Upbeat sentiment drowns USD but oil retreats on China, Russia news

An absence of Fed speakers cooled down the market’s fears of recession while cautious optimism from Europe helped trigger the latest risk-on mood. The firmer sentiment, however, remains doubtful as China steps back from its previous growth commitments while Russia unlocks gas supplies to Europe, despite stating fears of more energy troubles.

Wall Street managed to cheer mixed US housing data and ease concerns over the global economic slowdown. Shares in Asia-Pacific manage to track their US counterparts despite witnessing mixed headlines from China and hawkish updates from Australia.

Oil prices fade upside momentum at a one-week high while gold remains pressured. The US dollar, on the other hand, appears to stop sellers around a two-week low.

BTCUSD and ETHYSD also remain firmer on softer USD and risk-on mood. However, the US FBI and the UK’s FCA push for more regulations on cryptocurrencies, which in turn tame the bulls.

Following are the latest moves of the key assets:

• Brent oil snaps five-day uptrend as it retreats from weekly top, down 1.20% around $107.00 at the latest.
• Gold drops 0.20% intraday to $1,708, printing the first daily loss in three.
• USD Index bounces off a fortnight low to snap three-day downtrend.
• FTSE 100, STOXX50 and DAX are all printing mild gains at the latest.
• Wall Street remained firmer with Nasdaq’s 3.11% daily gains.
• BTCUSD prints 0.50% intraday gains as it retreats from monthly peak to $23,500 while ETHUSD remains pressured around $1,550, up 0.10% intraday.

Fed’s absence favors risk-on mood but China pokes optimists

Risk-on remains on the table as traders brace for this week’s key events, namely ECB and PMIs. The firmer sentiment weighs on the US dollar but headlines from China appear to have probed the greenback bears of late, activating the USD Index rebound from a fortnight low.

China’s Premier Li Keqiang stepped back from his previous optimism of achieving the growth target while showing flexibility on the economic growth rate. Also, a two-month high of covid numbers from the dragon nation and no change in monetary policy from the People’s Bank of China (PBOC) challenge the mood. Furthermore, Beijing’s dislike of Washington’s transit of the Taiwan Strait could also be considered negative for the sentiment.

Elsewhere, headlines from Russia suggested a short-term relief to oil sellers even if the tussle with the West over the Ukraine invasion remains unsolved. On the other hand, gold prints the first daily loss in three.

That said, AUDUSD fails to cheer hawkish comments from RBA Governor Lowe and GBPUSD also appear to ease despite strong UK inflation suggesting further rate hikes from the BOE. 

BTCUSD struggles to defend bulls at a five-week high amid fears of more regulations while ETHUSD can’t also remain pressured after easing from a 1.5-month top as optimism surrounding Merge fades.

⏫ 🟢 Strong buy: USDCAD

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD

⬆️ 🟢 Buy: USD Index, USDJPY

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

Second-tier data to entertain traders

Canada inflation numbers to join US Existing Home Sales and Eurozone consumer confidence to offer a busy day ahead. However, the recent market moves appear to have faded the previous risk-on appetite and hence the US dollar may regain its upside momentum ahead of the key Thursday. As a result, optimists should stay cautious.

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