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Forex Today: Strong Risk-Off Moves Pause Over Asian Session

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on May 10, 2022
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Fears over tightening monetary policies and high inflation rates sent stocks and other risky assets strongly lower yesterday.

Markets continued to trend yesterday in a risk-off direction, but risky assets have recovered a bit during today’s Asian session. Yesterday saw the US Dollar Index reach a new 2-year high, the S&P 500 Index trade below 4,000, most commodities sell off sharply (especially Natural Gas which ended the day down by more than 10%), and cryptocurrencies fall strongly while Bitcoin traded below $30k for the first time in 10 months. It is hard to see what news could reverse this risk-off sentiment before Wednesday’s US CPI (inflation) data release, which the market will be anticipating keenly for a further hint that the pace of inflation may be slowing.

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The Forex market is retracing a little against its long-term trends over today’s Asian session, but the retracement looks unlikely to run much further. The Euro and the British Pound began to stabilize against the greenback, which made most of its gains against a weak Swiss Franc, and the Australian and New Zealand Dollars. The current retracement is seeing the US Dollar weak while the Swiss Franc is showing the most short-term strength.The cryptocurrency sector continues to decline for the seventh consecutive week, with Bitcoin trading at a 10-month low and Ethereum trading at a 3-month low. Technical analysis suggests that if Bitcoin breaks below $28,800 it could quickly fall to $10k. There are signs the entire crypto market is in danger of sharp falls in value and general destabilization.US Treasury Yields continue to look strong, although the 10-year yield has been significantly more bullish than the 2-year over recent days, with the former briefly touching a new long-term high yesterday before retracing.Two members of the Bank of Japan have commented on monetary policy and the economy relative to the Yen’s value. Uchida said “we must continue to support the economy with the current aggressive monetary easing”. Suzuki said that “the recent rapid Yen fall is not desirable”. The Japanese Yen briefly touched a new 20-year low against the US Dollar yesterday before regaining strength significantly, suggesting that we may now see a significant pause in the Yen’s devaluation.Daily new coronavirus cases globally fell last week for the seventh consecutive week.It is estimated that 65.5% of the world’s population has received at least one dose of a coronavirus vaccination, while approximately 6.6% of the global population is confirmed to have contracted the virus at some time, although the true number is highly likely to be much larger.Total confirmed new coronavirus cases worldwide stand at over 517.7 million with an average case fatality rate of 1.21%.The rate of new coronavirus infections appears to now be increasing only in Dominica, China, South Africa, and Taiwan.The Chinese state is doubling down on its “zero covid” strategy, with increased lockdown restrictions in Beijing and a continuing lockdown in Shanghai. The measures are hurting the Yuan and the Chinese stock market.

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