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MTrading Team • 2022-07-01

US dollar resumes run-up as risk-off escalates, gold, cryptos drop further

US dollar resumes run-up as risk-off escalates, gold, cryptos drop further

Softer consumer spending in the US joined traders' rush towards bonds to amplify the risk-off mood of late. Fears of economic slowdown get stronger day by day as central bankers stay on course with monetary policy aggression without fearing a short-term decline in activities. The pessimism also takes clues from the ongoing Russia-Ukraine crisis and China’s inability to convince markets that it has emerged from the covid-led fall in the activities.

Elsewhere, the US Dollar regains upside momentum after retreating from the two-week high. The greenback’s strength drowned the prices of gold and silver as they refresh multi-day lows. Antipodeans are not spared from the risk-aversion and drop around 1.0% whereas USDJPY refrains from respecting the greenback as downbeat yields weaken the yen pair.

It should be noted that the BTCUSD drops for the sixth consecutive day but ETHUSD rebounds even as traders lose confidence in e-currencies.

  • Brent oil drops for the third consecutive day to refresh its weekly bottom, down 0.3% near $109.00 at the latest.
  • Gold declines for the fifth straight day as bears attack yearly low under $1,800.
  • USD Index rises back towards two-week high, up 0.25% near 105.00 by the press time.
  • FTSE 100 slides around 0.6% but STOXX50 and DAX are both consolidating recent losses with mild gains at the latest.
  • Wall Street closed in the red with Dow Jones and S&P500 marking 0.8% loss while Nasdaq falling 1.3% by the day’s end.
  • BTCUSD drops 1.70% to $19,650 while ETHUSD bounces off two-week low to $1075 at the latest.
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Pessimism grows with each effort to talk down

Most policymakers, be it from central banks of the US, the UK and Europe or governments in China and China, have tried their hands to infuse optimism in the markets. However, every one of them has failed so far. The reason could be linked to the declining growth numbers and a jump in the inflation data. Recently, US consumer spending dropped to a three-month low to add to the market’s worries. That said, the softer PCE inflation figures couldn’t soothe the pain.

UK government tried to please traders with offers to ease VAT but the political jitters in the country joined Brexit fears to exert downside pressure on the GBPUSD. Elsewhere, China’s Caixin Manufacturing PMI also tracked the official activity numbers to the north but failed to impress commodity buyers.

It should be noted that the Treasury yields are poking the monthly lows and the fear index is also loud about portraying the investors’ woes. Equities are downbeat and the cryptocurrencies couldn’t be left apart amid broad weakness in economic sentiment.

⏫ 🟢 Strong buy: USDCAD

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD, Brent oil

⬆️ 🟢 Buy: USD Index, USDJPY

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

Eurozone inflation, US PMI in focus

Although the risk-off mood can keep favoring the US dollar versus the rest, the Euro may improve if the bloc’s inflation number refreshes record high and push the ECB towards heavier rate hikes when they start increasing benchmark rates in July.

On the other hand, the US ISM Manufacturing PMI will also be watched carefully to get the hints of economic slowdown and can propel the USD, even if it comes out softer.

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