Firmer yields join risk aversion to recall USDJPY bulls

The full markets’ return brought sour sentiment with it as traders reassess bearish bias over the Fed’s next move. Fears surrounding the G20 meeting in Bali and downbeat comments from Fed policymaker Christopher Waller joined the IMF’s gloomy economic forecasts to exert additional downside pressure on the sentiment.

The risk-off mood underpins the US dollar’s recovery and weighed on prices of gold, as well as crude oil. As a result, the Antipodeans couldn’t cheer the firmer Chinese equities.

It’s worth noting that the end of the bond market’s long weekend triggered the rebound in the US Treasury yields, which in turn joined firmer USD to propel the USDJPY moves.

Cryptocurrencies, on the other hand, print mild gains amid upbeat comments from crypto.com CEO and the Binance leader.

Following are the latest moves of the key assets:

• Brent oil drops from one-week high, down 0.70% intraday near $97.20.
• Gold pulls back from the highest levels since August while printing mild losses near $1,760.
• USD Index reverses from a three-month low, up 0.15% intraday near 106.60 as we write.
• Stocks in Europe and the UK are mildly bid while tracking Wall Street’s upbeat performance on Friday.
• BTCUSD and ETHUSD are exceptions to the risk-off play as they gain nearly 3.0% each while flashing $16,800 and $1,260 by the press time.

Markets fade the US inflation-led optimism

With the Fed’s Waller keeping rate hike woes on the table, the market’s previous hopes of pivot lingered during early Monday. Adding to the woes were fears that the US and China won’t be able to set peace with each other at G20, as far as the Taiwan issue is concerned. Further, the fears of the Eurozone and the UK’s readiness to talk down Russia during the global gathering also raise tensions and trigger the rush to risk safety. On the positive side, China’s announcement of easing virus-led controls and norms that can help the ailing reality second appeared to have defended the optimists.

As a result, the USDJPY turned out to be the biggest gainer among the major G10 currency pairs whereas AUDUSD occupied the other hand as China recently hopes to bring relating with the US back on track. Amid these plays, gold reverses from a three-month high while prices of Brent crude oil snap a three-day uptrend.

BTCUSD and ETHUSD portray a surprising optimism, despite record outflow from exchanges, as the crypto market leaders come forward to defend their respective offerings after the FTX fiasco.

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

G20, Fedspeak eyed

While the economic calendar appears mostly silent during early Monday, headlines from the G20 will be important to determine near-term risk appetite. Also important will be the additional comments from the Fed policymakers after Waller’s mixed message. Overall, risk aversion is likely to remain present but the strength of which will depend upon the qualitative catalysts.

May the trading luck be with you!