Crude Oil recovers as fears of supply crunch join demand hopes, market’s cautious optimism

Global markets remain mildly positive as easing fears of banking fallouts join the central bankers’ hesitance in suggesting higher rates. Adding strength to the optimism could be China’s hopes of higher growth, as well as the IMF’s push to developed economies for a system to balance the weaker banking sectors and less fluent countries. It should be noted that the cautious mood ahead of inflation clues from Europe and the US probed the sentiment.

With the mild upbeat mood, US Dollar fades the previous day’s recovery and helps prices of Gold and Crude oil. The oil price has additional reason to pare earlier losses in the form of likely increasing energy demand from China and a supply crunch among the OPEC+ group members.

Talking about currencies, AUDUSD leads the G10 gains while USDJPY and GBPUSD also cheer the greenback’s retreat despite positing minor moves. That said, USDCAD and USDCHF also remain mildly offered while EURUSD struggles for clear directions as Germany's inflation data looms.

Cryptocurrencies grind higher during the three-day recovery as optimism ahead of the Ethereum Shanghai update contrasted with looming fears of tough regulations in the US.

Following are the latest moves of the key assets:

• Brent oil picks up bids to reverse the previous day’s pullback from two-week high of around $78.20, up 0.40% intraday.
• Gold prints mild gains near $1,970 while paring the weekly loss.
• USD Index drops back to 102.50 after the previous day’s corrective bounce.
• Wall Street closed in the green but the equities in the Asia-Pacific region traded mixed. However, shares in Europe and the UK remain firmer for the third consecutive day.
• BTCUSD and ETHUSD bulls keep the reins for the third consecutive day around $28,800 and $1,800 respectively.

Sentiment improves with a pinch of salt

Although the aforementioned catalysts allow markets to remain positive, despite the inaction on the bond front, a cautious mood ahead of the key inflation data and a lack of guarantee over the banking sector seems to probe the optimists.

Also restricting the positive vibes are recently firmer data from the US, EU and the UK, which in turn suggest the need for higher rates even if the policymakers hesitate. Further, the talks that the economic recession is unavoidable also poke the risk-takers as they wait for Germany’s HICP and second-tier US data.

Commodities have China factor remain worries as the dragon nation’s claims of economic resilience contrast with the impending Sino-American tussles and global ire over Beijing’s ties with Russia.

Elsewhere, a tussle between the crypto industry players and the US SEC joins the likely increasing flow of money into the BTCUSD and ETHUSD to challenge the once-loved investment forms.

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

Risk is the key

German HICP inflation gauge, the final reading of the US Q4 GDP and Q4 Core PCE could entertain the market players moving forward. However, major attention should be given to the yields and the market’s risk appetite for clear directions.

May the trading luck be with you!