Traders struggle to extend Friday’s optimism, USD weighs on oil, gold and cryptos

Market sentiment dwindles during early Monday, fading Friday’s cautious optimism, as covid and geopolitical headlines weigh on risk appetite during a sluggish start to the week. Adding to the risk-off mood could be the fresh fears of inflation and growth.

The risk-aversion wave recalls the US dollar buyers around the 20-year high, which in turn weigh on prices of gold and crude oil. 

Equities were mixed after the previous day’s upbeat performance but BTCUSD and ETHUSD extend losses of multiple weeks.

China’s data populated calendar ahead of a likely quiet day for data watchers. Though, risk catalysts can keep the markets liquid.

Following is the list of major assets’ latest performances:

• Brent oil pauses three-day uptrend around $110.00, down 1.21% intraday.
• Gold drops below $1,800 to renew three-month low.
• USD Index regains its place near 20-year high, mildly bid near 104.60 at the latest.
• FTSE 100 and DAX dropped to near 0.40% while EUROSTOXX50 prints mild losses near 3,685.
• Dow Jones gained 1.5%, S&P 500 rose 2.39% whereas Nasdaq rallied around 3.80% on Friday.
• BTCUSD and ETHUSD both fall near 6.0%

China, Russia renews risk-off mood

Fed’s Powell and downbeat US data triggered the much-awaited market consolidation on Friday. However, fears of no sooner covid relief to China and pessimistic data weighed on the sentiment during early Monday. Also adding strength to the risk-off mood was Russia’s indirect threat to Sweden and Finland as they prepare to join the North Atlantic Treaty Organization (NATO). Furthermore, South Korea’s readiness for a big interest rate hike and a rebound in the US inflation expectations are extra catalysts that weighed on the risk appetite.

While the risk-aversion wave renewed US dollar strength, prices of gold stayed pressured near a three-month low, flashed on Friday, whereas Brent oil snaps a three-day uptrend as comments from the Middle East hint at the easing pressure on supplies.

The US equities rallied on Friday but the optimism couldn’t hold well in Asia and early Europe on Monday.

Moving on, cryptos bear the burden of sour sentiment as well as fears of negative from the first major discussions in El Salvador as the country nears bankruptcy following its acceptance of Bitcoin as a legal tender.

⏫ 🟢 Strong buy: USDJPY, USDCAD

⏬ 🔴 Strong sell: Nasdaq, silver, AUDUSD

⬆️ 🟢 Buy: USD Index

⬇️ 🔴 Sell: DAX, FTSE 100, brent oil, gold, ETH/USD, BTC/USD, GBP/USD

Qualitative catalysts to dominate ahead of US Retail Sales

Given the traders’ anxiety over the Fed’s next moves, backed by a lack of clarity over the key US data, global markets may remain pressured heading into Tuesday’s US Retail Sales.

Also, China’s mixed comments over Shanghai and Beijing’s covid conditions and Russia’s battle with Ukraine in Donbas keep the risk-off mood active.

As a result, the US dollar may stay firmer, which in turn could weigh on the riskier assets like commodities, equities and cryptos.

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