Slowing demand amidst skyrocketing inflation poses fear of a market recession

Midday Update

Markets continued to experience thin liquidity as investors wrapped up the Easter Holiday on Monday. The USD remains resilient against foreign currencies as bids remain in favour of the major currency. The economic calendar is light as major markets are still closed; however, traders watch out for the Bank of America’s earnings report and FOMC member Bullard’s speech.

So far, the NZDUSD pair has dropped by -0.45% in the early European session as the dollar remained on the bid side. The pair is down to 0.6733 as slowing commodity demand underpins the New Zealand dollar due to the Chinese lockdown.

The economic slowdown caused by the lockdowns poses global risks as spending slumps. A break below the near-term support could renew selling pressure towards 0.6575 support. Traders focus on FOMC member Bullard’s speech later in the New York session.

The USDJPY pared earlier losses during the European session after a remarkable BoJ governor Kuroda speech. The governor indicated a weak yen would impact corporate profits, while it was premature to debate an exit from that easy policy. The pair is back up by +0.11% and faces a near-term resistance at the 126.79 area and a failure break above that area may see the pair taking a corrective move towards the 126.00 psychological area.

AUDUSD edged lower losing -0.40% early Monday morning as the pair holds slightly above 0.7350 near-term support. Bears may target the 0.7300 near-term psychological support as Dollar hawkishness makes the pair continue to suffer selling pressure.

More than likely, the entire markets focus will turn to Fed Chair Powell on Thursday although no new policy direction is likely to be unveiled.

US equities futures opened lower on Monday ahead of the Bank of America report. The S&P500 futures were down-0.42% breaching the 4400, which coincides with 4-week support. Nasdaq futures dropped by -0.54% to 13800, previous resistance turned support.

A break below that immediate support may open room for further downside towards 13000 psychological area, a 1-year low. The Dax futures lagged behind with a -0.33% drop as the outlook brings a possibility of a $34000 near-term target.

In the commodity markets, oil opened higher as Libya shut the biggest oil field potentially disrupting supply in the near term. Brent extended gains to 113.73 before shading off some gains below the 114.80, a 3-week resistance. Gold opened higher by +0.89 to 1993.7 as investors seek the yellow metal as a near-term safe-haven asset amid inflationary pressure.

Bitcoin was down by -1.90% lower after slightly sweeping below the $39000 support. A break below that near-term support may see bears seeking lower prices while a break above $44000 may open room for further upside gains as market recession worries may push demand for cryptocurrencies higher.