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MTrading Team • 2022-09-28

Fears of economic slowdown propel US dollar to fresh multi-year high

Fears of economic slowdown propel US dollar to fresh multi-year high

After witnessing a brief correction in the sentiment, global markets again turned bearish during early Wednesday as headlines surrounding the European energy crisis and China’s efforts to tame recession woes gained major attention. On the same line were firmer US data and hawkish Fed bets, as well as the UK’s economic pessimism and the BOE’s likely inability to trigger recovery.

The risk-aversion wave favored the USD index to refresh its 20-year high, which in turn drowned prices of commodities and Antipodeans, led by NZDUSD and AUDUSD. The USDJPY pair struggles to push back against the bullish greenback performance while the EURUSD drops to the fresh low since 2002.

Gold prices also renewed the yearly bottom but prices of oil stay mildly positive amid fears of a supply crunch. It’s worth noting that the US Treasury bond yields formed fresh multi-year tops and weigh on the Asia-Pacific equities, even if Wall Street closed mixed.

Cryptocurrencies aren’t immune from the US dollar’s strength and had the additional burden of easing inflow to please bears.

Following are the latest moves of the key assets:

  • Brent oil struggles to push back bears, paring intraday losses around $85.00 at the latest.
  • Gold renews yearly low near $1,1615 by the press time.
  • USD Index renews two-decade high around 114.80.
  • DAX and Eurostoxx both lose near 1.5% each while the FTSE is down 1.0% as we write.
  • Wall Street closed mixed wherein Dow Jones and S&P 500 printed mild losses while Nasdaq gained 0.25%.
  • BTCUSD losses 1.5% near $1,8800 whereas ETHUSD declines more than 3.0% to revisit the sub-$1,300 area.
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No room for optimism!

Russian gas pipeline’s major leakage could be termed as the key catalyst that recalled the market bears amid fears that the European energy supplies are far from return. Adding to the woes were chatters of the PBOC’s efforts to defend the yuan, as well as the BOJ’s bond-buying to restrict the yen’s slump versus the US dollar.

Furthermore, upbeat US data and hawkish comments from the Fed speakers allowed the Treasury yields and the US dollar to remain on the bull’s table.

It should be noted that Australia’s upbeat Retail Sales failed to impress AUDUSD buyers due to the pair’s risk-barometer status while the downbeat comments from New Zealand’s policymakers weighed on the NZDUSD prices.

As if the firmer USD and yields weren’t enough, downbeat headlines from China exerted additional pressure on gold prices. Alternatively, supply crunch woes, mainly linked to Russia and the hopes of output from the OPEC+, helped oil prices to defend the ground.

BTCUSD and ETHUSD bear the burden of Fed Chair Jerome Powell’s downbeat comments, as well as updates that inflows were down for the seventh consecutive week.

⏫ 🟢 Strong buy: AUDUSD

⏬ 🔴 Strong sell: ETHUSD

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

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

Central banks, geopolitics in focus

Multiple central bank policymakers are up for speaking throughout the day and can infuse volatility into the markets. However, the US dollar is likely to remain on the front foot, which in could drown the prices of commodities and Antipodeans. It’s worth noting that the GBPUSD is an inch far from the record low and is likely to refresh the 1.0340 level.

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