- US dollar strengthens amid rate hike bets.
- Gold turns bearish amid rising yields.
- USDCAD rallies as traders shrug high oil prices.
- BTCUSD and EURUSD sell-off persists.
A resurgent dollar is sending shockwaves in the currency market after Federal Reserve Chairman Jerome Powell hinted of imminent rate hikes as early as March. The dollar index, which tracks the greenback strength, has already powered to one and half month highs of 96.66.
While the FED did leave the interest rate unchanged at 0.25%, it signaled rate hikes as a way of curbing inflationary pressures. The FED chair reiterating that rate hikes are unlikely to threaten the labor market has affirmed the strength of the US economy, thus the strengthening of the greenback.
Gold technical analysis
Meanwhile, gold was one of the biggest casualties on the dollar, turning bullish and powering to multi-week highs. XAUUSD has since pulled back from two-month highs of $1854, with bears in firm control.
The precious metal is at risk of plunging back to the $1800 handle after short-sellers steered a drop below the $1833 and $1818 support levels. A breach of the $1800 psychological level could leave the precious metal susceptible to further losses to multi-month lows of $1782. On the flip side, the metal finding support above the $1800 level could pave the way to bounce back to the $1818 level.
Factors driving XAUUSD lower
The downside action on gold is being fuelled by shrinking open interest on the metal to lows of 17.8K from highs of 158.7K as of last week. The sell-off amid shrinking open interest might signal a deeper pullback in the near term.
In addition, the sell-off is being fuelled by treasury yield turning bullish, with the 10-year yield rising to highs of 1.84% following the hawkish stance by the FED chair. With yields rising, dollar strength has continued to pile pressure on the yellow metal fuelling a sell-off on XAUUSD.
USDCAD bounce back
Meanwhile, the Canadian dollar remains under pressure against the dollar despite oil prices holding steady above the $80 a barrel level. USDCAD has since powered to three-week highs of 1.2710, a rally fuelled by renewed dollar strength.
A rally past the 1.2700 level has opened the door for another leg high, probably to the 1.2780 mark, the next substantial resistance level. The rally on the USDCAD could be limited on oil prices holding steady near seven-year highs, expected to continue fuelling CAD strength.
Bitcoin and Ethereum sell-off Persists
In the cryptocurrency, Bitcoin and Ethereum remain under pressure after plunging below critical support levels. The two cryptocurrencies have been moving in tandem with stocks since the start of the year. The sell-off on BTCUSD and ETHUSD has come at the backdrop of investors selling risky assets amid growing concerns about accelerated monetary policy tightening by the Federal Reserve.
BTCUSD slid to levels not seen since July of last year after a drop to lows of $33,150. After struggling to find support above the $40,000 level, Bitcoin has come under immense pressure with the correction from record highs of $68,000 gathering pace in recent days. A drop to lows of $30,000 looks likely.
The same fate has also befallen Ether which has continued to slide after failing to find support above the pivotal $3,000 handle. A drop to lows of $2,400 has left the crypto vulnerable to further losses, probably six-month lows near the $2,000 handle.
Broader macroeconomic concerns have fueled the sell-off in the wider cryptocurrency market. Concerns about how the FED is likely to react to combat runaway inflation have only gone to pile pressure on riskier assets such as Bitcoin and Ethereum.
Regulatory concerns with the Russian central bank proposing the banning and use and mining of cryptocurrencies have only gone to fuel the sell-off wave.