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MTrading Team • 2022-12-29

USDJPY drops amid Coronavirus, geopolitical fears

USDJPY drops amid Coronavirus, geopolitical fears

Global markets turned risk-averse early Thursday amid escalating fears of China’s Covid conditions and fresh attacks on Ukraine by Russia. Even so, the US Dollar remains depressed while tracking the pullback in the Treasury bond yields.

As a result, the sour sentiment joins the BOJ’s action to weigh on the USDJPY prices and make it the biggest winner among the key G10 currency pairs. On the contrary, AUDUSD fails to cheer the USD’s weakness due to the Aussie pair’s risk barometer status and trade links with China.

Elsewhere, Gold price struggles to defend the previous bullish bias while crude oil extends the previous day’s losses.

Cryptocurrencies fail to portray the risk-aversion as BTCUSD remains depressed but ETHUSD prints mild gains and benefits from the US Dollar amid mixed clues.

Following are the latest moves of the key assets:

  • Brent oil renews intraday low to $82.00, down 1.56% on a day by the press time.
  • Gold prints mild gains around $1,810 while reversing the previous day’s losses.
  • USD Index snaps two-day uptrend around 104.20, printing 0.20% intraday downside at the latest.
  • Wall Street closed in the red and troubled stocks in the Asia-Pacific region but equities in Europe and the UK decline as we write.
  • BTCUSD and ETHUSD trade mixed around $16,500 and $1,200 in that order.
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China, Ukraine weigh on risk appetite but year-end inaction limits market moves

Although China’s unlock joined a pullback in the US Treasury yields to favor the market sentiment, a run-up in the virus cases and announcements needing covid test results for Chinese travelers before entering major nations have weighed on the risk profile. On the same line, a missile attack by Moscow on Kyiv and Kharkiv also favored the risk-off mood.

Even so, the mixed US data and hopes of no recession in the US allowed the bond bears to take a breather, which in turn weighed on the US Dollar.

Bank of Japan undertook bond market actions twice in the day and favored the Yen while softer Treasury yields exerted additional downside pressure on the USDJPY.

Gold struggles to keep the gains whereas Crude oil extends the previous day’s losses amid fears of declining demand due to China's Covid spread.

Elsewhere, Alameda Research’s swing in favor of Bitcoin failed to recall the BTCUSD bulls but Ether appears defending the post by printing mild gains after a two-day downtrend.

  • Strong buy: GBPUSD
  • Strong sell: ETHUSD, USDJPY
  • Buy: USD Index, USDCAD, Nasdaq, EURUSD
  • Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

Risk catalysts are the key

Given the mixed market reaction and the US Dollar’s inability to stay firmer, despite the risk-off mood, traders will seek more headlines from China and Ukraine to determine near-term market moves. Also important will be the US weekly jobless claims and the second-tier activity data.

May the trading luck be with you!