Market sentiment remains slightly positive after Monday’s dicey performance as traders await Federal Reserve (Fed) Chairman Jerome Powell’s bi-annual Testimony. The recent cautious optimism could be linked to a series of previously released downbeat US data and Powell’s failure to convince markets of the Fed’s hawkish stand and the US economic soundness. It’s worth noting, however, that the risk-negative headlines from the Middle East and the US join pre-event anxiety to challenge the optimists.
US Dollar Index (DXY) remains defensive after bouncing off a three-week low the previous day whereas major currency pairs lack clear directions ahead of this week’s top-tier catalyst. Among them, EURUSD and GBPUSD gain major attention as the pair bears hesitate to retake control despite downbeat data from the Eurozone and the UK, as well as the political jitters. That said, USDJPY recaptures 161.00 after snapping a two-day losing streak the previous day whereas USDCAD stays depressed even as prices of Crude Oil, Canada’s key export item, drop for the third consecutive day.
Elsewhere, AUDUSD picks up bids to reverse the week-start pullback from a six-month high but the NZDUSD holds lower grounds after taking a U-turn from a three-week top.
Crude Oil pares the previous weekly gains ahead of US inventories and the key data amid mixed catalysts. However, Gold prices recover as traders rush toward safety during uncertain times.
Bitcoin buyers ignore the highest exchange outflow since November 2023 and the German government’s BTC transfers amid optimism surrounding the spot ETH ETF launch. Furthermore, the Republican party’s plans to improve the state of crypto regulations in its latest manifesto, released on Monday, also underpinned the BTCUSD and ETHUSD rebound.
Following are the latest moves of the key assets:
The US Dollar’s gauge of six major currencies, namely the DXY, remains sidelined after reversing from a three-week low on Monday. The Greenback’s inability to rebound justifies the market’s lack of conviction in the Fed Chair Powell’s optimism amid mostly downbeat US data. That said, the US Consumer Credit Outstanding grew in May while Employment Trends softened for June. That said, the New York Fed’s survey of consumer expectations also showed weaker inflation expectations for one year, to 3.0% from 3.2%. Apart from that, doubts about US President Joe Biden’s ability to win national elections and the previously released US employment and inflation clues also challenge the Greenback buyers.
Meanwhile, consolidation ahead of the key US catalysts joins the risk-negative headlines to allow the USD to edge higher. Among them, the US dislike of the India-Russia ties, fears of no ceasefire in the Russia-Ukraine and Israel-Hamas wars, as well as the US-China tension, challenge the sentiment. Furthermore, political setbacks in Europe and the new UK Prime Minister Keir Starmer’s comments suggesting a bad state of the British economy also weigh on the risk appetite and allow the US Dollar to lick its wounds.
Apart from the downbeat comments from UK PM Starmer, a reduction in the UK’s total sales for June and mixed statements from Bank of England (BoE) policymaker Jonathan Haskel also challenge the GBPUSD buyers. However, the fresh round of optimism in Britain, due to the Labour Party’s victory with majority seats, joined the doubts about the Fed’s hawkish stand to put a floor under the Cable pair.
Elsewhere, EURUSD justifies downbeat prints of Eurozone Sentix Investor Confidence for July while paying little heed to European Central Bank (ECB) policymaker Klaas Knot’s rejection of immediate rate cuts.
NZDUSD remains depressed amid mixed sentiment ahead of the Reserve Bank of New Zealand’s (RBNZ) monetary policy meeting announcements, scheduled for Wednesday, as the shadow board reaffirms the market’s expectations of no policy action in the meeting. Alternatively, AUDUSD ignores a three-month low Aussie Consumer Sentiment per the Westpac and China-linked fears to edge higher despite the US Dollar’s corrective bounce.
USDCAD fades Friday’s corrective bounce off a 6.5-month-old rising support line, down for the second consecutive day, even as Canada employment figures contrast with upbeat inflation figures to challenge the Bank of Canada’s (BoC) defense of higher rates. In doing so, the Loonie pair ignores downbeat Oil prices.
Crude Oil remains pressured for the third consecutive day amid the US Dollar’s rebound and a jump in Saudi Oil exports to China due to the price cut. The Black Gold ignores geopolitical woes in the Middle East while bracing for the US weekly oil inventories per the industry source American Petroleum Institute (API). It’s worth noting that Reuters came out with the news citing a four-month high in Saudi Crude Oil exports to China. Further, the Hamas leader blames the new Israel evacuation order for ruling out chances of witnessing progress in the ceasefire negotiations.
Gold picks up bids to reverse the week-start losses as mixed markets direct traders toward traditional safe-haven even as China’s two-month halt of Gold buying tests the XAUUSD bulls.
As Fed’s Powell recently failed to impress the US Dollar bulls amid downbeat US data, the Greenback traders will take his optimism with a pinch of salt before renewing the USD longs. However, US Treasury Secretary Janet Yellen has mostly been successful in favoring the US Dollar rebound and can back Powell to spread the optimism should she choose. Apart from that, the Greenback’s consolidation ahead of the US Consumer Price Index (CPI) and the risk-negative catalysts may also allow the USD to pare the previous weekly losses.
To sum up, Powell and Yellen both have to sound optimistic to defend the US Dollar recovery, which in turn will challenge the commodities and Antipodeans. That said, the market’s reactions for EURUSD and GBPUSD could be mixed due to political factors whereas USDJPY may defend buyers as traders brace for the Bank of Japan’s (BoJ) rate hike.
May the trading luck be with you!
