Market News from FxPro

FOMC minutes send markets an important message
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Alex Kuptsikevich, a senior analyst from FxPro reported that investors were waiting for the November FOMC meeting minutes to clarify whether the committee would cut the pace of rate hikes. The minutes confirmed these expectations, but as they were primarily priced in, we did not see a strong reaction immediately after publication.

While remaining concerned about high inflation and the need for further rate hikes, the signals from the minutes further strengthened expectations that the next rate hike is likely (76% by CME's FedWatch estimate) to be 50 points.
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Despite speculators' very measured reaction, this signal's importance should not be underestimated as it helps the market to move up after a lull, as seen in the charts of the major benchmark US markets.

The S&P500 index moved up towards the local highs set on November 15. The S&P500 futures at the time of writing are testing the 200-day moving average, a significant indicator of the long-term trend from which the stock has reversed to a decline since April. A consolidation above 4050 would be a crucial bullish victory signal, capable of setting the tone for stocks through Christmas.
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The Dow Jones 30, the top performer against the S&P500 and Nasdaq100, has been trading above its 200-day average for a fortnight and is now rewriting the highs from April, having broken above the August peak, which is a significant signal of a trend change. Moreover, it is now 19.9% above the lows set on October 3, flirting with the formal end of the bear market.

The EURUSD broke above 1.0400 early on Thursday, climbed above the 200 SMA and is also trying to show a break of the downtrend. Fixing the pair above that level by the end of the week, or better yet, the month, could fuel the influx of speculative capital with a position bet on a further bounce.

Separate from the tech analysis signals, we also pointed out yesterday that the US labour market is probably already losing jobs. Suppose this trend is confirmed in the official monthly report next Friday. In that case, the Fed's confidence that the committee can raise rates above 5% and hold them at that level for an "extended period" will be in question as job cuts, if they become a trend, guarantee an economic slowdown during the quarter.
 
Brighter business sentiment in Germany
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Alex Kuptsikevich, a senior analyst from FxPro reported that Germany’s Ifo Business Climate Index improved in November, strengthening from 84.5 to 86.3 (85.0 was expected). The overall index rose following an improvement in expectations over the last two months.
Signals that the sharpest downturn may be over and that the situation will stabilise further we also previously noted in Markit PMIs and the ZEW Indicator of Economic Sentiment.
The outcome of the Ifo index is encouraging for both economists and market participants. The same kind of reversal signalled the start of a period of economic stabilisation after almost free-falling in both 2009 and 2020. These hopes for changes are also bolded by lowering energy prices, improved consumer expectations, and rising export volumes.

Global reversals in the Ifo sentiment index coincided with EURUSD and many European stock indices hitting their cyclical lows. Improving business sentiment may provide additional reasons to remain confident in the single currency and to buy back at historically low levels.
 
Sales below the surface still prevail in crypto
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Market picture

Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin failed to build on the gains, rolling back to the levels of two days ago, losing 1.2% in the past 24 hours to $16.5K. Global markets have been quiet due to US holidays and few meaningful economic publications, allowing the cryptocurrency to continue balancing in a tight range for almost two weeks.
The cryptocurrency market's capitalisation fell by 1% to $827bn overnight. Without a solid positive stock index performance, crypto has nowhere to draw strength for future purchases.
Bitcoin has failed to exploit the inverted head-and-shoulders pattern fully. Perhaps the reason for that is the lack of big players due to the holidays. However, the chances are high that it is still because of the ongoing cautious selling in the sector: the big players continue to reduce their positions, probably forgetting about it again for a couple of years.

News background
The New York Times reported that the troubled cryptocurrency lender Genesis Global Capital is not ruling out bankruptcy. Genesis has hired investment bank Moelis & Company to explore options, including filing for insolvency.
Ripple chief technology officer David Schwartz said the community was unlikely to learn a lesson from the FTX collapse and would be cautious going forward. Changpeng Zhao, head of Binance, allowed for the possibility of buying FTX assets. In an interview with Bloomberg, he said that some of them could still be saved.
The 10,000 BTC stolen from the Mt.Gox exchange, which has been dormant for seven years, is on the move. Ki Young Ju, a crypto analyst and head of CryptoQuant, made the announcement. In doing so, he commented that it was criminal money. The transaction was the largest since August 2017.
 
Bitcoin's never-ending search for a bottom
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Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin closed last week with a new formal decline, losing $100 to $16490. At the start of trading on Monday, it loses another $360 to $16150. The week starts with a subdued risk appetite on global markets due to China unrest. Ethereum is performing better, adding 3.3% over the week to $1170. Other leading altcoins in the top 10 are changing from -2.5% (Polkadot) to 22.2% (Dogecoin).
Total crypto market capitalisation, according to CoinMarketCap, was up 2% for the week, to $817bn. The cryptocurrency Fear & Greed Index rose to 28 by Monday, moving into "fear" versus "extreme fear" at 21 a week earlier.
Bitcoin has updated two-year lows below $15,500 in the past week on news of the possible bankruptcy of cryptocurrency lending service Genesis Global Capital. Bitcoin is under pressure from institutionalists whose risk appetite is firmly tied to stock markets. Bitcoin continues to look for a bottom from which it can push back, but the negative external backdrop is not yet conducive to buying.

