Crude Oil softens on US Dollar recovery ahead of Fed Chair Powell’s speech

Sour sentiment joins strong yields and mostly hawkish Fed talks to underpin the US Dollar recovery on early Thursday, as market players brace for Fed Chair Powell’s speech. Also, an absence of positives from China and growing worries about the Israel-Hamas war add strength to the risk-off mood and allow the US Dollar to edge higher.

The same joins firmer yields to trigger a pullback in the commodity prices while exerting downside pressure on the Antipodeans. With this, the risk-barometer AUDUSD drops the most among the G10 currency pairs while Gold and Crude oil retreat from a multi-day high marked the previous day. Elsewhere, Wall Street closed with losses and weighed the US stock futures, as well as kept the Asia-Pacific optimists off the table.

It should be noted, however, that the cryptocurrencies also bear the burden of the US Dollar in addition to the broad market pessimism due to the US SEC-linked concerns.

Following are the latest moves of the key assets:

• Brent oil retreats from a two-week high to $91.30, down half a percent intraday by the press time.
• Gold price fades upside momentum after rising to an 11-week high the previous day, indecisive near $1,950 at the latest.
• USD Index prints mild gains around 106.60, extending the previous day’s rebound from the weekly low of late.
• Wall Street closed negative and so did the Asia-Pacific stocks, as well as equities in Europe and the UK.
• BTCUSD and ETHUSD edge lower to around $28,300 and $1,550 as we write.

Risk aversion joins firmer yields to propel US Dollar

On Wednesday, US President Joe Biden visited the war-struck Israel and said that the US will make sure Israel has what it needs to defend itself. The same flagged more geopolitical tensions between Israel and Hamas, as well as a likely widening of war due to Iran’s threats to join the fight. The same joined mostly upbeat US data to propel the US 10-year Treasury yields to 4.97%, reaching its highest level since 2007 by the press time, which in turn favored the US Dollar.

Talking about the data and Fed talks, Building Permits dropped to 1.475M in September, a better-than-expected figure of 1.45 million, and the Housing Starts recovered to 1.35M, softer than the analysts’ expectations of 1.38M. Further, the Fed Beige Book noted that economic activity had "little to no change" during September and early October.

Also, Fed Governor Michelle Bowman said that Inflation has come down but is still too high. On the same line, New York Fed President John C. Williams mentioned, “Fed needs restrictive monetary policy for a while to cool inflation.” However, Fed Governor Christopher J. Waller said that they can wait, watch and see before making definitive news on the policy path.

On a different page, there prevails an increase in ETH Open Interest (OI) but a sustained decline in the BTC OI suggests the market’s favor for Ethereum even as the Bitcoin ETFs are in buzz. Also, chatters that the US SEC is engaging with Cathie Wood’s Ark Investments over the Bitcoin ETF roils sentiment at the crypto front, especially amid the firmer US Dollar.

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

Speeches from Fed’s Powell, US President Biden in the spotlight

Moving on, Existing Home Sales, the Philly Fed index, and the weekly Jobless Claims will decorate the calendar while Fed Chair Jerome Powell will speak during the latter part of the day and US President Joe Biden will also address the nation afterward. Both these speeches will be important as the Fed needs to defend the policy hawks to allow the US Dollar Index to remain firmer whereas statements suggesting geopolitical fears from Biden can add strength to the Greenback.

May the trading luck be with you!