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MTrading Team • 2022-06-08

Risk-aversion gains momentum ahead of key catalysts

Risk-aversion gains momentum ahead of key catalysts

Market sentiment continues to deteriorate as recession fears grow stronger. Also weighing on the risk appetite is the anxiety ahead of this week’s important data/events, namely the ECB and the US CPI. Furthermore, headlines from Ukraine contrast with China’s optimism and keep the mood sour.

US dollar reverses the previous day’s pullback while yields regain 3.0% to stay firmer around a three-week high flashed earlier in the week. Price gold bears the burden of a firmer greenback but Brent oil stays up for the second consecutive day.

USDJPY refreshes a 20-year high during a four-day uptrend while Antipodeans remain pressured. Further, USD/INR also stay mildly bid inside a familiar trading range even as the RBI announced a rate hike.

BTCUSD and ETHUSD extend Tuesday’s losses amid a risk-aversion wave, reversing corrective pullback after the introduction of the Federal Cryptocurrency Bill.

Following is the list of major assets’ latest performances:

  • Brent oil remains mildly bid around $121.00, up for the second consecutive day.
  • Gold stays pressured around $1,850.
  • USD Index reverses yesterday’s pullback from two-week high, up 0.26% near 102.70 at the latest.
  • FTSE 100 drops half a percent but EUROSTOXX50 and DAX are down around 0.25% and 0.10% respectively.
  • Nasdaq and S&P 500 both added nearly 1.0% gains whereas Dow Jones rose 0.80% on Tuesday.
  • BTCUSD and ETHUSD drop around 1.7% and 0.30% while taking offers near $30,600 and $1,800 by the press time.
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Fears escalate amid light calendar

Tuesday’s corrective change in the market’s mood fails to gain acceptance as traders reassess the odds of the major central banks’ anticipated hawkish path.

US Treasury Secretary Janet Yellen announced plans for relief in this year’s US budget while the record slump in the US trade deficit raised hopes of the market’s recovery. However, World Bank Chief David Malpass renewed growth fears which gained momentum after the Atlanta Fed’s GDP barometer neared the recession mark.

Representatives from China also raised concerns over slowing demand growth and contributed to the risk-off mood, even as unlocks in Beijing and Shanghai kept the Chinese and Hong equities firmer. Additionally, no agreement on the passage of vessels carrying food between Ukraine and Russia hints at the United Nations (UN) intervention and signals further geopolitical tensions.

US Dollar Index traced Treasury yields to regain upside momentum while Brent oil cheered fresh geopolitical woes. Antipodeans stayed remained depressed while the USDINR pair failed to aptly portray the RBI’s higher-than-expected 50 bps rate hike.

Cryptocurrencies continue to dwindle amid the market’s indecision and fears of more regulatory hurdles.

⏫ 🟢 Strong buy: USDCAD, USDTRY and USDCNY

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD

⬆️ 🟢 Buy: USD Index, USDJPY

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

Absence of major factors can extend risk-aversion

Considering the strong fears in the market amid an absence of likely positive factors and a light calendar, the risk-off mood is likely to continue ahead of Thursday’s ECB, as well as Friday’s US inflation data.

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