Risk profile deteriorates on China, cautious mood ahead of FOMC Minutes

Global markets begin the week’s trading on a back foot, after a week full of bull’s ruling and softer USD, as traders await confirmation of the Fed’s ‘neutral’ rate after recently softer inflation statistics.

Other than the pre-FOMC anxiety, China’s downbeat data and the People’s Bank of China’s (PBOC) rate cut also tried to lure the bears and renewed the US dollar strength.

On the contrary, easing covid restrictions in Shanghai, resumption of Russian bond trading on Wall Street and Japan’s GDP managed to battle the pessimism.

Even so, the US dollar strength triggered the much-awaited pullback of gold, as well as weighed on the crude oil prices. Further, USDJPY was the strongest but the AUDUSD and NZDUSD returned to the bear’s radar after a week’s absence.

BTCUSD and ETHUSD are both struggling to extend the weekly gains as traders reassess the bullish catalysts amid multiple doubts.

Following are the latest moves of the key assets:

• Brent oil drops 2.0% to mark the second consecutive daily loss at around $98.50.
• Gold reverses Friday’s gains around monthly top, down 0.80% near $1,787 at the latest.
• USD Index gains 0.25% as buyers approach 106.00 during the two-day rebound from the monthly low.
• FTSE 100, Eurostoxx and DAX are all losing around 0.50% intraday by the press time.
• Wall Street closed with heavy gains led by Nasdaq’s 2.09% run-up.
• BTCUSD reverses from two-month high while ETHUSD extends Friday’s losses to $1,900.

Bear’s return or a pullback?

Although the markets turned risk-averse during early Monday, the bears are still far from the throne as traders await this week’s key central bank actions and meeting minutes. On top of that, China’s mixed signals and failure to generate credit demand, despite ample supplies, also keep the bulls on their toes.

The market’s anxiety underpins the US dollar demand and consolidates recent gains of gold, as well as Antipodeans. Crude oil prices fail to cheer Aramco’s expectations of firmer energy demand while a slew of China data and the PBOC’s rate cut couldn’t please AUDUSD buyers. That said, NZDUSD also pares recent gains as traders seem to have pocketed the RBNZ rate hike concerns.

Elsewhere, the Asia-Pacific shares mixed but the stock futures in the US and Europe print mild losses while ignoring Friday’s upbeat Wall Street close.

Cryptocurrencies retreat from monthly high as bulls need confirmation of the next upswing amid looming concerns over the economic health and regulations.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETHUSD

⬆️ 🟢 Buy: USD Index, USDCAD, Nasdaq

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

Second-tier US data will entertain traders but risk catalysts are the key

Having witnessed the return of bears earlier in the day, the risk-aversion is likely to prevail at least before the Fed Minutes. However, today’s Empire State Manufacturing Index and chatters over the Fed’s next move, as well as China’s covid-linked news, might try to appease buyers. It should be noted that the yields will be important during the week and hence need to be observed closely, together with the central bank moves and minutes.

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