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MTrading Team • 2022-10-10

Risk-aversion joins hawkish Fed bets to drown AUDUSD

Risk-aversion joins hawkish Fed bets to drown AUDUSD

Global markets began the week’s trading with a risk-off mood as geopolitical fears surrounding Russia and China intensifies. Also roiling the sentiment could be the expectations of the Fed’s faster rate hikes despite recession woes.

As a result, the risk-barometer AUDUSD pair dropped to a fresh 30-month low but the US Dollar Index (DXY) struggles to defend the bulls amid an extended weekend in Japan, the US and Canada.

Prices of gold and crude oil also declined whereas the stock futures and European equities witness mild losses at the latest. That said, an off in Tokyo and Washington limits the bond market moves but the downbeat risk profile keeps bears hopeful ahead of this week’s US inflation and Fed Minutes.

Elsewhere, the cryptocurrencies also witness downside pressure after posting weekly gains.

Following are the latest moves of the key assets:

  • Brent oil retreats from a five-week high, down 1.35% intraday around $98.00 at the latest.
  • Gold drops for the fourth consecutive day, down 0.70% around $1,680 as we write.
  • USD Index prints four-day uptrend near 113.00 as bulls poke one-week high.
  • FTSE and DAX both drop half a percent but Eurostoxx is down 1.1% by the press time.
  • Wall Street closed with losses led by Nasdaq’s 3.80% slump.
  • BTCUSD and ETHUSD both remain mildly offered near $1,9400 and $1,315 at the latest.
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Risk appetite worsens…

Be it the explosion on the Crimean bridge or Russia’s response that blew the Ukrainian President’s office, not to forget the US-China tussles over Taiwan, geopolitical fears are back on the table and weigh on the market’s sentiment. In doing so, the sour sentiment weighs on the commodities and Antipodeans even as China returned from a one-week holiday with good news on covid. Furthermore, Fears of the EU’s economic slowdown and chatters that the key central banks, apart from the Fed, may ease their rate hike trajectory also weighed on the market’s mood.

It should be noted that the partial markets and a light calendar elsewhere restrict the reaction to the risk-negative headlines, even if prices of oil and AUDUSD lead the bears. The Aussie pair has an additional negative in the form of the RBA’s dovish rate hike that directed it towards the year 2020 low.

Cryptocurrencies failed to defend the corrective bounce as traders rushed towards the risk safety. Also exerting downside pressure on the BTCUSD and the ETHUSD prices could be the fears of the harsh regulations and softer inflow.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETHUSD

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

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

Risk catalysts to direct intraday moves ahead of the key events

As the risk-off mood is mainly due to the headlines from Ukraine and surrounding China, not to forget the Fed, an off in the US and a lack of major data/events elsewhere will highlight the qualitative factors as the key catalysts. Additionally, chatters surrounding the central banks and recession will add strength to the risk-off mood, which in turn could keep the US dollar on the front foot while weighing on the prices of commodities and Antipodeans.

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