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MTrading Team • 2022-07-13

Markets remain dicey ahead of US inflation

Markets remain dicey ahead of US inflation

Traders portray the typical pre-data anxiety while waiting for the US Consumer Price Index (CPI) data for June. The risk appetite remains mixed as China’s covid updates and uncertainty surrounding the US economic growth join the cautious mood. 

The US dollar manages to regain upside momentum against this backdrop but the equities play mixed tunes and so do commodities.

Prices of gold resist extending the previous day’s corrective pullback but those of crude oil rally amid fears of a supply crunch and hopes of more stimulus from China.

NZDUSD fails to cheer the RBNZ’s 50 bps rate hike while USDJPY also resumed the run-up towards refreshing the 24-year high.

Cryptocurrencies are surprisingly paring the latest losses while snapping a three-day downtrend as equities have been mildly positive in the early Asian session.

Following are the latest moves of the key assets:

  • Brent oil bounces off three-month to snap two-day downtrend, up 1.45% intraday near $102.20.
  • Gold remains sidelined around the yearly low near $1,723.
  • USD Index stays firmer at the highest levels since 2002, up 0.08% intraday near 108.25 by the press time.
  • FTSE 100 is down nearly 0.80% intraday while STOXX50 and DAX lose 0.65% and 0.70% on a day by the press time.
  • Wall Street closed with mild losses on Tuesday.
  • BTCUSD gains 2.0% as buyers approach the $20,000 threshold while the ETHUSD gains over 3.0% around $1,070.
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Central banks, recession and China fail to overcome traders’ indecision

Be it the RBNZ’s unimpressive rate increase or China’s mixed covid updates, not to forget anxiety over the US economic growth, traders remain clueless during early Wednesday. 

That said, the RBNZ Rate Statement conveyed economic fears and drowned the NZDUSD prices while the USDJPY cheered an initial rebound in the US Treasury yields. However, the White House’s (WH) rejection of economic slowdown battles the IMF’s downbeat US growth forecasts to challenge the risk profile. Additionally, an increase in China’s covid numbers from Shanghai joined chatters that the run-up in cases is from the quarantine area and doesn’t cause major worries.

On the other hand, IEA’s crude demand forecasts and a pullback in the USD Index (DXY) managed to recall the oil buyers amid hopes of more stimulus and an easy economic rebound from China.

Gold remains pressured at a yearly low as the US dollar bounces back towards the 20-year high.

It should be noted that the BTCUSD and the ETHUSD might have cheered the French push for more digitalization of currencies and Coinbase’s hopes of witnessing a new all-time high in the next two years.

⏫ 🟢 Strong buy: USDCAD

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD

⬆️ 🟢 Buy: USD Index, USDJPY

⬇️ 🔴 Sell: DAX, FTSE 100, gold, BTCUSD

Nothing matters more than US CPI

Given the mixed concerns in the market, mainly due to the headlines concerning China and the US economic growth, traders will pay major attention to today’s US CPI for June. Although expectations are favoring the strong numbers, which in turn could propel the USD amid hopes of the Fed’s aggression, a negative miss in the outcome won’t be ignored. As a result, traders need to remain cautious ahead of the data.

Also important is the Bank of Canada’s (BOC) interest rate decision as the Canadian central bank is up for a 75 bps rate increase. The same could drown USDCAD if the US inflation numbers fail to please the greenback buyers.

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