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MTrading Team • 2023-03-03

EURUSD turns bearish as bond market portrays risk aversion

EURUSD turns bearish as bond market portrays risk aversion

The month-start risk-on mood failed to prevail amid fresh fears of higher inflation and more lifts from the key central banks. Adding strength to the sour sentiment could be the headlines suggesting more US-China tension and fading optimism about Beijing’s likely economic rebound.

The downbeat risk profile joins firmer details of the US manufacturing activities to underpin the US Dollar’s rebound, which in turn exerts downside pressure on the commodities and Antipodeans. That said, EURUSD had an extra downer amid fears of a recession in the bloc. Further, AUDUSD and NZDUSD dropped the most among the G10 currency pairs due to their ties with China and riskier assets. It should be noted that the downbeat Japan data and strong US Treasury bond yields propel the USDJPY price.

On a different page, Gold price printed the first daily loss in three while Crude oil snapped a two-day recovery whereas BTCUSD and ETHUSD reverse the previous day’s gains at the latest.

Following are the latest moves of the key assets:

  • Brent oil drops half a percent to snap a two-day uptrend as sellers poke $84.00.
  • Gold prints mild losses to challenge the three-day rebound near $1,830.
  • USD Index eyes to regain 105.00 while paring the month-start losses near 104.80.
  • Wall Street closed with mixed but the equities in the Asia-Pacific region, as well as shares in Europe and the UK, print minor losses as we write.
  • BTCUSD and ETHUSD both report minor losses as sellers attack the $23,400 and $1,650 levels respectively.
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Markets return to the logical path

After the elusive optimism during the March start, markets returned to the more logical path of risk aversion as major central bankers renew inflation fears and showed readiness for more rate hikes. Adding to the risk-off mood are the headlines suggesting no respite from the US-China and the Russia-Ukraine tension, as well as fears of economic slowdown in the UK and Australia.

With this in mind, the key US Treasury bond yields cross crucial upside hurdles to renew the multi-month highs, which in turn joined upbeat US details to renew US Dollar buying. It should be noted that the comparative tone of the European Central Bank (ECB) officials to those from the US Federal Reserve (Fed) appears less hawkish. The same join looming economic fears over the old continent, due to the Ukraine war and Russian sanctions, to weigh on the EURUSD price.

USDJPY cheers strong yields while AUDUSD and NZDUSD bear the burden of the risk-off mood. Additionally, Gold price reversed from the short-term key resistance to convince the bears while Crude oil fell for the first time in three days amid economic fears and supply concerns.

BTCUSD and ETHUSD failed to defend the previous day’s gains as options markets portray the bearish bias amid likely regulatory fears.

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

EU inflation, central bank talks and second-tier US data to watch

Given the downbeat risk profile, the US Dollar may keep its upside moves amid a lack of top-tier releases and hawkish Fed bets. However, Euro could pare some of its latest losses versus the greenback if the EU inflation rises further and ECB President Lagarde defend its hawkish bias.

May the trading luck be with you!