Crude oil extends recovery from yearly low amid firmer sentiment, supply cut fears

Risk profile improves during early Tuesday, after witnessing a downbeat start to the key week, as headlines from China appear less destructive. Also favoring cautious optimism could be the mixed comments from the policymakers of the European Central Bank (ECB) and the US Federal Reserve (Fed).

The firmer sentiment allowed prices of commodities and Antipodeans to print the biggest intraday jump in over a week. Among them, Brent oil marked a notable rebound from a yearly low as supply crunch fears joined the risk-on mood.

Elsewhere, the US Treasury yields remain depressed and exerted downside pressure on the US dollar. The same helped gold to print the first daily gains in three.

Talking about the G10 currency pair, AUDUSD and NZDUSD aptly portray the upbeat mood while USDJPY cheers the market’s expectations of BOJ’s policy tightening in early 2023. Further, USDCAD has an extra benefit in the name of strong oil prices, due to Canada’s reliance on energy exports, to please the bears.

Cryptocurrencies also reverse the latest downtrend amid the market’s firmer sentiment even as fears of more regulations challenge BTCUSD and ETHUSD traders.

Following are the latest moves of the key assets:

• Brent oil eyes the biggest daily gains in three weeks while rising nearly 3.0% to regain $86.00.
• Gold prints the first upside in three days as buyers poke $1,755 mark by the press time.
• USD Index returns to the bear’s radar after a two-day absence, down 0.45% intraday near 106.20 at the latest.
• Wall Street closed in the red but equities in the UK and Europe begins the day on a firmer footing.
• BTCUSD snaps five-day downtrend near $16,500 while ETHUSD rises 3.5% to regain $1,200 as we write.

China propels risk-on mood

China cheers on being the world’s largest economy as a mild drop in its daily covid infections and a stimulus for the housing markets shifted the market’s mood towards the good. With this, the dragon nation bolstered the hopes of overcoming the virus woes and renewing the economic transition from bad to boom. 

On the other hand, global policymakers also tried to reconfigure their hawkish statements after witnessing softer economics of late, which in turn allowed traders to aim for riskier assets.

With this, the risk barometer AUDUSD gains the most among the major currency pairs while the USDJPY benefited from the hawkish expectations and mostly upbeat data from Japan.

Even so, the cautious mood ahead of the European inflation, Fed Chair Powell’s speech and the US jobs report tested the optimists heading into crucial trading sessions.

It should be noted that the fears of contagion risks from FTX, followed by BlockFi’s filing of bankruptcy, raised fears of stricter crypto ruled and challenged the BTCUSD and the ETHUSD buyers.

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

German inflation, risk catalysts are important

Although the aforementioned factors are crucial to gauge the market’s clear move, today’s inflation data from Germany and comments from the key central bankers, as well as GDP data from Switzerland and Canada, will be important to determine intraday moves. Given the latest shift in the mood, signals for easy rate increases could help the riskier assets.

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