Market News from FxPro

[FxPro_2022]

The pound clears the way up

Alex Kuptsikevich, a senior analyst from FxPro reported that The British pound is on the offensive, having risen to a three-month high against the dollar thanks to a developing correction in the latter, market stabilisation following the change of government and pro-inflationary news.
Jobless claims rose by 3.3K in October after a 3.9K increase in September. September's data was an impressive revision from the initially reported 25.5K jump. Statistics now point to stabilisation in the number of unemployed near 1.5m - 2009-2013 levels. A month ago, the UK labour market was losing jobs rather briskly.

More positivity comes from the wage dynamics. Taking bonuses into account, they are up 6% in the three months to August, better than the 5.5% a month earlier. In addition, rumours are circulating about the Prime Minister's intention to raise the minimum wage, which could further push wages.
A more substantial than previously estimated labour market and new signs of rising wages create more incentive for the Bank of England to raise interest rates actively.
GBPUSD surpassed 1.19 on Tuesday, adding more than 15% to the lows at 1.0330 set on September 26th. The Cable overcame a pullback of more than 38.2% of the amplitude of the decline from the highs of 2021 to the lows of September, a significant Fibonacci retracement level. Breaking this mark indicates that we see more than a corrective bounce in the Pound before a new round of decline.

However, despite the impressive size of the rally of the last almost two months, the Pound still has the potential to rally further due to the extreme previous oversold condition. The nearest local bullish target looks to be the 1.2200 area, where the pair received support on declines in 2016, 2019 and 2020.
There are chances that this area will now turn into an equally significant resistance. This area is also close to the 50% mark of the decline, a move above which could clear the way further up.

 

[FxPro_2022]

US PPI gives more encouraging signals, but markets may have a break

Alex Kuptsikevich, a senior analyst from FxPro reported that inflation in the USA continues to slow faster than expected. In October, PPI showed a gain of 0.2% m/m and 8.0% y/y against expectations of 0.4% and 8.3%. Producer prices often leads consumer inflation trends. For example, CPI peaked in June, three months after the PPI.

The core producer price index slowed to 6.7% y/y last month against a peak of 9.7% in June. This is a significant indirect sign that inflation is not spreading as dangerously through the economy as feared.
The slowdown in US inflation caused an impressive boost to risk-sensitive assets as it reassured markets that the Fed would slow the rate hikes in a 50-point move instead of 75 in December.
The Nasdaq100 index was above 12,000, gaining over 2.5% since the start of the day; EURUSD was a step up from 1.0450. Nevertheless, don't expect a repeat of last week's rally after the CPI release: much of it is already priced in. In addition, the markets are close to sensitive trend levels. The EURUSD and the Dollar Index are testing the 200 SMAs, which are essential trend lines.

Crossing at high rates often proves to be a strong signal of a long-term trend change. The S&P500 tries to get a foothold above the significant round level of 4000 and trades around its 200 SMA. Since the second half of April, its approach has intensified the sell-off in the index, taking 10% off in seven sessions at the end of April and in ten sessions in August.
Short-term traders should be prepared that such significant levels in these global market benchmarks will prove to be a tough nut to crack, and the buoyant growth of the markets will be put on hold for a while.

 

[FxPro_2022]

Bitcoin consolidates but is ready to go down further
Market picture

Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin is trading at around $16.8K with no significant changes overnight and in the consolidation area of the last five days. The panic sell-off appears to be over, with key stablecoins regaining their pegs. The market capitalisation stands at $847 billion (+0.2% overnight).
Bitcoin is consolidating near the 23.6% retracement of the 5-10 November collapse. Failure to go higher indicates heavy selling pressure, suggesting a higher chance of losing 1k in value than going up by the same amount. This pattern suggests that if it fails under $15.6K (the low of the drop), the next target for the bears will be the 12K area. This is also where the 2019 cyclical highs and the August 2020 pivot area are located.

