Market News from FxPro

[FxPro_2022]

Strong PPI pushing Fed to do more

Alex Kuptsikevich, a senior analyst from FxPro reported that after consumer prices, US producer prices delivered another hawkish surprise. PPI rose by 0.7% in January, impressively stronger than the expected +0.4%. The annual price growth rate slowed from 6.5% to 6.0%, against expectations of 5.4%.
It is worth disregarding the slowdown in the annual inflation rate, as it is due to the high base effect of the previous year, while the monthly increase remains above the historical average.
Producer prices are a couple of months ahead of consumer prices, so today's release is a crucial hawkish signal for the Fed to continue raising rates without letting inflation expectations hang in the balance.
Aside from high inflation, the labour market also needs more reasons to take a breather. Initial jobless claims remained below 200k for the fifth week in a row, complementing the 3% rise in retail sales in January.
Overall, this mix of data suggests that the economy is in good shape. Still, it now risks triggering a reassessment of the monetary policy outlook, which is harmful to the markets.

 

[FxPro_2022]

Crypto market stalls after pump

Market picture
Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin gained 11.5% last week to close at $24.5K. The price stabilised near this level at the start of the new week. The cryptocurrency's market capitalisation rose 9.3% last week to $1.12 trillion. Almost all of the growth came in the first half of the week, with smaller gains in the final days.
Sunday saw a fresh attempt to push BTCUSD above $25K. However, the bulls failed to form a nice weekly candle to close above a significant level, leaving the rate below the 200-week average and touching the 50-week. Buyers may be more cautious in the coming days as a death cross formed on the weekly timeframes last week, although it should not be taken as a sell signal.
Ethereum grew 9.5% to $1680. Other leading altcoins in the top 10 gained between 1.2% (XRP) and 16.7% (Polygon). The exception was BNB (-2.3%). The total capitalisation of the crypto market rose 8.3% over the week to $1.11 trillion, according to CoinMarketCap.
News background
US authorities continue their "cryptocurrency crusade". The US Securities and Exchange Commission (SEC) has charged Terraform Labs (TFL) and its CEO, Do Kwon, with running a multi-billion-dollar securities fraud scheme. The SEC charged TerraUSD (UST) and the LUNA token with algorithmic stablecoin.
US Senate Banking Committee Chairman Sherrod Brown called for a comprehensive regulatory framework for cryptocurrencies to protect investors from losing money. The congressman recalled that the digital asset market lost $1.46 trillion in capitalisation in 2022 and that cryptocurrencies have cut more than 1,600 jobs.
The Wall Street Journal wrote that banks are ending partnerships with crypto firms for fear of reprisals from regulators threatening to separate digital assets from the traditional financial system.
Platypus, a decentralised financial protocol based on the Avalanche blockchain, suffered an attack in which a hacker stole around $8.5 million in crypto assets. However, Chainalysis estimated that during 2022, the total amount of money raised by cryptocurrency fraudsters fell from $10.9 billion to $5.9 billion.

 

[FxPro_2022]

Macros continue to weigh on Crude Oil

Alex Kuptsikevich, a senior analyst from FxPro reported that for the third month, oil has barely moved out of its wide range of $73-82 for WTI barrel and $78-88 for Brent. This is not a balance and equilibrium of supply and demand forces but a tug of war.
This does not often happen in large liquid markets, but the range movement has more to do with political actions and statements than the market’s technical picture. The recent reversal from the upper end of the range coincided with the US postponing the start of the renewal of the strategic reserve. A move closer to the lower boundary in early February coincided with comments from Russian officials that production would be cut by 500kbpd.

The sideways movement forms a stable reflex for traders, but it is important to understand that this trading mode does not last forever. This is a case when macroeconomics can determine the exit direction from the range. And the current data snapshot suggests an exit from this sideways range.
The strong US labour market has not led to a significant increase in oil demand, and commercial inventories have risen from 420M to 471M in recent weeks. This is 14.6% higher than in the same week a year ago. Inventory levels above 500m have coincided with periods of extreme market tightness (March 2016, February 2017 and April 2020) associated with price falls before or after. More recently, the idea that the US government is acting as a strong potential buyer has temporarily supported prices.
It is worth being prepared that the fight against inflation is still ongoing, so it would be wise to expect oil purchases for reserves to start any time soon, as this would send a counterproductive signal. Regardless, it is worth remembering that the recent robust labour market data and inflation surprises increase the chances that the Fed will go further in its rate hikes than previously hoped. The latter is bad news for oil, which is very sensitive to the dollar and interest rate movements.
A hypothetical bearish scenario looks viable if prices fall below $72 in the coming weeks. A consolidation would open the way to $62, where oil bottomed out several times since April 2021.
Conversely, a move above $83 would signal that a correction from the global lows of April 2020 to the highs of June 2022 has occurred and that a new mega-wave of growth awaits oil. This scenario is hard to believe, given that prices have dragged global economic growth over the past year.