News background
According to Barron's, Genesis Global Capital has been the subject of an investigation by US regulators over the suspension of withdrawals and the company's liquidity crisis. It is unclear whether US federal regulators are involved, but at the very least, Alabama state supervisory agencies are investigating.
The DeFi-project Ardana team from the Cardano blockchain ecosystem has said it has suspended its development due to "uncertainty over funding and the timing of the project".
Bloomberg, a news agency, reports that Cryptocurrency lender Matrixport is seeking funding for $100 million. And while the company says the moves have nothing to do with a lack of liquidity, investors are little reassured.
Analysis of Bitcoin transactions helped British police arrest over 100 people in the biggest anti-fraud operation in UK history, led by Scotland Yard. The iSpoof website was taken down, and phone fraud suspects were caught.
 
WTI Crude is on track towards $50
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Alex Kuptsikevich, a senior analyst from FxPro reported that Oil is losing over 3% on Monday due to concerns around demand in China caused by strengthening lockdowns. Also, demand for risky assets, including oil, declined due to massive protests in China against the zero-covid policy. In addition, the news that the US has granted Chevron a license to produce oil in Venezuela should not be missed either.
The price of WTI dipped below $74 on Monday, while Brent was temporarily trading below $81, hitting its lowest level in 11 months. Oil is very sensitive to fluctuations in global supply and demand, so even news of a potential supply and demand shift was enough to intensify the sell-off.
Today's move down confirmed the severity of the downward momentum of the last three weeks, as prices broke the support that stood two months ago. On the technical analysis side, the two upside impulses above $93 for WTI were nothing more than a corrective pullback as part of the downside trend from June this year.
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Looking solely at the chart, the price could pull back quite quickly by another $10 to 64, where it last received support from buyers in August and December 2021. The realisation of the Fibonacci pattern suggests a drop to $49 (161.8% of the initial decline).
However, in oil, such long-term patterns are permanently disrupted by geopolitics. And now traders should also keep in mind that oil bounces in recent months have been directed by OPEC+, which first hinted at and then announced production quota cuts.
It is also worth realising that the energy situation in Europe looks better than expected only because of warmer weather. This factor remains outside the influence of the authorities, and in case of colder weather, energy prices could go up sharply, despite economic weakness.
Geopolitics and weather are the most significant risks to an overall bearish scenario in oil, which sees the price falling another $10 before year-end to $64 and $25 to $49 before the end of the second quarter next year. Translated into Brent, the scenario assumes a drop to $71 and $57, respectively.
 
Another false hope for the reversal in Bitcoin?
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Market picture
Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin attempted to climb out of the hole during the week, adding 6.5% to 17250 on Monday morning. Ethereum add 10%, to $1290. Other leading altcoins in the top 10 changed from -0.2% (BNB) to +14.5% (Litecoin).
Total crypto market capitalisation, according to CoinMarketCap, was up 5.9% for the week, to $867bn. The cryptocurrency Fear & Greed Index was unchanged for the week, remaining at 26 points ('fear').
Although Bitcoin's exchange rate has been the highest in the last three weeks, the history of recent months has restrained optimism, as we have seen a smooth rise followed by a precipitous fall more than once.
The 50-day moving average, which used to be a reliable trend indicator in 2020, gave several false bullish signals since this July. Therefore, it makes sense for longer-term speculators to look for the series of local highs.
So far, each new local high is lower than the previous one. The latest local high is near the 22K, close to the 200-day MA. Probably only a new, higher high will be a reliable, albeit relatively lagging signal of a trend change.

News background
James Gorman, CEO of Morgan Stanley, one of the world's largest banks, said he was "glad he didn't buy bitcoin for $60,000". He said he refrains from investing in digital assets because of the high level of risk and unpredictability.
Tether, the issuer of the USDT stablecoin, denied The Wall Street Journal's (WSJ) accusations of issuing unsecured loans, saying that the WSJ's concerns about Tether setting the stage for a global crypto industry crisis were not well-founded.
Opera developers have announced a partnership with the Alteon LaunchPad platform. Through the partnership, browser users can issue non-interchangeable tokens quickly and cheaply.
 