News background

The decline in HODLer balances does not indicate a widespread loss of confidence in bitcoin's prospects, Glassnode notes. However, miners have sold off almost 10% of their bitcoin holdings amid the collapse of FTX.
Initial estimates by Crypto Fund Research suggest that cryptocurrency funds' losses due to the FTX bankruptcy could be as much as $5 billion, but final estimates could be much higher.
The FTX bankruptcy led to a panic among crypto investors and a massive withdrawal of assets from centralised exchanges. Collectively, exchanges have lost more than $5bn in the past week.
Binance CEO Changpeng Zhao and MicroStrategy founder Michael Saylor urged users to keep assets in cold wallets, especially during "market turbulence".
Cryptocurrency holders are predominantly doing so, with hardware crypto-wallet providers Trezor and Ledger reporting multiple growths on their products. According to Citigroup, trading volume on decentralised exchanges soared 30% in November.
Changpeng Zhao, head of Binance, proposed an association to bring together major players in the crypto industry to work with policymakers and regulators. He announced six critical requirements for centralised exchanges.
The Bank for International Settlements (BIS) conducted a study on the motives of cryptocurrency investors. As it turned out, the main reason for investing in digital assets was lust for profit rather than distrust of traditional banks and government institutions.

 

[FxPro_2022]

The probable peak of UK Inflation

Alex Kuptsikevich, a senior analyst from FxPro reported that the UK Consumer Price Index delivered another "positive" surprise, adding 2% for October, above the average forecast of 1.7%. Annual inflation accelerated to 11.1% against 10.1% previously and the forecast 10.7%. Inflationary pressures are much stronger here than in the USA and China, which reported a stronger-than-expected slowdown last month but are in line with continuing escalating price tensions in Europe.
Producer prices are slowing their growth rate. PPI input prices added 0.6% m/m and 19.2% y/y against 20.7% a month earlier and peaked at 24.3% in June. From July to October, this index added 0.66%, suggesting an annulated increase of just under 2% - a decisive cooling, though not a price correction.
The PPI of producer price output slowed to 14.7% from 16.3% in September and a peak of 17.3% in July. For the three months, the index added 0.8%, reaching a trajectory of 3.3% in annulated terms.

Producer price development suggests that the following inflation report in November will show a deceleration of consumer price inflation. So, the current 11.1% y/y CPI could be the peak level for years.
Investors and traders are more concerned about how this will affect Bank of England policy and, thus, the British markets. It may not affect it because the BoE had earlier forecasted inflation beyond 11%, so inflation stays on the trajectory that the BoE envisages.
Anyway, the central bank's comments will not be long in coming as later today there will be a hearing of its representatives in a special parliamentary committee. As these hearings coincide with the release of the new inflation data, the focus will be on this issue.

The Bank of England will likely highlight the work on rate hikes that started in November 2021 and hint at further hikes in the foreseeable future in increased increments of 50-75 points. It also cannot be ruled out that hawkish comments will accelerate the strengthening of GBPUSD into the 1.2200 area, from where we saw the start of the last peak in August. A decisive move higher would signify the markets' belief that the UK is on the road to recovery, having avoided the worst-case scenario.

 

[FxPro_2022]

Silver is one step ahead of Gold

Alex Kuptsikevich, a senior analyst from FxPro reported that silver is testing the $22 per ounce mark today and crossed it briefly yesterday. Although Gold marks the fifth consecutive session of back-to-back gains, Silver may have been one step ahead in this market cycle.
In early November, the price of Silver pushed up from the 50-day moving average, which had worked as a support for a week and a half before, as the metal was bought off intraday on dips under this line.
Further, while the S&P500 and stock markets, in general, were recovering from the not-so-dovish Fed comments, Silver rallied more than 7% on solid NFP data, leaving the other precious metals behind. This was a clear game-changer event for this market.
By rising in the following days, the price has reached its 200-day moving average, which Gold, S&P500 and EURUSD have yet to do. Since late last week, Silver has been gaining support on declines towards this line, confirming a change in the long-term trend.

