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MTrading Team • 2022-07-05

China fails to impress buyers as full markets assess economic fears

China fails to impress buyers as full markets assess economic fears

The market’s risk profile remains downbeat as the US traders return from a long weekend, mainly backed by the fears of recession and major central banks’ aggression. The sour sentiment failed to cheer talks that the US braces for Trump-era tariff removal for China. 

Risk-off mood propelled the US dollar and the Treasury yields while drowning the prices of commodities and Antipodeans.

As a result, the AUDUSD pair fail to cheer RBA’s 0.50% rate lift and the NZDUSD bear the burden of downbeat business sentiment data.

On the other hand, gold and crude oil also remain pressured while cryptocurrencies struggle to extend the previous day’s recovery moves.

Following are the latest moves of the key assets:

  • Brent oil remains pressured at around $116.30, snapping two-day uptrend.
  • Gold drops for the second consecutive day as sellers attack $1,800.
  • USD Index rises the most in a week, up 0.40% intraday near $105.60.
  • FTSE 100 drops 0.50% but STOXX50 and DAX are both printing mild gains of late.
  • Wall Street remained close due to the US Independence Day holiday.
  • BTCUSD struggles to defend the upsi
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No respite from risk-aversion

The Sino-American trade optimism and China’s readiness to put aside around 500 billion yuan for infrastructure funds tried to lure the riskier assets on early Tuesday. However, strong economic slowdown signals from Italy and Germany appear to have roiled the mood amid the full markets. On the same line were fears that the US-China trade peace won’t ease the supply crunch, or the inflation.

Elsewhere, the RBA announced a widely expected 50 bps rate hike but failed to propel the AUDUSD as the Rate Statement raised doubts over the further increase in benchmark rates. Additionally, China’s Caixin Services PMI managed to track the headline activity numbers but remained mostly ignored whereas New Zealand’s quarterly reading of business sentiment pressured the NZDUSD towards the south.

It should be noted that the firmer US Treasury yields joined fears of recession to underpin the US dollar’s run-up towards refreshing the two-week high, which in turn drowned gold and triggered a U-turn in crude oil prices.

BTCUSD and ETHUSD portrayed a relief rally on Monday, amid an off in the US, but fail to keep buyers on the board as chatters surrounding the Indian tax system and fears of more regulations weigh on the cryptocurrencies.

⏫ 🟢 Strong buy: USDCAD

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD

⬆️ 🟢 Buy: USD Index, USDJPY

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

Second-tier US data to help prepare for big events

US Factory Orders for May and final readings of the UK and Eurozone PMIs will decorate the calendar as traders await Fed minutes and US employment data for June, not to forget US ISM Services PMI and ECB Minutes.

Given the economic fears and an escalation in the Russia-Ukraine tussles, not to forget the market’s lack of interest in cheering risk positives from China, the US dollar is likely to remain firmer ahead of the crucial data/events. As a result, the further downside for gold and Antipodeans are on the cards. However, crude oil prices may witness recovery on chatters of a looming supply crunch.

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