AUDUSD justifies risk-indicator status amid recession fears

After several central banks’ moves, the market sentiment turned sour as higher rates renew economic slowdown concerns. The risk-off mood joined fears of RBA’s limited capacity to lift the rate versus the chatters about the Fed’s July rate increase to drown the AUDUSD.

That said, the US Dollar cheers the downbeat sentiment and hawkish testimony of Fed Chair Powell to print the biggest daily gains in six weeks. While the strong USD weighs on the commodities and Antipodeans, the Gold price struggles for clear directions at critical support near $1,910.

It’s worth noting that the GBPUSD fails to justify upbeat UK Retail Sales, due to the firmer US Dollar and fears of UK recession, whereas the EURUSD bears take clues from the downbeat German PMI.

Elsewhere, markets in China are off for the second consecutive day but the rest in the Asia-Pacific zone aren’t seeing any improvement amid recession woes.

Talking about the cryptos, SEC’s crackdown on industry players dragged the BTCUSD and ETHUSD from monthly highs but the hopes of more investment underpin the corrective bounce of late.

Following are the latest moves of the key assets:

• Brent oil drops to the lowest level in over a week to $73.00 by the press time.
• Gold price remains sluggish after refreshing a three-month low, mildly bid near $1,918 at the latest.
• USD Index refreshes weekly high around 103.00, after reversing from a six-week low the previous day.
• Wall Street closed mixed whereas Asia-Pacific shares edged lower. That said, equities in Europe and UK are on the downside to begin the trading day.
• BTCUSD and ETHUSD print mild gains around $30,000 and $1,880 to reverse the previous day’s pullback from the monthly high.

Risk aversion in full steam

Be it CBRT, BoE and Norges Central Bank’s stronger-than-expected hawkish surprise or Fed Chair Jerome Powell’s readiness to lift the rates, not to forget normal rate increases from SNB, the majority of the central banks flagged “higher for longer” rates the previous day. The same joined the current high inflation days and geopolitical tension surrounding China and Russia to refresh fears of recession and propelled the US Dollar.

With this, the riskier assets like AUDUSD, equities, Gold and crude oil remain pressured, even if the Gold price struggle of late. That said, USDCAD appears hesitant as BoC’s surprise rate hike earlier in June still backs the CAD.

It should be noted that the market’s risk-off mood need validation from today’s PMIs to keep the US Dollar on the front foot otherwise a full-blown jump in the bond price and the recovery in the Gold can’t be ruled out.

• Strong buy: USDCAD
• Strong sell: ETHUSD, GBPUSD, Gold
• Buy: USD Index, Nasdaq, USDJPY
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

PMIs in focus

Having witnessed upbeat UK Retail Sales and softer German PMI, not to forget mixed activity numbers from Australia and Japan, market players are all waiting for the flash PMIs from the UK, Eurozone and the US for clear directions. It’s worth noting that the traders should expect high volatility for the rest of the day and the same may keep the US Dollar firmer unless the US PMIs disappoint.

May the trading luck be with you!