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MTrading Team • 2022-07-25

Fed week begins on thin ice, oil remains pressured

Fed week begins on thin ice, oil remains pressured

Traders kick-start the FOMC week amid fears of recession and central bank aggression, mainly led by the Fed and the ECB. Adding to the pessimism are the concerns over fresh Australia-China tussles as Canberra pushes Beijing to remove trade sanctions. On the same line is anxiety ahead of a virtual meeting between the US and the Indo-Pacific trade and economic ministers.

US dollar cheers the risk-off mood with mild gains, which in turn weighs on commodities and Antipodeans. Crude oil drops for the fourth consecutive day while gold also fades two-day uptrend.

It’s worth noting that Friday’s downbeat US CPI and weekend comments from the US policymakers hint at further economic pain and faster rate hikes ahead.

Cryptocurrencies also bear the burden of the market’s risk-off mood, as well as fears of more regulations and less participation.

Following are the latest moves of the key assets:

  • Brent oil prints four-day downtrend by falling 1.35% to $102.40 by the press time.
  • Gold snaps two-day uptrend with mild losses around $1,725.
  • USD Index rises 0.20% to 106.75 after posting the first weekly loss in four.
  • Stock futures in the US and Europe print mild losses.
  • Wall Street closed with losses amid downbeat tech sector performance.
  • BTCUSD declines 3.0% intraday around $21,800 while ETHUSD drops nearly 5.0% to $1,520 at the latest.
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Risk-aversion on the table

Although Friday’s downbeat prints of the US PMIs tried to push back Fed hawks, fears of recession and underlying details suggesting more price pressure kept the market in a cautious mode at the start of the key week.

US Treasury Secretary Janet Yellen talked down fears of the US economic slowdown while ECB President Christine Lagarde confirmed more rate hikes during the weekend.

It should be observed that fears of more pain for the corporate, due to the firmer US dollar, provided an additional downside factor and weighed on equities during the Asian session.

A firmer US dollar and fears of softer energy demand drowned crude oil prices but the Canadian dollar appears to be less on the losing side after strong Canada Retail Sales, published the previous day. That said, NZDUSD drops the most among the G10 currency pairs as traders weigh economic fears surrounding China with the Fed’s 0.75% rate hike while also paying less attention to the hawkish RBNZ.

BTCUSD and the ETHUSD fail to extend the weekly gains as sour sentiment joins talks that the key crypto players aren’t in a position to regain market acceptance amid recession woes and regulatory concerns, not to forget less participation. 

⏫ 🟢 Strong buy: USDCAD

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD

⬆️ 🟢 Buy: USD Index, USDJPY

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

German IFO Sentiment could entertain traders

Moving on, a light calendar could restrict the market moves ahead of the key Fed move, likely a 0.75 bps rate hike. However, the second quarter earnings season and talks surrounding economic slowdown may entertain traders.

In addition to the Fed, Eurozone GDP and the US Core PCE are additional important catalysts that will offer notable moves looking forward.

That said, German IFO sentiment numbers for July will be important for Monday.

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