Market News from FxPro

[FxPro_2022]

Encouraging weakness of US data

Alex Kuptsikevich, a senior analyst from FxPro reported that US consumer prices rose markedly weaker than expected, sparking excitement in financial markets. A rise in weekly jobless claims also added to the picture of a weakening economy, reviving speculation that the Fed will slow down tightening soon.

The consumer price index for October rose 0.4%, slowing the annual growth rate to 7.7% from 8.2% a month earlier and stronger than expected at 7.9%. The core index (without energy and food) added 0.3% last month, slowing from 6.6% to 6.3% against expectations of 6.5%.

The weak inflation data takes speculators' fears off the radar that the Fed will make another 75-point hike and that the key rate will exceed 5% in this monetary cycle.
Before this, for more than a year, we have only seen an apparent tightening of the tone time after time. However, the neat reversal of official commentary rhetoric has been given a firm footing in subdued inflation.

It won't be right to tune in to an imminent rate cut or a pause in rate hikes, but slowing the pace is big news for markets strangled by Central Bank policy. And they are now able to breathe more freely.

 

[FxPro_2022]

Crude Oil may be ready to fall further

Alex Kuptsikevich, a senior analyst from FxPro reported that oil has lost 7.5% since Tuesday, bouncing back to $84 for WTI. Pressure intensified on Wednesday after the weekly inventory report. Having failed to break above $93 for the second time in just over a month, oil appears to have completed its correction from its June-September decline, heading towards $75.
Weekly data showed a 3.9M barrel increase in commercial inventories, reversing the decline a week earlier. At the start of November, inventories were 2.5% below the five-year average for the same week. From this point of view, the situation is quite normal-ish. The strategic reserve continues to melt away, masking the lag between production levels and demand.
Notably, weekly production levels remain close to 12M BPD, at 12.1M last week versus 11.9M the week before. However, these numbers may well be considered sufficient given the slowdown in China, which is increasingly evident from the data released this week.

Also on the side of the market bears was Oman, whose oil minister warned of a possible drop in the price to "$70 after this winter". Adjusting to the shift of the OPEC cartel member, market participants began to consider an even deeper decline.
On the chart, oil has formed a ‘double top’, failing to raise above $93 at the start of the week. And now, the $83 level, where the previous support area is located, is worth paying more attention to. A fall below that would confirm the pattern, suggesting a possible target in the $73 area.
A resistance area in oil has formed in the last month at 61.8% of the decline, a classic Fibonacci retracement. This pattern will finally get confirmation if the price falls under $75. It is considered that in this case, the bears' target will be the area of 161.8% of the initial movement, i.e., the mark near $50.
A drop here looks excessively pessimistic now, but volatile oil has repeatedly lost more than 70% of its peak value during economic downturns. And given the increasing risks of a recession early next year in the USA, the Eurozone, and the UK, plus a sharp slowdown in China at the same time, a fall to $50 looks like a pessimistic working scenario.

 

[FxPro_2022]

Inner pressure in crypto remains
Market picture

Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin is trading near $17.3K, adding 4.6% in the past 24 hours. Total crypto market capitalisation is up 3.6% to $873bn. This could be considered a good performance, but the dynamics of other markets led us to expect more from cryptocurrencies.
FXT's failure continues to weigh on the entire sector, which is now clearly dominated by client money outflows due to an apparent drop in confidence in cryptocurrency exchanges. While most of this may be the transfer of coins to cold wallets, impressive sales also exist. As a result, there is a noticeable shift to short-term speculation in the crypto market with an attempt to reduce leverage and lock in profits on the upside.
News background
After several days of sharp declines, the crypto market recouped some losses amid weak US inflation data. Risky assets rose, while the US dollar fell due to speculation over a slowdown in the Fed's rate hike.
Tron founder Justin Sun said he was working with FTX to "develop a solution to start moving forward". He did not specify which initiative he was referring to. Sun later added that FTX has resumed trading Tron (TRX) on its platform, and the parties are now working to restore the withdrawal feature.
The head of FTX, who did not deny the $8bn hole in its balance sheet, stressed that the liquidity problems were solely with the global FTX International platform and did not affect US-based FTX.US.
JPMorgan believes bitcoin's fall isn't over, and the FTX liquidity crisis could lead to "cascading liquidations" and BTC collapsing to $13,000.
Binance confirmed its $70bn in assets, revealing on its website the addresses where it stores the cryptocurrency.

