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MTrading Team • 2022-04-20

US Dollar, gold retreat amid cautious optimism, cryptocurrencies dwindle

US Dollar, gold retreat amid cautious optimism, cryptocurrencies dwindle

Risk aversion eased on Tuesday as the Western traders returned from a long Easter Weekend.

The positive mood took clues from Fedspeak that ruled out odds of a higher than 0.50% rate hike, as well as from the news that China’s covid conditions seem to improve in recent days. Adding strength to the firmer sentiment were upbeat earnings from Wall Street giants and firmer US housing data.

In doing so, traders ignored the International Monetary Fund’s (IMF) pessimistic economic growth forecasts and escalating geopolitical fears in Ukraine.

The risk-on mood stopped the US dollar bulls at the 25-month high and the prices of gold also retreated, which in turn favored BTCUSD and ETHUSD. Brent oil, however, posted the biggest daily fall since March-end amid fears of a reduction in global demand due to the IMF forecasts.

Moving on, Canadian CPI and second-tier US housing data will join Fed speakers to entertain traders ahead of the key central bankers’ speeches up for publishing on Thursday.

Following is the list of major assets’ latest performances:

  • BRENT OIL consolidates the biggest daily fall in three weeks above $108.00, up 1.0% at the latest.
  • GOLD drops back to $1,945 during two-day downtrend, losing 0.30% intraday.
  • The USD Index retreats from two-year high to 100.80 rate.
  • Dow Jones and S&P 500 gained around 1.5%, Nasdaq rallied over 2.0%.
  • FTSE 100 and DAX print mild losses near 7,600 and 14,200 respectively while EuroStoxx50 seesaw near 3,850.
  • BTCUSD and ETHUSD snap two-day rebound with mild losses around $41,350 and $3,100 in that order.
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Risk-off takes a back seat but bears aren’t out of the woods

Investors took a sigh of relief on Monday as Fed’s Bostic, Evans and Kashkari rejected hopes of a 0.75% rate hike. The higher-than-expected US housing numbers and the risk-positive covid updates from China joined firmer earnings reports to strengthen the risk-on mood and helped all the three Wall Street benchmarks to gain over 1.0%.

The Fedspeak, however, probed the US dollar bulls, as well as multi-month high Treasury bond yields, but the USDJPY couldn’t be stopped from rising to the fresh high since 2002.

During the Asia-Pacific session, the People’s Bank of China (PBOC) disappointed markets with no action but the ex-China shares tracked Wall Street gains. That said, the European equities trade mixed during the initial hour as the IMF’s pessimistic growth forecast and the Ukraine-Russia woes test bulls.

The Washington-based organization further cut global economic growth projections and weighed on crude oil prices too. On the same line were the IMF’s negative comments on the cryptocurrencies that poke BTCUSD and ETHUSD at the latest.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETH/USD, BTC/USD

⬆️ 🟢 Buy: USD Index, gold, silver, Nasdaq

⬇️ 🔴 Sell: DOW JONES, S&P 500, DAX, FTSE 100, Brent oil

Bulls seek strong support with nothing major positive in the bag

Having witnessed a positive daily performance, traders are likely to consolidate recent losses during Wednesday’s full markets. However, the risk-on mood will need strong support and a repeat of Tuesday’s dovish Fedspeak to keep the ball rolling.

That said, US Existing Home Sales and Canada’s Consumer Price Index (CPI) will also decorate today’s calendar.

It’s worth noting, however, that Thursday becomes a crucial day for the markets as various central bankers, including Fed Chair Powell, are up for speeches, which in turn may trigger cautious sentiment ahead of the event. Also likely to challenge the bulls are the grim concerns over the Russo-Ukraine crisis and any negative COVID-19 news from China, not to forget worsening fears of higher inflation and economic recession.

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