Market News from FxPro

[FxPro_2022]

US construction slump reminiscent of 2005

Alex Kuptsikevich, a senior analyst from FxPro reported that the number of US building permits issued collapsed by 11.2% in November to 1,342K after falling by 3.3% a month earlier. Barring a dip in the pandemic, this low number of permits was mid-2019 when the Fed turned to cut rates to support waning economic growth.
The biggest thing the Fed can do in the coming months is to slow the rate hikes and hope for a pause in the hike in a quarter or two.
The number of housing starts fell by 0.5% following declines of 2.1% and 2.9% in the previous two months. The decline is not so steep here, but a clear downward trend is still in place.
The rate of decline in construction is now comparable to what we have seen since 2005. On the other hand, overall construction volumes are near 2017-2019 levels, which can be considered an essential watershed between a desired economic slowdown and an uncontrolled collapse.
The chill in housing real estate could be confirmed or denied in tomorrow's secondary home sales publication, where a second consecutive decline of more than 5% and a tenth consecutive month of decline are expected. Housing market weakness is terrible news for the dollar as it revives speculation that the Fed will stop hiking or reverse to lower rates sooner than the FOMC is currently forecasting.

 

[FxPro_2022]

Crypto market lull nears breakthrough point

Market picture
Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin is trading near $16.8K on Wednesday morning, almost unchanged over 24 hours. The first cryptocurrency reaffirmed on Tuesday that it often acts as an indicator of financial market sentiment for the day. Its ability to halt the decline and record a slight rise was echoed later by crucial stock indices.
And that predictive ability is worrisome on Wednesday, as BTCUSD shows a slight downward bias, failing to build on Tuesday's gains. Taking a step back, we can see that the crypto market remains in a prolonged consolidation. Investors often pick up liquidity during such periods, and strong moves usually follow.
After a strong sell-off lasting more than a year, conditions are forming for a reversal to the upside, as the RSI on the weekly charts forms a bullish divergence. The 50-day MA, downtrend and 200-day average lines have dipped to 17350, 19350 and 20300, making it easier for the bulls to convince the world of a reversal.
News background
According to the IntoTheBlock platform, the share of unprofitable bitcoin addresses increased to 52% after BTC fell below $17,000. Forty-four per cent of cryptocurrency holders are now in the breakeven zone.
The collapse of FTX will trigger a prolonged crisis in the blockchain industry, says Scott Minerd, founder of Guggenheim Partners. He says the crypto industry will experience turmoil comparable to the dot-com bubble in the late 1990s, leading to increased regulatory scrutiny.
The Bank of Canada has called for more careful oversight of stablecoins by regulators due to their risks to the international financial system. The central bank pointed to the intense concentration of stablecoins among their large holders, and the three largest stablecoins account for 90% of the coins in this crypto asset class.

 

[FxPro_2022]

New buying the dip in Bitcoin

Market picture
Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin's chart remains a horizontal straight line with several pulsations down and up over the past five weeks. The rate remains near $16.8K as the intraday dip of 1.6% to the $16.55K area was quickly redeemed at the close of trading in the US.
Total crypto market capitalisation remains near $810bn - one-third of levels one year ago. The market may need a real disaster, such as strict regulation for further declines. And without such news, current levels remain attractive for buying on Bitcoin declines. So many individual projects carry existential risks (which Bitcoin doesn't), and it takes building a broadly diversified portfolio of 100 or 500 coins to spread the risk across the portfolio.
Meanwhile, the 50-day moving average in BTCUSD has fallen to $17.1K. The bulls' task of giving a broad trend signal to break the bearish trend is getting easier. But the market needs more liquidity and faith in long-term potential amid this year's problems with cryptocurrencies and fears of regulation.

News background
According to a survey by Accenture, an IT consulting firm, only 20% of its clients invest in cryptocurrency. Of those who have already purchased digital assets, 28% are set on holding them long-term. Some 16,000 respondents took part in the study.
The US Securities and Exchange Commission (SEC) recognised the token of the bankrupt FTX exchange as a security. FTX management manipulated the price of the FTT token by buying it in large volumes on the open market and inflating the price.
In Brazil, bitcoin could be used as a means of payment and as an investment asset. The law that gave it to the country's president signed that status.

 

[FxPro_2022]

Crypto bulls try to encourage buyers

Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin has added 1.4% in the last 24 hours, reaching the 16.7K level. It is a new attempt to test the 50-day moving average on a general lull and an effort by the bulls to paint a more optimistic technical picture with less strength while liquidity remains depressed.
This tactic is already successful, as the total capitalisation exceeds 800 billion (+1.6% in 24 hours).
The current dynamic looks like an attempt to draw a line under a bearish 2022. We also note that the December lows were higher than the November lows. But to argue for a reversal, it is more prudent to wait for a renewal of the local highs rather than relying only on the waning declines.
Closing the day above the 50-day average (around 16750) might give new momentum to the upside, and consolidation above 17K might be notable news in the quiet information flow and serve as a decoy for the bulls.
At the same time, we recall that since July 2022, overcoming the 50-day average served as a trigger for selling on impressive volumes, and bitcoin soon renewed lows.