 

[FxPro_2022]

UK economy softer landing and more solid Pound

Alex Kuptsikevich, a senior analyst from FxPro reported that the pound rally gained new momentum on Friday morning, following a respite after the 3% rise in GBPUSD on Thursday. The British currency was supported predominantly by better-than-expected economic data and comments from the Governor of the Bank of England on the intention for further rate hikes.
The UK economy contracted by 0.2% in the third quarter - noticeably less than the forecasted drop of 0.5%. One year ago, growth in the same period diminished to 2.4% after 4.4% in the second quarter and +2.1% expected. For September, the economy contracted by 0.6%, following a decline of 0.1% in August.
Industrial production added 0.2% in September, losing 3.1% y/y. Manufacturing is more challenging, holding on to volumes in September after contracting by a cumulative 2.9% in the previous three months.

Separately, there is an improvement in the balance of foreign trade. The monthly deficit decreased to 15.6bn compared to 17.2bn a month before, 16.1bn a year ago and a peak of 23 in January. However, this is well above 'normal' levels from 2013 to 2019, near 12bn. Exports are up 46% y/y, or 11.8bn and imports are up 27% or 11.4bn.
The UK economy has started to contract without surprises, evidenced by earlier labour market figures. So far, it is a softer landing than previously feared.

Nevertheless, it is essential for market participants that the published data shows a less tragic slowdown trajectory and that the decline in commodity prices in recent months is easing the pressure on imports and industry. In this environment, there are more and more reasons for long-term buying of the British pound, which renewed its historic low against the dollar in September. As a result, the GBPUSD is now above 1.1750, having beaten off losses since August.

The rise in the British currency also shows signs of breaking the downtrend as GBPUSD has surpassed previous local highs and has consolidated above the 50-day average. On the technical analysis side, GBPUSD may encounter little resistance up to the 1.20 area by the end of the month, where the bulls will still have to prove their strength.

 

[FxPro_2022]

Is dollar growth over? Likely so

Alex Kuptsikevich, a senior analyst from FxPro reported that the dollar index lost 4% last week, the most significant drop since March 2020. Such powerful moves against the trend often signal a further trend reversal. However, it will probably be a slower pace of decline and not a one-way street as we see it over the previous ten days.
The pressure on the dollar has intensified over the past two weeks on speculation that the Fed will slow down the pace of policy tightening and that the maximum interest rate in this monetary cycle could be lower than previously feared. Signals from Fed members and slower-than-forecast inflation supported this view, triggering a wave of demand for risky assets.

At the same time, monetary regulators in other countries were in no hurry to soften their rhetoric, returning markets to a familiar situation where the Fed acts first and more aggressively than its peers in lowering and raising rates. But overall, it does not stand out for any rigidity.
The monetary watchdogs in the Eurozone have continued to signal in recent weeks that they are prepared to maintain the high speed of rate hikes, which fed their purchases in the Euro. That pressure could be fuelled by sales of dollar assets from the reserves of the SNB and the BoJ.
USDCHF and USDJPY returned under the emotionally significant levels of 1.0 and 150, attracting market-oriented and trend-following participants' interest.

The nearest target for the Dollar Index correction is 105, actively operating as a resistance and support between May and August. This is also where the 61.8% Fibonacci retracement level of 2021-2022 comes in. A decisive failure below would confirm that we see the Dollar moving into a decline and not just a correction in a long-term uptrend. In this scenario, the Dollar Index heads into the 90-100 area, where it has been comfortable since 2015, with a potential pullback to the upper bound of this range in the first quarter of 2023.
History has other examples. In late 2008, two weeks of a significant sell-off in the dollar were followed by three months of gains, and the DXY rewrote local highs, finally reversing only in March 2009. However, it is essential to remember that in both March 2020 and March 2009, the EUR reversal was sustained when supported by the equity market surge we also witnessed last week.

