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MTrading Team • 2022-05-18

US dollar recovers as market optimism fades, gold, cryptos decline but oil struggles

US dollar recovers as market optimism fades, gold, cryptos decline but oil struggles

Multiple factors ranging from China’s covid conditions to matters concerning Russia, not to forget hawkish Fedspeak, renewed risk-aversion wave during early Wednesday.

The risk-off mood underpinned the US dollar's bounce off the weekly low, which in turn weighed on prices of gold and Antipodeans. Brent oil, however, struggled for clear directions as geopolitical headlines resurfaced supply crunch fears.

Leading cryptocurrencies also portrayed sour sentiment and had to bow down against the USD, in addition to bear the burden of the UST slump and uncertainty over future regulations.

Following is the list of major assets’ latest performances:

  • Brent oil regains $113.00, up 0.40% around seven-week high.
  • Gold struggles around three-month low, close to $1,815 by the press time.
  • USD Index snaps three-day downtrend around 103.6.
  • FTSE 100 drops 0.20% but DAX and EUROSTOXX50 both gain around 0.3% daily at the latest.
  • Dow Jones rose 1.34%, S&P 500 gained 2.02% whereas Nasdaq added 2.20% on Tuesday.
  • BTCUSD loses 2.0% to retest $29,800 while ETHUSD prints 3.0% daily fall as sellers attack $2,030 level.
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Multiple incentives for bears to return

Although a few top-tier data were up for publication on Wednesday, except for the UK’s inflation and Japan’s GDP, the market turned risk-averse as China’s Shanghai stepped back from total unlock and the mainland registered an increase in virus cases, as well as covid-linked deaths.

Also challenging the mood were headlines suggesting the EU and the US readiness for more hardships for Russia. On the same line were Sweden and Finland’s start of the initial process to join NATO, which Moscow has clearly warned against.

Furthermore, Fed’s Evan’s renewed heavy rate hike woes while the UK’s inflation missed the market forecasts despite refreshing its all-time high to 9.0% YoY.

As a result, the US Dollar Index snapped a three-day downtrend and weighed on the riskier currencies like equities, commodities and Antipodeans. Even so, Brent oil prices were least affected due to supply crunch fears emanating from Russia.

BTCUSD and ETHUSD regain bearish bias as firmer USD joined the recent slump of Terra’s UST and market talks over harsh stipulations ahead.

⏫ 🟢 Strong buy: USDCAD, USDCHF

⏬ 🔴 Strong sell: Nasdaq, silver, AUDUSD

⬆️ 🟢 Buy: USD Index, GBPUSD, USDJPY

⬇️ 🔴 Sell: DAX, FTSE 100, brent oil, gold, ETHUSD, BTCUSD

Risk catalysts are the key

Given the lack of major data/events left for publishing, except for Canada’s inflation figures, global traders will keep their eyes on the headlines concerning COVID-19, Russia and the monetary policy framework at the major central banks to determine near-term directions.

That said, the return of the risk-off mood is likely to extend amid fewer remaining positives to witness going forward. However, any surprises will have higher reactions amid mixed markets.

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