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MTrading Team • 2022-11-08

Risk aversion recalls oil bears amid focus on US mid-term elections, China covid conditions

Risk aversion recalls oil bears amid focus on US mid-term elections, China covid conditions

After a mildly positive start to the week, market sentiment sours during early Tuesday thanks to escalating fears of the coronavirus outbreak in China and the resulting economic toll on the globe. Adding to the risk-off mood are the anxieties amid the US mid-term elections and mixed concerns over the Fed’s next move.

Given the fears of recession underpinning the firmer yields, the US dollar rebounds from a one-week low, which in turn weighs on the prices of commodities and Antipodeans.

That said, equities were also mildly offered but the cryptocurrencies are to the south as fears of harsh regulations and less participation weigh on the BTCUSD and ETHUSD.

Following are the latest moves of the key assets:

  • Brent oil snaps two-day uptrend, down 0.25% intraday near $99.20 at the latest.
  • Gold extends Monday’s losses to $1,668 by the press time, down 0.42% intraday.
  • USD Index rebounds from an eight-day low to print the first daily gains in three around 110.50, up 0.30% intraday as we write.
  • Stocks in Europe and the UK are mildly offered even as Wall Street managed to keep the buyers hopeful.
  • BTCUSD and ETHUSD drop to the lowest levels in two weeks, to $19,800 and $1,495 at the latest.
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Markets are sentimental ahead of the key data/events

With the highest daily covid counts from China leading to fresh lockdowns and a dash to the manufacturing hub, the global risk profile deteriorates. The virus woes join the fears of an economic slowdown amid higher inflation and aggressive rate hikes to keep the bears hopeful as they brace for the key inflation data from China and the US. Elsewhere, Donald Trump’s teasing of “very bid” announcements exerted additional downside pressure on the risk appetite amid a light calendar day. Even so, mixed Aussie data and firmer RBNZ inflation expectations contributed to the risk-off mood.

That said, cryptocurrencies lead the bear run followed by crude oil amid fears of less demand. On the same line were Asian stocks and equities in the West. The risk-barometer pairs, namely AUDUSD and USDJPY play their roles while highlighting the US dollar’s demand whereas the EURUSD appears less infected to the recently hawkish comments from the ECB officials. 

Further, political uncertainty in the UK and anxiety ahead of the fiscal plan announcements weigh on the GBPUSD. Gold extends the week-start losses while copper is also in the red as traders rush for risk safety.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETHUSD

⬆️ 🟢 Buy: USD Index, USDCAD, Nasdaq, EURUSD

⬇️ 🔴 Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

EU Retail Sales, risk catalysts in focus

Moving on, the fears of economic slowdown and a deadlock in the US elections, as well as indecision over the Fed’s next move, could keep the market players on the edge. However, the first readings of the Eurozone Retail Sales and headlines surrounding central banks, will also be important to watch for fresh impulse. Overall, the bears are back in the game and may keep the reins ahead of Thursday’s US CPI.

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