0685, and 1.0790, while the support levels are at 1.0531 and 1.0467. The European Central Bank is ready for its monetary policy announcement next week, which could also impact the pair’s movements.

Resistance: 1.0631, 1.0685, 1.0790

Support: 1.0531, 1.0467

XAUUSD (4-Hour Chart)

The XAU/USD pair extended its downtrend during Wednesday’s trading session, reaching the lowest since February. The bearish move was not sustained, and the price bounced back slightly to trade around $1814.26 at the time of writing. The daily chart shows a bearish outlook for gold, and the risk remains skewed to the downside.

Looking at the 4-hour chart, the bears remain in control as gold trades below all its moving averages, with the 20 SMA accelerating south between the longer ones. The momentum indicator remains directionless within negative levels, while the RSI indicator resumed its decline after correcting oversold conditions, currently at around 36.

If the bearish pressure continues, the immediate support levels to watch are $1,804, $1,789, and $1,774. On the other hand, a rebound in gold’s price could face resistance at $1,829, $1,841, and $1,858.

In conclusion, the bearish trend in gold remains intact, and a sustained break below the support levels could lead to further downside momentum. However, any rebound in price would face significant resistance levels, and a reversal in the trend would require a significant shift in market sentiment.

Support levels: 1,804, 1,789, 1,774

Resistance levels: 1,829, 1,841, 1,858

Economic Data

CurrencyDataTime (GMT + 8)Forecast
USDInitial Jobless Claims21:30195K