 

[FxPro_2022]

Bitcoin gets ready to move

Market picture
Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin has declined slightly over the past 24 hours - the bulls have still not decided to go on the offensive. Perhaps it is because of an overhang of selling orders from struggling miners.
The first cryptocurrency is trading near $16.7K to start the day on Tuesday, having retreated from its 50-day moving average but maintaining a positive bias towards the upside within the trend of several trading days. US exchanges return to action today to increase liquidity, including in cryptocurrencies.
Traders should be prepared that there may be attempts to form new market trends from the new year. And it could be a decisive move upward or another sell-off after a lull.
Regarding seasonality, January is considered a neutral month for BTC. Over the past 12 years, Bitcoin has ended with growth on six occasions. The average growth over the last 12 years has been 22%, while the average decline has been 17%.
In the first case, BTC could end January at around $20,100. Second, it could finish at about $13,700, updating November's lows. Meanwhile, in the last eight years, bitcoin has declined in January on six occasions, giving buyers of the first cryptocurrency little chance.

News background
The popular YouTube blogger Coin Bureau believes that bitcoin still needs to bottom out. In his opinion, we should expect BTC to drop to $10,000 during the first three months of 2023.
Negative sentiment in the crypto market will dominate until spring 2023, said the crypto fund QCP Capital.
The Italian parliament passed a bill to tax cryptocurrency traders. Traders will now pay 26% on profits made from digital trading assets. On the other side of the coin, Britain is introducing tax breaks for foreigners trading through local brokers to make London a crypto trading hub, as it is now with currencies and metals.

 

[FxPro_2022]

The numbered days of S&P500’s bear market

Alex Kuptsikevich, a senior analyst from FxPro reported that the S&P 500 index peaked in the first trading session of 2022, and it would be naive to expect the index to start rising from the first days of the new year. The stock markets may experience some pressure in the coming weeks, but there is growing confidence that the index will end 2023 with a gain in the region of 4000 from the current levels near 3800.
The short-term risks for the stock indices are now centred around the effects on the economy of the key rate hikes and the assessment of how many more hikes are in store over the coming months.
In previous months, employment and consumer activity data have surprised both markets and the Fed with their strength. However, it is worth preparing for cuts to increasingly extend beyond the tech giants, spreading across the economy.
Although markets and many observers are predicting a recession, the worsening economic data will likely trigger a new sell-off in equities that might take the S&P500 to the 3600 area. Approaching last October’s lows seems enough reason for the Fed to soften its policy stance further.
At the same time, the current slowdown, created by the Fed's hands, is less frightening than the natural recessions of 2000/01, 2007/08 and 2020.
At the same time, there is a significant risk that the US economy still degenerates to the level of a natural recession, requiring stimulus from the central bank and the government to revive growth. In the latter case, the market pressure could go much further than the base case scenario suggests. The disappointment of early buyers and retailers creates the potential for the S&P500 to fall to 3,000 by the end of the year.

 

[FxPro_2022]

Ethereum rushes up; others likely to follow
Market picture

Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin lost 0.5% on Tuesday but started Wednesday with a substantial gain, adding more than 1.3% to $16.8K. The current levels are one-week highs and send the price to the area above the 50-day moving average.
These are new signs that the prolonged sideways slide is ending, and one should be prepared for higher volatility, and this time it may be the altcoins that come to life first, not the first cryptocurrency.
Ethereum is adding over 3.5% since the start of the day, making a solid move above its 50-day moving average and testing the highs of the last three weeks. Here we see a large amplitude of gains, which increases the chances of a break of the downtrend. At the same time, traders with a more distant outlook would prefer to wait for confirmation in the form of a rewrite of the previous highs near $1350.
News background

Crypto-asset monitoring service PricePrediction predicted the bitcoin exchange rate in a month at $15,532, which is about 7% lower than the current value of BTC.
Last year was more of an ice age than a crypto winter, said Circle's head of strategic development Dante Disparte. However, he is optimistic: bankruptcies and industry clean-up could be a boon for the crypto market in the long run.
Despite the bear market, the level of fraud and hacks in the cryptocurrency industry will not diminish in the new year, according to CertiK, a blockchain security-focused analyst firm. Fraudulent schemes and techniques have been worked out, and the market is vulnerable.
Fourteen years ago, on January 3, 2009, a person (or group of people) under the alias Satoshi Nakamoto launched the leading bitcoin network by mining a genesis block of 50 BTC. The first transaction occurred on 12 January 2009 - Satoshi Nakamoto sent 10 BTC to Hal Finney.

