AUDUSD justifies risk-barometer status to lure bears amid dicey markets

Market participants remain clueless early Tuesday after a dull start of the key week comprising top-tier central bank announcements and inflation data. Also restricting the momentum could be the mixed headlines surrounding geopolitics. The traders even fail to justify the full market return after a long weekend in China, Australia, and Hong Kong.

With this, the US Dollar Index (DXY) struggles to defend the buyers after refreshing a one-month high the previous day. In contrast, the EURUSD licks its wounds at the lowest level in a month as political pessimism in the Old Continent grows. GBPUSD also reverses the previous day’s recovery move from a one-week low as the UK employment data raised doubts about the Bank of England’s (BoE) hawkish move and the uncertain political environment in Britain.

While the trading sentiment is mostly cautious, the risk-barometer AUDUSD fades the week-start rebound from 50-SMA, especially amid China woes and downbeat data from home. On the same line, NZDUSD also drops as the US Dollar edges higher and challenges commodities, as well as the Antipodeans. Further, USDCAD failed to cheer the Crude Oil’s biggest daily jump in seven months, hovering around the one-month high marked the previous day. That said, Gold price also retreats to 10-week-old rising support as hawkish Fed concerns gain more acceptance, especially after Friday’s strong US employment report, whereas China's optimism fades.

BTCUSD posts the biggest daily slump in a month while ETHUSD also falls the most in a week despite the news suggesting record-breaking inflows to the crypto investment products.

Following are the latest moves of the key assets:

• WTI Crude oil prints mild losses around $77.80 after rising the most since November 2023.
• Gold pares the previous day’s gains by posting minor losses near the $2,300 threshold as we write.
• The USD Index lacks clear directions above 105.00, challenging the two-day uptrend at the latest.
• Wall Street closed with mild gains but the Asia-Pacific shares edged lower. British and European shares printed minor gains during the initial trading hour.
• BTCUSD and ETHUSD both lose more than 2.0% intraday by flashing $67,600 and $3,550 prices as we write.

Traders brace for volatile Wednesday…

Monday’s holiday in China, Australia, and Hong Kong joined a light calendar elsewhere to offer a modest start to the crucial week. The momentum failed to return to the table early Tuesday even as headlines from China and the UK data allowed information to the traders. The reason could be linked to the mostly contrasting views on the US Federal Reserve’s (Fed) rate cuts and the Bank of Japan’s (BoJ) ability to announce more rate hikes. Also, the European Central Bank’s (ECB) hesitance for further rate cuts and the looming rate reductions on the Bank of England (BoE) confuse traders. Furthermore, geopolitical news from the UK, Eurozone, US, and the Middle East add trading filters.

The US Dollar benefits from the market’s indecision, especially after Friday’s strong US employment report, whereas the EURUSD bears the burden of the political pessimism in France and Germany. It should be noted that the New York Fed’s survey on consumer expectations signaled an increase in the 5-year inflation expectations from 2.8% to 3.0% whereas the one-year counterpart fell slightly from 3.3% to 3.2%. Also, the US Employment Trend for May improved from the lowest level since October 2021 to 111.44 and echoed chatters about strong US job markets, as well as sturdy inflation, to defend the US Dollar bulls.

Meanwhile, an improvement in the Eurozone Sentix Investor Confidence for June, to 0.3% from -1.8, and hawkish comments from ECB President Christine Lagarde failed to inspire the EURUSD buyers. Not only ECB’s Lagarde but the policymaker Joachim Nagel also cited hesitance in reducing the rates further.

Elsewhere, the UK’s latest jobs report showed an increase in the Unemployment Rate and Claimant Count Change to challenge the BoE’s hawkish bias. However, improvement in the Average Earnings put a floor under the GBPUSD pair. It’s worth noting that the mixed feelings about the UK’s ruling party’s victory in general elections weighed on the Pound Sterling of late.

Apart from the previously stated catalysts, the fresh woes about China allow the US Dollar to attract bids. That said, the news suggesting the European Commission’s readiness for more tariffs on Chinese electric vehicles (EV) joined Bloomberg’s piece signaling the Hong Kong court’s liquidation order for China’s mid-sized builder Dexin to fuel the China woes. Furthermore, headlines suggesting China banks’ USDCNY shorts also question the nation’s ability to defend the economy and its currency from the firmer US Dollar.

Considering China’s dominance in the commodity market, as well as its importance for Australia and New Zealand, the AUDUSD and NZDUSD remain pressured due to economic fears about Beijing. Apart from that, downbeat Aussie sentiment data also weigh on the risk-barometer pair. It’s worth noting that the cautious mood ahead of this week’s Australia inflation data and the US/China catalysts also challenge the Aussie pair.

USDCAD, on the other hand, struggles to welcome the buyers amid the latest jump in Oil prices. That said, the WTI crude Oil jumped the most since November 2023 on concerns about witnessing higher energy demand due to the lower rates and China stimulus, as well as due to the OPEC+ supply cuts. Moving on, Gold price seesaws within a two-month-old trading range as China’s gold buying slows amid domestic pessimism and higher prices of the metal, not to forget the strong US Dollar. Also challenging the XAUUSD bulls is the indecision about the Fed’s rate cuts in 2024 and political uncertainty in major economies.

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

OPEC report, politics eyed ahead of busy days…

Looking ahead, Tuesday’s full markets will allow traders to better utilize the geopolitical headlines and amplify the momentum even as the cautious mood ahead of Wednesday’s top-tier data/events will limit the moves. The same could help the US Dollar to defend the previous weekly gains ahead of the FOMC and US inflation, which in turn can exert downside pressure on the riskier assets like commodities, Antipodeans and equities. However, OPEC’s monthly energy forecasts will be the key for Oil traders and hence should be observed closely by the bulls, especially when the cartel has been forecasting higher energy demand of late.

May the trading luck be with you!