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MTrading Team • 2022-07-06

Recession woes trigger panic attacks as markets brace for Fed Minutes

Recession woes trigger panic attacks as markets brace for Fed Minutes

Risk-aversion intensified the previous day while fueling the US dollar towards a multi-year high, before the greenback bulls take a breather. The US Treasury yields and stock futures also lack momentum as traders await this week’s key events, namely the FOMC Minutes and US ISM Services PMI.

In addition to the fears of a slowdown, mast covid testing in China spread rumors that the dragon nation is up for another lockdown, which in turn strengthened risk-aversion. Furthermore, China’s readiness to support Russia, strategically though, joined firmer US Factory Orders to offer more pain for the optimists.

Gold remains sluggish around the yearly low and the crude oil also licks its wounds after falling around 9.0% on Tuesday. Antipodeans were on the back foot around the lowest levels in 2022 but cryptocurrencies surprise markets by showing inaction.

Following are the latest moves of the key assets:

  • Brent oil remains pressured around $107.30 after falling the most since March.
  • Gold rebounds from yearly low but stays on the bear's radar, up 0.30% near $1,760.
  • USD Index takes rounds to the highest levels since 2002, recently easing towards 106.00.
  • FTSE 100 rises 1.0% but STOXX50 and DAX are both gaining around 1.5% on a day.
  • Wall Street benchmarks closed mixed on Tuesday, Nasdaq rose 1.75%.
  • BTCUSD stays defensive above $20,000 but the ETHUSD rises over 1.0% to stay around $1,150.
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Bears on the roll!

Germany and Italy spread fears of economic slowdown by conveying pessimism due to the energy crisis in the bloc. The woes got extra support from the firmer US data to drown the currencies versus the US dollar. The sour sentiment exerted downside pressure on the gold whereas crude oil slumped the most in four months despite chatters surrounding the supply crunch.

It’s worth observing that fears of China’s lockdown and more pain over the Russia-Ukraine crisis added strength to the risk-off mood. However, Wall Street managed to close mixed ahead of Q2 2022 earnings season.

It should be noted that the political crisis in the UK and challenges to the ECB’s crisis-fighting scheme weighed on the EUR and GBP respectively. Further, the dollars of Australia and New Zealand witnessed more downside due to their reliance on commodities, China and status as risk barometers. The Treasury yields, however, rebounded and probed the USDJPY buyers.

⏫ 🟢 Strong buy: USDCAD

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD

⬆️ 🟢 Buy: USD Index, USDJPY

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

Fed, US data need to defend hawkish bets

Traders eye the latest Fed meeting’s minutes before extending the previous day’s panic moves. Should the FOMC Minutes portray cautious optimism on the part of the Fed, the latest pessimism might have an intermediate rebound ahead of Friday’s US NFP. Additionally, US ISM Services PMI also needs to defy the downbeat forecasts and cross the previous release to keep the USD bulls on the table.

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