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MTrading Team • 2023-03-22

AUDUSD benefits from pre-Fed cautious optimism, downbeat US Dollar

AUDUSD benefits from pre-Fed cautious optimism, downbeat US Dollar

Global markets remain mildly positive during early Wednesday as traders await the Federal Reserve’s (Fed) battle with inflation amid the banking crisis. The risk-on mood takes clues from the US authorities’ efforts to ward off the risk of another financial market crackdown via banks. Also brightening the mood could be the downbeat US Treasury bond yields, which in turn kept the US Dollar pressured near a five-week low marked the previous day.

With these factors in mind, AUDUSD justifies its risk-barometer status and reverses the previous day’s gains while the other Antipodeans and commodities also remain firmer. That said, the GBPUSD has an extra advantage, in the form of upbeat UK inflation data but looming Brexit woes and hopes of the Bank of England’s (BoE) dovish hike probe the Cable buyers.

It’s worth noting, however, that the prices of Gold and Crude oil remain pressured as traders keep hawkish Fed bets on the table.

Elsewhere, BTCUSD and ETHUSD grind higher at the multi-day tops marked in the last week amid fears of more industry players’ bankruptcy contrasting to strong whale activities.

Following are the latest moves of the key assets:

  • Brent oil snaps two-day rebound near $74.80, down 0.50% intraday at the latest.
  • Gold remains pressured for the third consecutive day despite recent inaction near $1,920.
  • USD Index seesaws around five-week high, treading water near 103.30 as we write.
  • Wall Street closed with notable gains but equities in the Asia-Pacific region, as well as shares in Europe and the UK, trade mixed afterward.
  • BTCUSD and ETHUSD print mild losses as crypto bulls take a breather around the highest levels in nine and seven months respectively, near $28,200 and $1,795 by the press time.
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Risk profile stays firmer as traders await Fed

After a slew of banking fallouts and the policymakers’ rush to defend the depositors, traders seem to be less awry feeling that the authorities are going what it takes and the steps might probe the central bank hawks to rethink future rate hikes. The same weighs on the yields and keeps the US Dollar depressed near the multi-day low ahead of the key Fed decision. Also important to watch is the China-Russia ties and the global ire over this issue even if the banking rout and central bank talks supersede the subject.

With this in mind, backed by hopes of China’s sustained recovery, AUDUSD rises the most among the G10 currencies while GBPUSD follows the suit as strong UK CPI propels hawkish BoE bets, even if Brexit fears probe Cable buyers. Further, USDJPY joins EURUSD and USDCAD to print no major moves amid the market’s anxiety ahead of this week’s top-tier data/events.

Gold struggles to keep the buyers on the table while Crude Oil also fades two-day recovery from the lowest levels since December 2021 marked on Monday.

Cryptomarkets are struggling to keep the latest bullish bias even if the whales are all in to cheer the softer US Dollar and hopes of more investments. The reason could be linked to the fear of more industry bankruptcies.

  • Strong buy: USDJPY
  • Strong sell: ETHUSD, GBPUSD
  • Buy: USD Index, USDCAD, Nasdaq, EURUSD
  • Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

Fed is the key

Although the UK inflation data allowed the GBPUSD buyers to smile, major attention will be given to how the Fed portrays the dot plot for future rate hikes. Also important will be to closely observe Fed Chair Jerome Powell’s ability to tame the banking fears and still deliver a hawkish message, which in turn could renew the US Dollar buying if delivered properly.

May the trading luck be with you!