US dollar weakness favors commodities, Antipodeans

AUDUSD

Market sentiment improves during a sluggish Friday even as global central bankers remained hawkish during their latest appearances. The risk-on mood also took clues from China-linked headlines and data, as well as sluggish yields.

The firmer risk profile drowned the US dollar and provided the much-needed rebound to the commodities, as well as Antipodeans. Among them, AUDUSD gained the most due to the Aussie- China ties and upbeat performance of iron ore prices, Australia’s main export item.

USDJPY was the second one in the line of major losers as bond prices and Japan catalysts improved.

The prices of gold and crude are on the front foot as traders expect that the latest round of stimulus could ease the supply-demand crunch.

Elsewhere, BTCUSD rises the most in six weeks while ETHUSD advances to the highest level in a fortnight.

Following are the latest moves of the key assets:

  • Brent oil gains 2.0% intraday as buyers poke $91.30 while cheering the biggest daily run-up in two weeks.
  • Gold renews weekly high around $1,730, up 1.05% by the press time.
  • USD Index slumps 1.05% as bears attack 108.50 level after breaking monthly support line.
  • DAX and Eurostoxx both rise around 1.2% while FTSE adds more than 2.0% gains at the latest.
  • Wall Street remained firmer with benchmark indices rising nearly 0.60% each.
  • BTCUSD posts the biggest daily gains in 1.5 months around $20,600 while ETHUSD refreshes a four-week high at around $1,720.

It is NOT optimism, just a consolidation

Over 1.0% fall in the US Dollar Index and firmer equities push traders to believe that the market is out of the bear’s jaws. However, it is NOT as the energy crisis in the Eurozone joins the covid-led lockdowns in China. Also keeping bears hopeful were the recently downbeat economic forecasts from the major central bankers, including the ECB, as they either inflate rates or show readiness for aggression.

Even so, hopes that the US-China trade tension may ease joined with softer China inflation to help trigger the market’s consolidation on Friday. Also favoring the traders could be the latest updates from the ECB and the Fed as they both matched market forecasts and provided no negative surprises.

Oil had additional advantages as the US announced a halt to the further increase in the Strategic Petroleum Reserve (SPR) release, at least for now.

Elsewhere, chatters that the US regulations may not hamper crypto growth joins Franklin Templeton’s launch of institution crypto account to favor the prices of BTCUSD and ETHUSD.

  • Strong buy: AUDUSD
  • Strong sell: ETHUSD
  • Buy: USD Index, USDCAD, Nasdaq, USDJPY
  • Sell: DAX, FTSE 100, gold, BTCUSD

Nothing major to watch except for Canadian employment

Having witnessed a busy week, Friday’s economic calendar seems light for the European and the US session. Even so, the Bank of Canada’s (BOC) hawkish tone highlights the upcoming jobs report for August while the last round of Fedspeak before the pre-FOMC blackout may also entertain traders.

May the trading luck be with you!