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MTrading Team • 2022-10-07

Pre-NFP caution underpins USD rebound, weighs on gold prices

Pre-NFP caution underpins USD rebound, weighs on gold prices

After a few positive days, market sentiment returned in favor of the US dollar on Tuesday, mainly backed by the firmer Treasury yields. The greenback also cheered geopolitical tensions surrounding China, North Korea and Russia, as well as the downbeat ECB Monetary Policy Meeting Accounts.

Even so, the mood on early Friday remains sluggish as traders await the key US jobs report for September. The same restricts the market moves but weighs on the prices of gold and oil while keeping the USD Index captive around recent highs.

Equities were mildly offered but the Treasury bond yields remained firmer. That said, AUDUSD keeps the RBA-linked losses while EURUSD, USDJPY and USDCHF are on the same line as they pare recent gains against the greenback.

On the other hand, BTCUSD and ETHUSD struggle for clear directions, pausing the latest downside, on fresh doubts about NFTs and regulatory fears.

Following are the latest moves of the key assets:

  • Brent oil retreats from a three-week high, down 0.75% intraday around $95.00 at the latest.
  • Gold drops for the third consecutive day, down 0.18% around $1,710 as we write.
  • USD Index pokes weekly high surrounding 112.50 during the three-day uptrend.
  • FTSE and DAX both remain directionless but Eurostoxx is down nearly half a percent by the press time.
  • Wall Street closed with losses led by Dow Jones’ 1.15% fall.
  • BTCUSD and ETHUSD both remain sidelined near $19,900 and $1,350 at the latest.
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Pre-NFP mood joins geopolitical tensions to weaken sentiment

Mixed statistics from the ex-US calendar joined fears of likely softening of the rate hike pressure, mainly outside the Fed, favored the US dollar’s recovery of late. The sour sentiment gained extra strength from ECB Meeting Accounts suggesting slower rate lifts, as well as geopolitical tensions between the West and Russia. On the same line could be the US tussle with North Korea and China, not to forget fears of a recession in the bloc.

Downbeat equities and the firmer US Treasury yields offered additional help to the US dollar. However, the pre-data anxiety restricts the greenback’s upside momentum during early Friday.

Gold prices fade the upside momentum while crude oil snapped a four-day uptrend. NZDUSD dropped the most among the G10 major currencies whereas USDCHF occupies the other end.

Elsewhere, fears of diminishing interest in the Non-Fungible Tokens (NFTs) and chatters over more crypto regulations from the US SEC weigh on the BTCUSD and the ETHUSD.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETHUSD

⬆️ 🟢 Buy: USD Index, USDCAD, Nasdaq, EURUSD

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

Nothing more important than the jobs report

Although the risk-off mood could help the US dollar to consolidate the previous weekly losses, it all depends upon today’s employment data from the US and Canada. Should the headline NFP remain weak, as most forecasts show, the US dollar may reverse the recent gains even if the Fed policymakers keep drumming higher rates. On the contrary, stronger job numbers will strengthen the hopes of higher rates from the Fed, which is the more likely outcome.

Other than the US and Canadian employment numbers, geopolitical headlines and oil-related chatters will also be important to forecasts short-term market moves.

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