 

[FxPro_2022]

Bitcoin set to break through
Market Picture
Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin continues its attempts to break through resistance at $25K. Volatility was muted on Monday as the primary driver of it - US equity markets – was closed yesterday. Cryptocurrency market capitalisation rose 1.2%.
According to CoinShares, investments in cryptocurrencies fell by $32 million last week, the second consecutive week of declines and the highest in seven weeks. Investments in Bitcoin fell by $25 million and Ethereum by $7 million. Investment in funds that allow to short bitcoin increased by $4 million.
Despite bitcoin's unsuccessful attempts to consolidate above $25K, intraday pullbacks from this resistance are becoming smaller, indicating a continued buying-the-dip pattern. A break above $25K is only a matter of time, potentially opening the door to $28K.
News Background
Galois Capital, one of the world's largest cryptocurrency-focused hedge funds, announced its closure. The fund lost around half of its capital after the FTX collapse.
The next cryptocurrency bull market will start in the East. The US will only have two options: embrace cryptocurrencies or be left behind, said Gemini exchange co-founder Cameron Winklevoss. Such comments came amid moves by US regulators against cryptocurrency companies.
The G20's Financial Stability Board (FSB) intends to draw up standards for cryptocurrency regulation by July.
Hong Kong will allow retail investors to trade cryptocurrencies on exchanges. Trading venues will be subject to mandatory licensing.
Meanwhile, Binance's introduction of a zero fee for bitcoin trading and the collapse of the FTX exchange allowed it to capture 98% of the BTC spot trading market.

 

[FxPro_2022]

Gold: End of correction or new downturn?

Alex Kuptsikevich, a senior analyst from FxPro reported that gold has lost more than 6.5% from its early February highs, correcting the November-January rally. Now it's time to decide on the next trend. The coming days should show whether we will see a new wave of growth in gold or whether the decline will continue.
From the beginning of November to the first days of February, gold gained more than 21%. The February declines stabilised the price at 61.8% of the initial rally, a classic retracement. This pattern suggests buyers are returning and opens the potential for a rally to $2170 (161.8% of the initial rally). A more conservative view suggests that the path to new highs will only open up after a sharp rise above previous highs at $1960.

Another indicator, the Relative Strength Index (RSI) on the daily timeframe, suggests that there is still room for a decline. According to this indicator, gold has been overbought for most of January and has yet to reach the oversold zone. On the weekly timeframe, the reversal in February coincided with a touch of overbought conditions, and so far, the indicator remains above 50, indicating the potential for further declines.
In addition, we note that mid-month gold fell below the 50-day moving average, which has worked well as a short-term trend indicator over the past year. When gold breaks below this moving average without any resistance from buyers, it looks like a signal that bearish sentiment is prevailing.
It is worth being prepared for the fact that gold's decline has paused but not ended. Up to the $1775-1800 area, we do not see any significant barriers to the fall. A break there would also allow the overbought RSI to correct fully. Gold has reversed several times near $1800, especially last year.

 

[FxPro_2022]

UK business activity stronger than expected

Alex Kuptsikevich, a senior analyst from FxPro reported that preliminary UK business activity figures for February surprised on the upside, sending the Pound into a mini rally of 1% within half an hour of publication and supporting prices later in the day.
The Manufacturing Business Activity Index climbed from 47.0 to 49.2, with the current reading suggesting a slight contraction in activity and marking the third month of recovery.
The services PMI jumped from 48.7 to 53.3, moving into growth territory, against expectations for a slight increase to 49.2. The latest reading is the highest since last June and has the potential to trigger a notable revision in expectations for the economy and interest rates.

Strong data releases have supported the GBPUSD at a very important time. Late last week, the pair tested support at its 200-day moving average. Buyers actively came to the rescue as the pair fell to the 1.1900 level, and today they are already testing the strength of the 1.2100 level.
On the technical side, a more important short-term level looks to be 1.21500, where the 50 SMA and the area of recent local highs are concentrated and from where the pair was actively sold off precisely a week ago and a correction of 76.4% from the rise from the September lows to the December highs.
For the pair to move higher, it will need increased risk appetite in global markets. And that may be a problem, as US index futures have come under pressure, and the FTSE100 is retreating from its historic highs, back below 8000.

 

[FxPro_2022]

Still searching for bottom in US home sales

Alex Kuptsikevich, a senior analyst from FxPro reported that US secondary market home sales fell by 0.7% to 4.0 million in January. Although this is a very nominal decline, it was the 12th consecutive month of falling sales. Sales fell below the pandemic low and were the lowest since October 2010, a period of severe mortgage crisis.
The likely reasons for this are the previous excess sales, which were boosted by generous government support programs and the Fed's ultra-low interest rates. Another factor putting pressure on the markets is prices: the median sales price in January 2023 was 359k, compared with 354.3k a year ago, but 28% higher than in March 2020.
The housing sector often acts as a leading indicator for the economy, and it is now pointing to a decline in consumer confidence that could soon spread further across the economy. This impact promises to intensify as house prices fall.