 

[FxPro_2022]

Eurozone industrial production: a meaningful boost in September

Alex Kuptsikevich, a senior analyst from FxPro reported that according to the latest estimates, Eurozone industrial production added 0.9% for September and 4.9% y/y. The figures are much better than the expected +0.1% m/m and 2.8% y/y, showing that the euro-region economy is in no hurry to slip into recession despite high energy prices.
The seasonally adjusted index was at its highest level in almost five years, remaining within the framework of multi-year global stagnation. The apparent reason for the sector's resilience is the massive backlog of orders formed on the back of the easing of pandemic restrictions.
There are two sides to the solid industrial production figures in the Eurozone. The strong figures for September create a high base from which a further decline may seem particularly deep and painful. On the other side, they show the relative vitality of the European economy and its positive reaction to the collapse of the euro.

In absolute terms, the Eurozone recession may not be as deep as feared a few months ago, despite high energy costs and a sharp rise in the ECB rate.
We note that commodity prices have fallen significantly in recent months. A relatively strong economy by the start of the extreme hike cycle forms more room for an ECB rate hike, which is suitable for the euro.
The EURUSD will likely face a few obstacles for the upside up to the area of 1.0400-1.0430, where the 200-day MA and the support of the pair in May-June are concentrated. Here, the pair could face local profit-taking, and there will be a fierce tug-of-war between the dollar bulls and the bears in the markets.

 

[FxPro_2022]

The aftershock of the crypto market?
Market picture

Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin is trading just below 16K by the start of active European trading on Monday, losing 23.6% to levels of seven days ago. Ethereum collapsed 25% to $1190. Other top altcoins in the top 10 fell from 20% (BNB) to 29.6% (XRP).
The total capitalisation of the crypto market, according to CoinMarketCap, fell 27% over the week to $757bn, to its lowest level since December 2020.
Bitcoin and the overall crypto market collapsed to two-year lows last week amid the bankruptcy of cryptocurrency exchange FTX and related companies. We continue to compare what is happening to the banking crises of the early 20th century, which led to the formation of modern securities market regulation with more transparency for investors but less anonymity.
Bitcoin was down to $15.8K by Monday morning, repeating lows set from Wednesday to Thursday. This is a timid attempt by speculators to form a 'double bottom', a reversing pattern in tech analysis. But we also draw attention to the impressive selling hitting the crypto market on bounces from increasingly lower highs.
This behaviour still indicates a huge interest in selling, creating risks for a new, deeper downside slippage. This could be the $12-14K range in a reduced liquidity environment.
The collapse of FTX is likely to cause more reputational damage to second-order altcoins, pushing back the new alt-season for some time. However, the top two dozen cryptocurrencies with working projects remain a good long-term bet for a diversified crypto portfolio.
News background

According to Glassnode, the share of profitable bitcoin addresses online has fallen to 50% - the lowest since March 2020. Short-term investors who have held BTC for less than six months have once again capitulated. Miners were also part of the reset, data from the CryptoQuant platform shows. Long-term investors, who now control up to 35.4% of the total BTC supply, also suffered significant losses.
The current situation in the cryptocurrency industry echoes the 2008 financial crisis, and more companies could collapse in the coming weeks, warned Binance CEO, Changpeng Zhao. He said that the market has yet to feel the effects of the crisis around FTX.
JPMorgan believes the collapse of FTX will help the cryptocurrency industry recover and prompt regulators to speed up regulation of the sector.

