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MTrading Team • 2022-08-19

US dollar cheers risk-aversion as yields renew monthly high

US dollar cheers risk-aversion as yields renew monthly high

Risk profile roiled during early Friday as hawkish Fedspeak and firmer US data joined recession fears from China and Europe. Adding to the sour sentiment were comments from RBNZ Governor Adrian Orr and mixed UK Retail Sales figures. The sour sentiment helped the US dollar to renew its monthly high while also fueling the US Treasury yields.

The bucket of risk-sensitive assets including Antipodeans, commodities and equities was on a softer footing. Among them, JPY led the losers among G10 currencies while EUR and CHF appeared to occupy the other end.

Further, prices of gold dropped for the fifth consecutive day to test the lowest levels in three weeks. On the same line was oil which snapped the two-day rebound from a six-month low flashed earlier in the week.

BTCUSD and ETHUSD print the biggest daily loss since late July as a risk-off mood joins South Korea’s hard verdict for cryptocurrencies.

Following are the latest moves of the key assets:

  • Brent oil snaps two-day uptrend, down 0.90% around $97.40 by the press time.
  • Gold drops to the fresh three-week low during five-day downtrend, losing 0.35% to $1,752 at the latest.
  • USD Index rises to fresh five-week high, up 0.20% near 107.70.
  • DAX, Eurostoxx and FTSE 100 all lose nearly 0.40% each.
  • Wall Street closed with mild gains with S&P 500’s 0.23% run-up being the longest.
  • BTCUSD and ETHUSD both slump around 6.0% by the press time as sellers attack $21,800 and $1,750 by the press time.
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Fedspeak, recession amplify the sour sentiment

Having witnessed firmer Philly activity data and softer Jobless claims, the Fed policymakers gained credence over their hawkish calls. Most of them tried to talk down the recession woes while Bullard again spoke for his favorite 75 bps hike in September.

Chinese policymakers brace for more measures to reject recession fears and Germany’s Finance Ministry officially accepted that the economy is in trouble amid an energy crisis.

Leaders of China and Russia confirmed their G20 visit after multiple rejections whereas the next week's Jackson Hole Symposium also looms, which in turn raised anxiety ahead of the key events.

USDJPY and crude oil witnessed more pressure as yields and fears of declining energy demand joined stronger USD. The same is the case with gold as China’s hardships favor bears due to the nation’s status as one of the biggest bullion customers.

The risk-aversion wave joined South Korea’s findings that around 15-20 crypto firms illegally operate in their country, which in turn praises China and the US for their tighter controls and can result in more hardships for the BTCUSD and ETHUSD traders.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETHUSD

⬆️ 🟢 Buy: USD Index, USDCAD, Nasdaq

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

Jackson Hole Symposium in focus

Given the lack of major data/events ahead of next week’s Jackson Hole Speech from Fed Chair Jerome Powell, traders may extend the latest risk-averse performance. However, headlines from China, Europe and Fedspeak may offer intermediate clues.

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