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Denis Sergienko • 2022-09-14

BOJ drowned yen, oil stays pressured amid recession woes

BOJ drowned yen, oil stays pressured amid recession woes

Global markets remain sluggish during early Wednesday, after witnessing the risk-off mood due to a slightly higher-than-expected US Consumer Price Index (CPI) on Tuesday.

The market’s indecision allowed the US dollar to pare some of the post-inflation gains, which in turn helped major currencies. However, the anxiety over the next week’s Fed meeting escalated and hence the AUDUSD and NZDUSD remained downbeat.

USDJPY, however, dropped the most among the G10 majors as softer USD joined the BOJ’s intervention. EURUSD stood on the other extreme, with no major moves, as the energy crisis signals fierce conditions for the bloc.

The price of gold and crude oil couldn’t cheer the softer greenback amid recession fears and strong yields while base metals also remained weak due to the China-linked woes.

Elsewhere, BTCUSD and ETHUSD lick their wounds after falling the most in a month and three weeks respectively.

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Following are the latest moves of the key assets:

  • Brent oil extends the previous day’s pullback from weekly top towards $93.00, down 0.90% at the latest.
  • Gold also remains pressured at one-week low, mildly offered around $1,700 by the press time.
  • USD Index pares the biggest daily gains since March 2020 by retreating to 109.70, down 0.30% intraday as we write.
  • DAX and Eurostoxx both print mild losses while FTSE appears indecisive.
  • Wall Street witnessed the sea of red wherein the Nasdaq slumped over 4.0%.
  • BTCUSD struggles to defend $20,000 while ETHUSD rises over 2.0% to $1,613.

Traders need clear directions

US CPI raised doubts about the policymakers’ hopes that inflation is easing. Wall Street posted the biggest daily slump in two years following the day and the Treasury bond yields also refreshed the multi-day top, which in turn propelled the US dollar. The following moves, however, appear sluggish as traders await key data/events from the US and Europe ahead of the next week's Fed meeting.

News of stimulus from China and BOJ invention allowed Asian traders to pare recent losses but the stocks in the West remain pressured. Also positive for the market sentiment could be the comments from US President Biden who ruled out the importance of the CPI uptick amid the recent easing in gas prices.

Chatters surrounding Taiwan also joined the inflation-led fears to weigh on the market sentiment.

As a result, the USDJPY appeared the biggest loser among the G10 currency pair while the EURUSD remained directionless. Gold and crude oil also held lower grounds due to the fears of economic slowdown and the Fed’s aggressive rate hikes.

On the other hand, Bitcoin mining difficulty and optimism surrounding Ethereum’s Merge seemed to have underpinned the latest corrective rebound in the major cryptocurrencies.

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

Risk catalysts, US data are the key

Having witnessed a disappointment from US CPI, traders will seek clarity over the US Retail Sales and University of Michigan’s Consumer Sentiment survey details to confirm the hawkish hopes from the Fed. Also likely to keep traders on the edge are headlines suggesting the EU’s announcement of an energy price cap plan and the trade talks with the US. On the data side, the US Producer Price Index (PPI) will decorate the calendar in the American session.

May the trading luck be with you!