 

[FxPro_2022]

ETH and BTC under pressure from the pros
Market picture

Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin is trading in the $16.7K area (+1.6% in 24 hours), a significant consolidation area of the past five days. It was helped back to these levels by the news of Binance launching a fund to help cryptocurrency companies experiencing temporary liquidity difficulties. The information has stopped a wave of selloffs but has yet to be able to turn the market around.
On the intraday charts of BTCUSD, there is a notable resistance area near the current price. In Ethereum, the situation is very similar, and the price fails to develop a growth above $1250 (+2.2% in 24 hours). The two most popular cryptocurrencies have the largest share of institutional investors, whose confidence in the sector has been eroded recently. It is their professional unloading into the market that we are now seeing on the charts.
The entire crypto market is more enthusiastic, adding 4.3% in capitalisation overnight to $841B, according to CoinMarketCap estimates.
According to CoinShares, investments in cryptocurrencies rose last week to their highest in three months. Inflows of $42M compared to outflows of $16M a week earlier. Bitcoin investments rose by $19M, and Ethereum by $3M. Investments in funds that allow shorts on bitcoin increased by $13M. Altcoin basket products attracted the highest since June by $8M. Investors saw the FTX collapse as an investment opportunity, CoinShares noted.
According to Glassnode, BTC withdrawals from cryptocurrency exchanges reached an all-time high of 106,000 BTC for the month. Previously, the market has only experienced similar BTC outflows three times in history.

News background

Binance CEO Changpeng Zhao and MicroStrategy founder Michael Saylor urged users to store assets in cold wallets, especially during "market turbulence". According to Bloomberg, FTX customers are unlikely to get their funds back.
Elon Musk said the crypto winter could be long, but bitcoin would eventually survive.
The collapse of FTX showed that the cryptocurrency industry needs "prudent regulation", US Treasury Secretary Janet Yellen said. The consequences of the incident could have been much worse if the crypto market had been more connected to the traditional financial system, she said.

 

[FxPro_2022]

New signs of slowing inflation in Switzerland

Alex Kuptsikevich, a senior analyst from FxPro reported that The Swiss Producer and Import Price Index was virtually unchanged in October, slowing down in annual terms to 4.9% against 5.4% a month earlier and against a peak of 5.9% in June.
In contrast to its larger eurozone neighbours, the producer and import price index is at the same level as in June. The USA has the same result, while in the Eurozone they rose by 10.5%, Germany by 16%, and the UK by 2%. From this point of view, Switzerland’s inflation is the least problematic among almost developed economies with popular currencies.
However, it is noteworthy that members of the Swiss National Bank remain hawkish, warning yesterday of a willingness to intervene further in the market and noting that they continue to write inflation down as a threat.
Historically, Switzerland has been characterised by low domestic inflationary pressures for various reasons ranging from capital inflows into the domestic banking system to a chronically substantial trade surplus and a high standard of living. And we can see that the central bank has not abandoned its values.
Indirectly, the rhetoric with the monetary watchdogs' concern about inflation pushes the markets to buy the franc in anticipation of further currency interventions and an interest rate hike in the middle of next month.

 

[FxPro_2022]

Asia slows more than expected

Alex Kuptsikevich, a senior analyst from FxPro reported that the statistics packages from China and Japan - the largest economies in the Asian region - came out below expectations, highlighting weak domestic demand and production.

Japan's economy lost 0.3% in the third quarter while it was expected to grow by the same amount. Meanwhile, real GDP added 1.8% y/y. A jump in imports was responsible for the decrease while private consumption showed a relatively moderate positive contribution.

Industrial production lost 1.9% in September, reversing a sharp turnaround after three months of growth, during which the index increased by 13.4%. A jump in energy prices prevents production from taking full advantage of the weaker yen. China's slowdown will likely constrain Japan's industry by not giving it enough orders.

China noted a 0.5% y/y fall in retail sales thanks to 0-covid restrictions. These are gradually easing but remain much more restrained than in other major economies worldwide. Industrial Production growth slowed to 5% y/y last month versus 6.3% in September.

Weighing retail sales and manufacturing numbers would be enough of a signal for the government to step up support to the economy.

Considering the weak data from Japan and China, their currencies have particularly strengthened this month by 6.5% and 4%, respectively. Currency volatility risks hurting exporters for whom exchange rate stability might be a better option after a slump since the start of the year.