Recession woes test corrective pullback on Juneteenth holiday, USD, crude drop

Financial markets affected by news on June 20 2022

Global markets appear mostly calm on Monday, as well as mildly positive, after the heavily volatile week. Improvement in China’s covid conditions and the PBOC’s inaction could be linked to the cautious optimism, not to forget Friday’s downbeat US data. However, an off in the US equities and bond markets gain major accolades while fuelling the corrective pullback.

The US dollar eases and underpins the rebound in commodities and Antipodeans. However, gears of economic slowdown keep Brent oil prices heavy. AUDUSD, on the other hand, leads the G10 buyers amid increasing hopes of hawkish RBA and positives relating to Australia’s biggest customer China.

Gold struggles to keep early day gains while Asia-Pacific shares also traded mixed. Further, European and the British share traders pare recent losses ahead of the key PMIs.

BTCUSD and ETHUSD lick their wounds around multi-month low but stay pressured as traders appear to lose confidence in the cryptocurrencies.

Following are the latest moves of the key assets:

  • Brent oil remains pressured around monthly low, down for the fourth day near $113.00.
  • Gold also struggles for clear directions around $1,840.
  • USD Index pares weekly gains around 104.50, down 0.20% at the latest.
  • FTSE 100 gains 0.70% but DAX and EUROSTOXX50 are up around 1.0% by the press time.
  • Wall Street benchmarks traded mixed Friday, with Nasdaq gaining 1.43% but Dow Jones losing 0.13%.
  • BTCUSD and ETHUSD both fail to recover from yearly low, posting 3.0% and 4.5% intraday losses around $20,000 and $1,080 at the latest.

Recovery remains elusive

Although a pause in the US Treasury yields’ rally, coupled with Friday’s downbeat performance, seem to underpin the recent relief rally, fears of recession weigh on the market sentiment. That said, the risk appetite remains murky amid a Juneteenth holiday as the weekend Fedspeak appears hawkish.

Friday’s downbeat US industrial production and today’s holidays pull back the US dollar across the board. Further, comments from the ECB policymakers seem to favor the EURUSD to cheer the greenback weakness while the People’s Bank of China’s (PBOC) status-quo joins China’s covid headlines and the hopes of improvement in the Sino-American trade deals help witness mildly positive mood.

Even so, Brent oil prices remain pressured around the monthly low, after posting the biggest weekly loss in three months, amid fears of economic contraction weighing on the energy demand. Also challenging the black gold prices are headlines suggesting an improvement in oil supplies.

AUDUSD benefits from the US dollar retreat and positive news from China ahead of tomorrow’s RBA Monetary Policy Meeting Minutes, as well as a speech from RBA Governor Philip Lowe. Gold, on the other hand, remains depressed despite the US dollar weakness.

Cryptocurrencies trade under water as markets appear to lose confidence in the BTCUSD and ETHUSD after the recent bloodbath.

⏫ 🟢 Strong buy: USDJPY, USDTRY and USDCNY

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD, Brent oil

⬆️ 🟢 Buy: USD Index, USDCAD

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

ECB’s Lagarde can entertain traders

Although the global markets are likely to witness corrective pullback in the absence of the US traders, as well as a light calendar, ECB President Christine Lagarde’s testimony can help witness notable moves. The bloc’s central bank leader, however, may have to accept the economic slowdown fears, which in turn could weigh on the EURUSD prices.

On a broader front, the Fedspeak, recession talks and Fed Chair Jerome Powell’s testimony will be crucial for markets, not to forget the preliminary readings of June’s PMIs.

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