US dollar renews weekly low as sentiment improves on China, Jackson Hole concerns

Having witnessed a risk-off mood in the last few days, cautious optimism allowed markets to pare recent losses during early Thursday. The main catalysts were sluggish yields and China’s stimulus. 

The improvement in risk profile exerts downside pressure on the US dollar, which in turn triggered the much-needed rebound of Antipodeans and commodities. That said, AUDUSD was the biggest gainer followed by NZDUSD. 

The price of gold also rose notably but crude oil struggled to capitalize greenback’s weakness on mixed clues surrounding the demand-supply matrix.

Cryptocurrencies aren’t left behind in posting gains even as traders doubt BTCUSD and ETHUSD run-up.

Following are the latest moves of the key assets:

• Brent oil struggles to defend bulls during four-day uptrend, up 0.40% near $103.30 by the press time.
• Gold rises half a percent to refresh weekly top around $1,763.
• USD Index remains on the back foot at around 108.30.
• FTSE 100 and Eurostoxx are both printing around 0.8% daily gain while DAX rises nearly 0.60% at the latest.
• Wall Street closed with mild gains, after an initially positive start, wherein S&P 500 led the bulls with 0.29% gains.
• BTCUSD rises 1.7% to $21,700 while ETHUSD adds close to 3.0% as buyers flirt with the $1,700 threshold by the press time.

Optimism or consolidation?

China’s stimulus appears to convince markets that the dragon nation may avoid recession, which in turn paves the way for Thursday’s brighter mood. However, the Taiwan-linked headlines joined firmer covid numbers and data suggesting softer economics to challenge the optimism. On the other hand, traders were also wishful of witnessing less hawkish rate guidance from Fed Chair Jerome Powell considering the latest US data, which in turn helped to improve the sentiment. However, the road to the bull’s home is still far as the German energy crisis amplifies recession woes. Hence, today’s market performance can be best termed as paring back of the recent moves rather than a trend change.

With this, the US dollar’s weakness appears doubtful and so do the latest advances of commodities and linked currencies. It should be noted that uncertainty surrounding Iran’s return to oil markets and OPEC+ output offer additional filters for the oil prices.

BTCUSD and ETHUSD might have cheered the latest inflow of funds, as well as the softer US dollar. However, the broad scenario remains dismal for cryptocurrencies amid fears surrounding economic slowdown and government regulation.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETHUSD

⬆️ 🟢 Buy: USD Index, USDCAD, Nasdaq

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

Second-tier US data to entertain traders

Revisions of the US Q2 GDP and Price Consumption data could join the weekly Jobless Claims to offer an active day to the market players. However, traders will be more interested in the central bankers’ speeches at the Jackson Hole amid recently hyped hopes of witnessing dovish guidance. Even so, softer US data might help the optimists to keep the reins.

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