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MTrading Team • 2022-11-01

NZD/USD leads the bulls as US dollar, yields retreat ahead of Fed

NZD/USD leads the bulls as US dollar, yields retreat ahead of Fed

Global markets turned surprisingly optimistic during early Tuesday as a pullback in the US Treasury yields joined chatters about a slower Fed rate hike from December. With this, the US dollar prints the first daily loss in four, which in turn adds strength to the rebound in prices of commodities and Antipodeans.

With this, the RBA’s second consecutive rate hike of 0.25% couldn’t derail the AUDUSD pair’s upside while strong New Zealand (NZ) housing data and optimism in China favored the NZDUSD to print the biggest jump among the G10 currency pairs.

That said, stocks in China rallied while the US stock futures also ignore Wall Street’s downbeat closing.

Elsewhere, prices of gold and crude oil look set to begin October with the biggest daily gains in a week.

It should be noted that the BTCUSD and ETHUSD also defied the two-day losing streak by the press time amid broad US dollar weakness.

Following are the latest moves of the key assets:

  • Brent oil snaps two-day downtrend while regaining $96.00, up 1.60% intraday at the latest.
  • Gold also prints the first intraday gains in four, up 0.70% around $1,645 by the press time.
  • USD Index drops to 111.00 while defying the three-day winning streak, down 0.38% on a day as we write.
  • FTSE rises 0.80% and Euro Stoxx is also up half a percent but DAX remains indecisive at the momentum.
  • Wall Street printed the first daily loss in three but the downside appeared limited.
  • BTCUSD and ETHUSD are both mildly bid near $20,500 and $1,600 respectively.
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It’s not a risk-on mood!

Although softer yields and indecision over the Fed’s move in December triggered cautious optimism during early Tuesday, the fears of recession and higher rates are far from over. Also acting as a risk-negative catalyst is China’s Caixin Manufacturing PMI which remained inside a contraction region for the third consecutive month. Further, the RBA’s slower rate hike also ruled out optimism as policymakers stay determined to announce a further increase in benchmark rates. Additionally, the hopes of PBOC stimulus and the Bank of Japan’s (BOJ) market meddling keep traders on their toes.

As a result, the US dollar selling appears ephemeral despite the latest weakness in yields and hawkish Fed bets. It should be noted that ECB President Christine Lagarde also mentioned the possibilities of a recession in the old continent, which in turn challenged EURUSD bulls.

Gold cheers softer US dollar and the World Gold Council (WGC) data suggests an increase in physical demand whereas upbeat equities and looming geopolitical crisis, coupled with the OPEC+ supply cuts, helped oil prices to recover.

Cryptocurrencies are also in recovery mode amid softer USD but the looming fears of harsh regulations keep BTCUSD and ETHUSD bulls cautious.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETHUSD

⬆️ 🟢 Buy: USD Index, USDCAD, Nasdaq, EURUSD

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

PMIs are in focus

The comments from RBA leader Philip Lowe and RBNZ’s Adrian Orr could help AUDUSD and NZUSD traders to gain a better grip over the bulls. Even so, the monthly PMIs from the US and Canada will be important considering the chatters about slowing rate increases in the future.  Above all, Wednesday’s FOMC is the week’s key event and can induce traders to emphasize Friday’s US jobs report if proved dovish. Overall, the US dollar may witness further downside ahead of the crucial data/events but the market optimists are too far from home.

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