Silver has already lingered near $22 in May and June, digesting the April collapse. There have also been repeated reversals in this area late last year and early this year. There might likely be some shake-out of market participants and partial profit-taking again.
The strong price momentum at the start of November and an even more impressive 9% rise in early October point to a demand, which might turn the market around. This bullish reversal is probably happening in Gold, but it is a more liquid and thus "noisy" instrument.
If we are correct, and after the local shake-out, silver goes further up, it could immediately target levels above $25, near the local peaks of March and April. If the strengthening does not fail again, the price may rise to $30 by August 2023.
It will be premature to talk about the possibility of reaching the highs of 2012 ($35) or 2011 ($50), but targets near $25 by the end of the year and $30 eight months later look achievable.

 

[FxPro_2022]

Strong US retail sales may support USD

Alex Kuptsikevich, a senior analyst from FxPro reported that according to the latest U.S. Census Bureau estimate, US retail sales rose 1.3% in October. Americans' purchases rose by 8.4% y/y, although an inflation adjustment (7.7% y/y last month) spoils the impression of a sales boom.

On the other hand, the Fed is making the most significant effort in the last 40 years to cool consumer demand, so the current result is hardly satisfactory.

Strong retail sales (or above expectations) boost the dollar and often spur demand in the stock market. This time we can only see the first part of this rule working, as solid retail activity feeds an inflationary spiral.

In response to a strong labour market and retail activity, the Fed may return to a tighter monetary policy line, returning market participants’ focus to a higher final rate - closer to 5.5% versus 5%.

 

[FxPro_2022]

The Crypto market prepares to take another step down
Market picture

Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin moved between $16.3K and $17.0K on Wednesday and is changing hands Thursday morning closer to the lower bound of yesterday's range. Some pressure on crypto comes from more wary financial markets, where major indices are down. The total capitalisation of the crypto market has fallen by 1.7% to $830bn in the last 24 hours. However, the overall quieter trading pattern should be noted after the surge in volatility in recent days.
Crypto Fear and Greed Index was down 3 points to 20 by Thursday and remains in a state of "extreme fear".

On the technical analysis side, Bitcoin's failure to cross $17.0K looks like a corrective rebound to lock in profits before a new round of declines. This scenario will only become main after the price approaches local lows near $15.8K, opening the way to $12K.
Ethereum is under more pressure, forming a sequence of declining intraday extremes. At the current price near $1200, we can see the dam-breaking effect at levels below $1100.
A similar pattern is seen in the overall cryptocurrency market capitalisation chart, where we see local reversals from lower levels.
News background
According to The Wall Street Journal, crypto lending platform BlockFi is preparing to file for bankruptcy. The company has acknowledged significant exposure to the FTX exchange. Last week BlockFi suspended customer withdrawals.

The collapse of FTX affected too many companies, which could extend the crypto winter to the end of 2023, according to cryptocurrency exchange Coinbase. Many institutional funds are stuck on FTX, causing increased distrust in the industry. Stablecoins dominance has reached a new high of 18%.
Bitcoin will fall heavily in November and hit "the bottom", forecasts Pantera Capital's crypto fund. BTC will then rise to $36,000 ahead of the next halving in March 2024 and continue to grow to a new record peak of $149,000.
According to the average results of a survey conducted by BDC Consulting among 53 cryptocurrency executives, bitcoin will stop the decline at $11,479. Meanwhile, over half of top executives intend to increase their investments in cryptocurrencies and have no plans to cut back.