 

[FxPro_2022]

Falling prices in Germany - a sigh of relief for the euro

Alex Kuptsikevich, a senior analyst from FxPro reported that inflation data from Germany yesterday and today reinforce hopes that the inflation wave is rolling back faster than expected. Whilst the early success does not promise a quick win, it does raise prospects that high inflation expectations have been avoided.
According to a provisional estimate, consumer prices for December in Germany fell by 0.8% after falling by 0.5% the month before. Notably, we are seeing a fall rather than simple exhaustion of growth. Vendors have begun to reduce prices actively following the fall in raw materials and energy costs. Annual inflation has slowed from 10.4% in October to 8.6%. However, the high-base effect will begin to be felt in February.
Import prices, an early indicator of inflation, accelerated their fall in November, losing 4.5% after decreasing by 1.2% and 0.9% in the previous two months. Import prices are 14.9% higher than a year earlier - a significant retreat after staying close to 20% y/y for the seven months to September.
Generally, weak inflation figures are bearish news for the currency as they suggest a sluggish economy and lead to lower interest rate forecasts. In this case, however, such an essential sigh of relief could support capital inflows into the euro. With lower inflation, the single currency retains more purchasing power. Furthermore, assuming less shock therapy from the ECB, investors may look more closely at purchases of European assets, expecting less dramatic degradation of local company earnings and not so steep a rise of debt service costs.

 

[FxPro_2022]

Oil started the year with a decline

Alex Kuptsikevich, a senior analyst from FxPro reported that the first two trading sessions of the year have clearly shown that traders are sticking to the bearish patterns formed in the previous six months. Interestingly, oil is not even helped by apparent producer lethargy, which translates into stagnant production and shrinking inventories.
Oil, which had been gaining for the last three weeks of the year, faced intense selling pressure below $80 for a barrel of WTI Crude, near which the 50-day moving average also passed. The sharp, almost 10% decline from that line in two days, as in previous similar episodes last year, sets the stage for a further drop.

A bearish pattern in oil since June persists with a sequence of lower highs and lower lows. This trend will be further confirmed, with WTI falling below $70 as part of the downward momentum that has begun.
Another batch of weekly inventory data is released today, from which a slight increase in commercial inventories is expected. If we ignore the high-frequency noise of the data, however, what catches the eye is stagnant production, which has been hovering around the 12m BPD level since last May. This is markedly lower than the peak of 13m in March 2020, with employment and GDP levels above pre-pandemic levels.

Producers thus refrain from competing with the state, which continues to sell off reserves at a lower rate.
In the short term, a fall in demand in China, where economic pain from the coronavirus pandemic is intensifying, is in favour of further price reductions. In addition, traders are under pressure from increasing recession risks in a third of the world economy, as predicted by the IMF. Signals that developed countries remain committed to fighting inflation and are willing to sacrifice growth are not helping oil now. Neither are all the new signs that financial institutions continue to tighten the terms of their hydrocarbon loans.

The more than 40% collapse in US gas prices over the past three weeks does not add to the optimism of oil buyers either. The price is now back where it was in January 2022, having put back a market premium due to fears of a supply disruption from Russia to Europe.
Potentially, oil could retreat to the $62-65 area, where it has repeatedly fumbled for support since April 2021. If economic indicators deteriorate further, the price may stop its decline at as low as $50.

 

[FxPro_2022]

Preliminary data sets up for another strong NFP report

Alex Kuptsikevich, a senior analyst from FxPro reported that the ADP said the US private sector added 235K jobs in December in a report ahead of tomorrow's official data release. The market expected an increase of 150k after a rise of 182K a month earlier. The ADP commented on the last report as a turning point, noting a decline of 100k in the manufacturing sector.
This time, observers pointed to a jump in employment in small and medium-sized companies while large companies were downsizing. This is a typical story of small businesses being the first to adapt to changing conditions.

Weekly jobless claims also came as a positive surprise. Initial claims fell to 204k against 223k a week earlier and an expected increase to 230k. The number of repeat claims fell from 1718k to 1694k, stabilising over the past five weeks.
Wednesday's published job openings data also came in better than expected, showing 10.46 million openings - much better than the 10.0 million expected.

The publication of robust data was further boosted by comments from Esther George, who said she had raised her benchmark rate forecast for this year above 5% and kept it at its peak until at least 2024. The bullish news set the dollar index up 0.75% in a couple of hours and is now trading near 104.80, its highest level since December 12.
The technical picture is beginning to look more and more like the start of a new dollar momentum after the corrective pullback from late September to mid-December.