USD pullback fails to impress gold, crypto on Fed-focused caution amid sparse trading in Asia

Financial markets affected by news on May 3 2022

Global financial markets witnessed a sluggish start to Tuesday amid holidays in Japan and China. This helped risk appetite to brace for the Fed’s hawkish action and weighed on the US dollar, while also helping equities on the Asia-Pacific, Europe and the UK bourses.

The US dollar pullback, however, couldn’t help gold and cryptocurrencies as traders remain cautious ahead of tomorrow’s Fed, especially after the RBA’s higher-than-expected hawkish move.

Brent oil prices are on the same line, with mild losses, even as the EU prepares larger sanctions on Russia and China’s covid condition is far from positive.

A lighter calendar and pre-Fed anxiety may restrict the market moves but the second-tier US data, as well as risk catalysts, can entertain intraday traders.

Following is the list of major assets’ latest performances:

  • Brent oil drops 0.80% while reversing the week-start gains to $106.60.
  • Gold remains pressured around the lowest levels since mid-February, down 0.40% around $1,855 at the latest.
  • USD Index prints mild losses around 103.40, near the 20-year high marked last week.
  • FTSE 100 rises 1.5% while DAX and EUROSTOXX50 add 0.30% and 0.80% respectively.
  • Dow Jones and S&P 500 rose 0.26% and 0.57% while Nasdaq jumped 1.6%.
  • BTCUSD and ETHUSD both remain pressured near $39,000 and $2,850 of late.

Markets brace for Fed in advance

Holidays in Asian majors allowed traders to pace themselves for the Fed’s 0.50% rate hike amid lackluster bond moves, which in turn triggered the US dollar’s pullback near a 20-year high. However, the yields remain firmer around the multi-month high and hence keep the fear trades on the table.

As a result, riskier assets like gold, BTC and equities fail to cheer the softer USD. Even so, AUDUSD rallies the most among the G10 currency pairs as the Reserve Bank of Australia (RBA) surpasses market expectations with a 0.25% rate hike.

European Union (EU) readiness the larger blackout of Russia from the SWIFT payment system, in addition to dumping energy imports from Moscow, as Mariupol continues to hear war alarms. On the other hand, mass-testing of covid continues in Beijing despite the holiday spirit. Also portraying the grim situations are the harsh activity restrictions in the dragon nation.

Elsewhere, two of the biggest Argentinean banks allowed crypto trading and the Smart Money also hints at bullish positioning. However, neither the BTCUSD nor the ETHUSD could benefit from this news as traders remain worried about a bigger Fed weapon to beat the inflation.

⏫ 🟢 Strong buy: USDJPY, GBPUSD

⏬ 🔴 Strong sell: Nasdaq, silver, AUDUSD

⬆️ 🟢 Buy: USD Index, DOW JONES, S&P 500

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

Snooze time ahead, data may offer intermediate moves

Although traders from Europe, the UK and the US will try to overcome the Asian session dullness, the pre-Fed anxiety and a light calendar may extend sluggish markets.

In addition to the US and Canadian numbers, headlines concerning Russia and China may also renew the market activity and add to the US dollar gains. However, it all depends upon the Fed and hence taking big risks ahead of the key event becomes less advisable.

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