Hawkish FED and increasing Tensions
After last week's published data from the US, most FED speakers supported the tightening policies by mentioning the 50 bps and 75 bps as the possible options as inflation is still so high. As the likelihood of higher interest rates increases, US bond yields rose on Friday towards 3%.
The USD, as a reaction, extended gains to trade above 108.50 early Monday, and it is expected to hold these higher levels. For now, the US dollar continues to lead the coquettish, outperforming non-US currencies. We must mention that the gold attraction is getting less with a stronger USD and higher bond yields. Spot gold fell for the fifth consecutive day. Around 1,730 USD, gold hit a new low since July 28 and recorded the most extended decline since November last year.
On the geopolitical front, tensions between Russia-Ukraine, and China-Taiwan are increasing the market risk. Remember that China is the world's second-largest economy and the largest factory, while Russia is the world's biggest Commodity exporter, especially gas, oil, and minerals.
Recently after the US announcement about trade talks with Taiwan, after the opposition from China's Commerce Ministry, the Foreign Minister also said on Thursday that Beijing will take resolute measures to defend its territorial integrity and urges the US not to make a wrong judgment about China's countermeasures.
On the Ukraine-Russia front, the explosion in Moscow on Saturday increased the risk-off sentiment in the market. According to the Russian reports, the Ukrainian-related attackers are suspected of planting an explosive device in a car. The dead is Darya Dugina, the daughter of Russian political philosopher Alexander Dugin. The incident may be "premeditated and tailored," and the original target of the suspect should be Alexander Dugin himself. After the incident, the conflict between Russia and Ukraine may further escalate.
So while the market risk is increasing and Yields are higher, we can expect t have the bulls for a longer time in the USD chart. From the technical point of view, the price moves above the 20-DMA and trend line, while the stochastic also remains bullish.
