Gold, BTC rebound as dollar bulls take a breather on softer yields, China, Russia sour sentiment

Global markets consolidate recent losses in search of more hawkish Fed comments and hopes of further easing from China. However, fears that the world’s second-largest economy can witness additional hardships due to the worsening covid conditions at home join the western ire over the Russian invasion to weigh on risk appetite.

Additionally challenging the rebound is the cautious ahead of this week’s top-tier data releases from the US, starting from today’s Durable Goods Orders and Consumer Confidence.

With this, Asia-Pacific shares trade mixed even as Wall Street managed to kick-start the week on a positive side. The US dollar, however, struggles around a two-year high with the benchmark 10-year Treasury yields printing a three-day downtrend.

The greenback’s pullback allows gold and other commodities, as well as cryptos, to print mild gains whereas shares in the UK portray smaller losses but those from Europe track their US counterparts.

The market’s mood is likely to remain downbeat as risk catalysts remain well-situated ahead of the key data/events, which in turn may recall the USD bulls and weigh on the riskier assets.

Following is the list of major assets’ latest performances:

• Brent oil struggles to defend the $102.00 level while pausing two-day downtrend.
• Gold sellers take a breather around  $1,900, paring early-Asian session gains of late.
• The USD Index remains sidelined around 25-month high, above the 101.00 level.
• FTSE 100 drops 0.40% but DAX and EUROSTOXX50 print mild gains.
• Dow Jones and S&P 500 rose 0.70% and 0.57%, Nasdaq gained 1.2%.
• BTCUSD and rise half a percent to $40,600 but ETHUSD declines 0.12% to $3,000.

It’s just a break from risk-off…

Despite witnessing a positive start to the week, investors aren’t optimistic as widespread covid-led lockdowns loom in China. Europe’s embargo on Russian oil and the global central bank’s urgency for faster tightening, ex-China and Japan, also challenge the bulls.

Even so, Monday’s short-covering allows gold to lick its wounds while the US dollar bulls take a breather. The same helped US equity benchmarks to print mild gains and help the Asia-Pacific shares to remain positive outside China, Australia and New Zealand despite the IMF’s worries for China and Asia.

Japanese policymakers, on the other hand, also struggle to convince markets that they can also intervene to save the yen and this, in turn, joined broad risks to help the Japanese currency recover some of the latest losses. The Canadian Dollar (CAD) also benefited from the Bank of Canada Governor’s (BOC) hawkish rhetoric, as well as a rebound in the Brent oil prices from a fortnight low.

Gold prices also pause the previous downside around the monthly low but the buyers seem unconvinced at the latest.

BTCUSD extends the previous day’s recovery moves from a six-week low but ETHUSD fails to do so amid fears of more supply and disappointment due to the delay in ‘Merge’.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: Nasdaq

⬆️ 🟢 Buy: ETH/USD, BTC/USD, USD Index

⬇️ 🔴 Sell: DOW JONES, S&P 500, DAX, FTSE 100, brent oil, silver, gold

More data and active days ahead

Traders are likely to witness more volatility during the upcoming days with eyes on the first readings of the US and European Q1 2022 GDP releases. Also important to watch are the growing covid fears from China and Russia’s rejection to push to ceasefire talks. However, the bets that Fed will fasten the monetary normalization and balance-sheet reduction seem to have waned of late, which in turn can help witness intermediate bounces in the markets.

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