Crude Oil ignores firmer US Dollar to edge higher on Russia, China concerns

Market players consolidate the previous moves against the riskier assets as the key central bank week begins with upbeat China data. In doing so, the traders allow sellers of gold and EURUSD to take a breather while keeping the Crude Oil buyers on the table. Further, the US Dollar struggles for clear directions at the highest level in a week, after snapping a three-week downtrend, as traders brace for Wednesday’s Federal Open Market Committee (FOMC) monetary policy announcements.

That said, AUDUSD and NZDUSD lick their wounds due to their trade links with China whereas USDJPY remains indecisive during a five-day winning streak amid traders’ cautious mood before Tuesday’s Bank of Japan (BoJ) monetary policy meeting. Further, USDCAD seesaws at the highest level in one week while struggling to justify firmer prices of Canada’s main export item, namely crude oil.

Talking about the cryptos, heavy long liquidations pushed BTCUSD toward posting the first weekly loss in three despite refreshing the record high, bouncing off a one-week low of late. ETHUSD also stays defensive after snapping a six-week uptrend, retreating from a multi-year top in the last few days.

Following are the latest moves of the key assets:

• Brent oil stays firmer at a 4.5-month high as bulls flirt with $86.00 by the press time.
• Gold price drops to the previous yearly top of near $2,148 during a three-day downtrend as we write, staying beneath the key $2,160 support.
• USD Index seesaws near 103.40-45 after snapping a three-week downtrend.
• Wall Street closed with losses while the Asia-Pacific stocks edged lower. Further, the shares in Europe and the UK also drifted lower during the initial hour.
• BTCUSD and ETHUSD fade the previous day’s corrective bounce off a one-week low near $68,200 and $3,620 at the latest.

US Dollar bulls take a breather as the key week begins…

The US Dollar struggles to defend the first weekly gain in four after rising the most in two months the last week even as the US consumer-centric data suggests firmer inflation and the need for higher Fed rates for a bit longer. The same, however, reaffirms the market’s concerns of witnessing the first rate cut from the US central bank in June, not in March and May, as well as joining the US soft landing chatters.

Elsewhere, China's Finance Minister Lan Fo'an flagged the need for a proactive fiscal policy and tested the optimism about the dragon nation’s economic transition. This challenged the previous bullish about the XAUUSD, due to China’s status as one of the world’s biggest gold customers. It’s worth noting, however, that firmer prints of China Industrial Production and Retail Sales put a floor under the precious metal amid a sluggish start of the key week.

Apart from that, Russian President Vladimir Putin’s reelection also challenges the market sentiment, as well as the XAUUSD buyers, as he promises to defend Ukraine's war agenda with weapons. On the same line was the weekend news suggesting Ukraine’s attack on the Sloviansk oil refinery in Russia's southern Krasnodar region.

While the US Dollar’s strength stopped the EURUSD bulls, hawkish comments from the European Central Bank (ECB) officials tested the pair sellers ahead of the FOMC. That said, ECB board member Klaas Knot spoke over the weekend while rejecting the odds of the Eurozone recession. Further, the Bank of Spain´s Governor, as well as the ECB policymaker, Pablo Hernández de Cos joined ECB Governing Council member, Gabriel Makhlouf to signal that the region’s central bank could start cutting rates in June.

USDJPY gained major attention amid expectations favoring the Bank of Japan’s (BoJ) end to the negative interest rate policy (NIRP) and yield curve control (YCC) policies in Tuesday’s monetary policy meeting. While the hawkish BoJ concerns exert downside pressure on the Yen pair, the recent strength in the Treasury bond yields and the US Dollar joins the Japanese central bank’s unscheduled bond buying to defend the ultra-easy monetary policy to challenge the USDJPY sellers.

Meanwhile, GBPUSD licks its wounds at the lowest level in a week as mixed UK data tests the Pound traders ahead of this week’s UK PMIs, Retail Sales and the Bank of England (BoE) Monetary policy meeting.

Further, NZDUSD justifies upbeat New Zealand (NZ) Business PSI and firmer China data while rising the most among the major currency pairs despite Prime Minister Christopher Luxon’s comments suggesting deterioration in economic conditions. Additionally, AUDUSD also grinds higher past 0.6550 amid upbeat statistics from the biggest customer, namely China, and anxiety ahead of Tuesday’s monetary policy announcements from the Reserve Bank of Australia (RBA).

It should be noted that the geopolitical fears emanating from Russia join upbeat China data and the US Dollar’s consolidation ahead of the FOMC to keep the Oil buyers hopeful, especially fears of supply crunch.

• Strong buy: USDCAD, USDJPY
• Strong sell: Crude Oil, US Dollar, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

A sluggish start to the key week ahead…

Although the top-tier data/events are likely to fuel market momentum starting from Tuesday, a lack of major catalysts during the rest of Monday may allow the US Dollar bulls to take a breather. That said, monetary policy decisions from the BoJ, RBA, BoE and the Fed will join the UK Retail Sales and PMIs for the top-tier economies to entertain the momentum traders. However, major attention will be given to Wednesday’s FOMC decision as the US Dollar bears await confirmation of June rate cuts and/or signals for easing inflation conditions in the US. Should the Fed dot-plot and Chairman Jerome Powell’s press conference push back rate cuts toward the late 2024, the Greenback could well extend last week’s run-up.

May the trading luck be with you!