Bitcoin loses volatility again
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Market picture
Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin once again failed to get on the upside track, and its exchange rate fell to $17K, around which it has been languishing since the beginning of the month. The reason for the decline was pressure in the markets due to relatively good economic data, which increased speculation that the Fed would have to go further in raising rates than previously expected.
We note that the crypto market recently had very subdued volatility compared to stocks, having missed much of the rally of the last two months but also not feeling the kind of pressure that stocks have been under since early December.
The cryptocurrency fear and greed index down 1 point by Tuesday, to 25, and had moved into "extreme fear" status. The total capitalisation of the crypto market fell 1.9% to $853bn.
The suppressed volatility in the cryptocurrency market is causing market participants to move stop orders closer to the current price. A drop below $16K (-6%) could devastate speculators' positions, delaying a potential market recovery for many more months. On the other hand, a rise above $18K (+6%) could open a direct track to $21K.
With professional market makers becoming less active towards the end of the year, it will become increasingly easy to swing the price in either direction (or even in both directions).

News background
According to CoinShares, investments in crypto funds fell by $11m last week after an outflow of $23m the week before. Bitcoin investments rose by $11m, and Ethereum fell by $4m. Investments in funds that allow shorts on bitcoin fell by $11m. Trading volume was $753m, compared to an average of $2bn a year ago, suggesting low investor engagement, CoinShares noted.
Cryptocurrency broker Genesis Global Capital has reached $1.8bn in debt and is likely to continue to grow, CoinDesk reported. Messari estimates that the platform needs to raise at least $500m to avoid liquidation.
Bloomberg Intelligence senior commodities strategist Mike McGlone believes that cryptocurrencies are now going through their last phase before hitting rock bottom. However, he says it will be tough for investors and companies to survive this phase.
A Chinese court has ruled that non-exchangeable tokens (NFTs) are virtual property that should be protected by law.
 
Australia not keeping pace with US rate hike
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Alex Kuptsikevich, a senior analyst from FxPro reported that The Reserve Bank of Australia raised its key rate by 0.25 percentage points to 3.1% on Tuesday morning, meeting expectations. The current rate level is the highest in 10 years and the eighth consecutive hike, but the RBA has signalled it is more to come.
The RBA considers current inflation at 6.9% YoY "too high", noting the contribution of global and local factors. The central bank is pointing at the need to balance supply and demand. Translated from central bankers’ language, it warns more pain for consumers to come via stricter credit conditions that are bad for jobs and loan rates. At the same time, Australia has moved from a run to a pitch for the third month, raising the rate by 25 points instead of 50.
While the Fed is also promising to slow down with tightening, the Reserve Bank of Australia did so earlier, widening the difference between the effective federal funds rate and the RBA key rate to 0.9 percentage points in November. This differential is likely to rise by 1.2 points after the Fed rate hike in just over a week by 0.5 points, as markets expect. Before March, the differential was -0.02 in favour of the AUD and later held in the range of 0.3-0.4 in favour of the USD.
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The main intrigue of the forex market is the answer to whether we will see a recovery of the 2018-2020 regime when the key rate in the USA was more than a percentage point higher than the Australian one. Fundamentally, this resulted from the US and China trade wars, which slowed the latter's growth. The technical manifestation for the forex market appeared to be pressure on the AUDUSD pair during this period, which was losing smoothly due to a sustained play on the interest rate differential - the carry trade.
Since October this year, when markets began to price in a slowdown in the pace of Fed rate hikes, the AUDUSD has shown a 10% rise, which has been losing strength in recent days in anticipation of new regulatory signals. As the differential continues to build, pressure on AUDUSD could once again become the primary short-term trend, following the November recharging of dollar bulls.
On the side of the Aussie, bulls could be played by Australia's tight labour market, with the lowest unemployment rate since 1974 and China's recent reversal to a stimulus after quarters of slowing growth. If these factors remain in place, they will allow for a noticeably higher rate hike in Australia than in the USA, returning curry traders' interest in buying AUDUSD.
 
The strength of the US economy spooks markets
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Alex Kuptsikevich, a senior analyst from FxPro reported that since the end of last month, the inverse dependence of major stock indices on US data has become more pronounced. Following the positive surprise of the November employment report (so-called ‘hard data’), markets received a better-than-expected ‘soft data’ batch.

ISM Non-Manufacturing Index rose from 54.4 to 56.5, against expectations of an average decline to 53.5. Markit Services PMI for November was upgraded from 46.1 to 46.2 in the final reading. The positive difference between expectation and fact explains the strength of the move.

But we also draw attention to the low nominal levels of the indices above. The services PMI has been in decline territory for the last five months. The non-manufacturing ISM is near its lowest levels since late 2019 if we exclude the dip on the first lockdown caused by covid-19. The employment component of the ISM index has been hovering near 50 for the last ten months, also setting up caution.

While a "the worse, the better" trade might make sense in the short term, a strong economy is a boon for markets in the longer term. This is especially true if we see inflation fading in parallel. And that is precisely the case now in the US, where petrol prices have returned to levels of the beginning of the year.
 
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