AUDUSD justifies risk barometer status amid cautious optimism

After witnessing a heavy fall in the riskier assets the last week, market sentiment improves on early Monday as US policymakers appear optimistic about turning down the default fears. Adding strength to the mildly positive sentiment could be Friday’s downbeat US data and other central bankers’ comments at the G7 suggesting no major rate hikes in the pipeline.

Alternatively, fears of more sanctions on Russia and political differences among the US diplomats keep the markets in limbo, despite allowing the riskier assets to take a breather after falling the most in many months the previous week.

US Dollar retreats from a monthly high while Gold price bounces off a fortnight low. That said, crude oil price, however, remains pressured as fears of higher US Oil reserve release join looming recession fears, mainly due to the banking crisis and softer data from China.

Among the major currencies, AUDUSD rises the most due to the PBOC’s inaction and the slightly positive mode whereas the EURUSD and GBPUSD pare the previous week’s heavy losses.

Elsewhere, BTCUSD and ETHUSD eye the biggest daily gains in two weeks amid optimism surrounding the Ethereum update and receding fears from the US SEC.

Following are the latest moves of the key assets:

• Brent oil remains pressured for the fourth consecutive day, down 0.40% near $74.00 at the latest.
• Gold price struggles to defend the first daily gains in four near $2,020.
• USD Index retreats from the highest levels in five weeks, mildly offered near 102.55.
• Wall Street closed with mild losses but the Asia-Pacific shares ended Monday with mixed moves. However, equities in Europe and the UK print mild gains as we write.
• BTCUSD and ETHUSD extend the previous day’s rebound to $27,450 and $1,830 by the press time.

Cautious optimism it is

With US President Joe Biden’s readiness to pass the debt ceiling extension, even with a veto, ahead of his Japan visit on Wednesday, the market’s risk aversion fades. Adding strength to the optimism were comments from the US Treasury Officials suggesting good progress in the policy talks. Elsewhere, downbeat US data and the recently mixed comments from the key central banks joined the People’s Bank of China’s (PBOC) inaction to also favor the cautious optimism in the market.

However, nothing is certain as the US policymakers still have a wide difference among their proposals to avoid the default while the Fed hawks keep promoting “higher for longer” rates. Elsewhere, the US-China tension remains on the table amid Washington’s ties with Taiwan, as well as the Western allegations that Beijing secretly helps Russia in the war with Ukraine.

Talking about the cryptos, the Ethereum’s Cancun upgrade and expectations that the US SEC may have a limited edge against the major players, as well as the US Dollar’s retreat, to propel the BTCUSD and ETHUSD price.

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

Second-tier US data eyed but debt ceiling talks are the key

Looking forward, the New York manufacturing index, BoE monetary policy report hearings and final readings of the Eurozone inflation, as well as the European Commission’s (EC) economic forecasts, will decorate Monday’s economic calendar. More importantly, Tuesday’s talks of US policymakers to avoid default and the US Retail Sales, as well as Friday’s Fed Chairman Jerome Powell’s speech, will be the key catalysts to watch for clear directions.

May the trading luck be with you!