 

[FxPro_2022]

Oil sinks

Alex Kuptsikevich, a senior analyst from FxPro reported that WTI oil is trading below $84, near last month's lows, having failed to experience a buying spurt following the week's inventory data.
While commercial inventories were down 5.4Mln Barrels compared to an expected 2MB decline, oil sales from the Strategic Reserve did not slow but slightly accelerated to 4.1MB last week compared to 3.6MB and 1.9MB in the prior two weeks. Commercial inventories are now 0.5% higher than in the same week a year earlier, while strategic reserves are down 35%.
Also, retail sales data released yesterday noted a 4% rise in fuel spending for October, with higher expenditure seen only from May to July at the height of the motor holiday season.
Meanwhile, US oil producers are holding production at 12.1M BPD. While they are up and updating the number of wells in operation, drilling activity is still working more to replace retiring capacity rather than ramping up production.

We should also add the OPEC+ production cuts to wonder further why the oil price is not rising. Quite the opposite, WTI closed below its 50-day average on Wednesday and is now developing a decline, testing lows from late October as part of the downtrend of the last ten days.
If we take a broader perspective, the decline since November 7 was a second failed attempt to break above $93, the 61.8% Fibonacci level of the June-September decline. The new slide down to the 50-day average is another argument favouring bearish dominance.

Fundamentally oil is weak because more and more countries are moving from slowing growth to a contractionary phase. And many are predicting more of them early next year when the effects of the rate hikes that have already taken place will begin to show their full force.
Because oil is so sensitive to the economic cycle, it may continue to fall to the lows of September ($75) even if the dollar does not return to where it was in late September. If an economic recession hits most of the eurozone and the US, China, and India slow sharply, oil risks plunging as low as $50, heading towards the 161.8% level of the original slump.

 

[FxPro_2022]

Cooling US housing market

Alex Kuptsikevich, a senior analyst from FxPro reported that the number of building permits in the US fell by 2.4% to 1,526K, the lowest since June 2020, and is almost 20% below the peak a year ago. Housing starts fell by 4.2% to 1,425k.
During the pandemic, the housing market first collapsed due to lockdowns but then took flight, inflated by monetary and fiscal stimulus. This year, in addition to the halting of financial support programmes and another budgetary stimulus, Americans are dealing with the fastest rate of monetary tightening in 40 years, returning mortgage rates close to their 2007 peaks.
The market is pretty good, considering such meaningful fundamental shifts. But we note that the market is deflating at a pace comparable to the mortgage crisis, which began in 2006 and continued through 2009. Then it took about a year and a half of declines before the banking industry collapsed, and the Fed went from raising rates to lowering them.
October's reading looks slightly better than expected and has briefly boosted demand for the dollar and renewed the momentum of the declining stock markets. It slightly increases the chances that the Fed, although slowing the rate hike, is still far from stopping.

 

[FxPro_2022]

Crypto: calm surface but strong currents underneath

Market picture
Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin made another attempt to break above $17.0K on Friday morning but has so far been unable to overcome this strong resistance level, moving around $16.7K. The entire crypto market rose by $4bn to $834bn – a minor swing tempered by the moderately negative Nasdaq Index and a stronger dollar over the day.
The cryptocurrency fear and greed index rose 3 points to 23 by Friday and remains in a state of "extreme fear". Lower market volatility drives the index up even if prices are not rising.
At the same time, retail investors should be active. Under the smooth surface of a calm market, capital will likely continue to flow out, if not out of crypto-assets altogether, then out of crypto-related companies, drying up their liquidity. And one should be prepared for someone else to go broke shortly.

News background
Investors continue to withdraw bitcoins from cryptocurrency exchanges. According to CoinGlass, cryptocurrency outflows have exceeded 220,000 BTC in the last ten days.
JPMorgan is drawing attention to the declining capitalisation of Stablecoins, indicating that investors are leaving the crypto infrastructure. Over the past few months, the stablecoin market has lost an estimated $41 billion.
El Salvador's President Nayib Bukele has decided to support bitcoin. El Salvador will buy one BTC every day from November 18. Tron founder Justin Sun joined Bukele’s initiative and will use the purchased BTC to back his stablecoin USDD.
The US Congress has taken an interest in Binance's role in the FTX collapse. The impact of Binance CEO Changpeng Zhao's public statements on the FTX situation will be the focus of a hearing as early as December.