 

[FxPro_2022]

Crypto market pressured by bigger trends

Market picture
Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin once again failed to break through the $25K level. Initial technical resistance was later supported by strong negative momentum in US equity indices, where the Nasdaq100 lost 2.5%.
On the weekly timeframe, the local situation looks like the market's inability to move into a bullish phase, as bitcoin sells off on touching the 50- and 200-week moving averages. Without a bullish reversal in the coming days, be prepared for another pullback to the $17.5K or even $16.5K area.
Glassnode notes that bitcoin is holding up well in the face of current market dynamics and regulatory pressure and attributes this to a change in participant behaviour. The buy-the-dip pattern has re-emerged among short-term investors. However, the number of "whale" addresses with balances of 1,000 BTC or more has fallen to mid-2019 levels, indicating that the retail sector is acting as a buying driver and the whales are selling.
News Background
According to Bloomberg, Chinese authorities have tacitly supported Hong Kong's initiative to establish a blockchain industry development centre in the metropolis. Companies previously operating in mainland China can now register in Hong Kong.
Despite rising prices, the Bank for International Settlements (BIS) estimated that the average retail investor would lose around half of their bitcoin investment between 2015 and 2022. The BIS reiterated its call for global coordination in cryptocurrency regulation, warning of the risks of increased spillover effects on the global financial system.
The Litecoin blockchain has introduced a counterpart to the Ordinals protocol, which allows users to post various objects in images, text, video, and other formats.

 

[FxPro_2022]

RBNZ warns it is not done with tightening

Alex Kuptsikevich, a senior analyst from FxPro reported that the Reserve Bank of New Zealand hiked its cash rate by 50 points to 4.75% early in the day. The rate has been raised by 425 points over the last ten meetings since October 2021, the sharpest uninterrupted hike in modern history.
In an accompanying commentary, the Bank forecasted a hike to 5.5% by September this year, leaving considerable room for further increases at subsequent meetings. Even so, New Zealand’s interest rates are now at their highest level since 2008. Before the "era of zero interest rates" that began after the global financial crisis, rates above 5% were the norm. Expected rates are, therefore, well within the norm. Moreover, the RBNZ expects the cash rate to fall later.
The NZDUSD initially received buying support from the RBNZ's decision and comments but later came under pressure from the global reduction in risk appetite that started earlier in the US. At the time of writing, the NZDUSD is slightly declining so far this week but has managed to hold above its significant 200-day moving average. The pair has withstood the onslaught of sellers on the way down in December and January.
Relatively hawkish comments from the RBNZ have supported the NZD, suggesting New Zealand will go further than many developed central banks in raising interest rates. At the same time, it is essential to recognise the widening trade deficit, creating a permanent capital outflow. On balance, it is too early to say that the NZDUSD has corrected the initial upward momentum from October and is preparing for a new wave of strengthening above 0.6500. It should be ready to fight for the trend in the coming days. A victory for the bulls can only be declared when the NZDUSD crosses 0.6350, while a victory for the bears can be declared when it falls below 0.6190.

 

[FxPro_2022]

Cryptocurrencies test Support after pessimism peaked

Market Picture
Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin stuck to support near $24K on Thursday. Cryptocurrencies balance gains and losses while waiting for meaningful signals from traditional financial markets. This consolidation could prove beneficial, confirming cryptocurrency's total capitalisation of over $1 trillion and paving the way for another leg higher.
In our view, the crypto market has passed its peak of fear, and we should expect an uneven but still upward movement with periodic corrections.
Local significant support has formed at $23.7K, but local reversals to the downside are coming from lower levels: $25K on Tuesday, $24.5K on Thursday and $24.1K on Friday morning.
A step back to a broader picture shows that the observed pullback remains within a typical correction following the rally from mid-February, which left bitcoin above January's highs. The real threat to our bullish view on bitcoin is a break below $21.5K, which would update local lows and break below the 50-day moving average, now acting as a trend indicator.

News Background
The New York Attorney General's office has sued crypto exchange CoinEx, alleging that the site violates the Martin Act and is not registered with the SEC or CFTC.
The Canadian regulator has banned trading in algorithmic stablecoins. The Canadian Securities Administrators Association (CSA) has unveiled new rules prohibiting local traders from buying and selling stablecoins that the agency does not approve.
The Bank of Israel has published a set of requirements for stablecoin issuers. The guidelines include banning algorithmic stablecoins if they are widely used for payments.
Circle, the issuer of USDC's second largest stablecoin, plans to increase its headcount by 15-25% by the end of the year, despite a trend of widespread layoffs in the crypto industry.