Market News from FxPro

Yen enters a new downfall

Alex Kuptsikevich, a senior analyst from FxPro reported that consumer prices in Japan continue to rise steadily, but this is of little concern to the central bank – a brutal combination for the Yen, which could repeat last year's alarming decline.
Japan's CPI rose 0.5% in January, the 15th month without a decline. The annual rate of increase also continues to grow, taking headline inflation to 4.3% and, excluding food and energy, to 3.2% y/y. This is the highest rate of price increases since the early 1980s.

From a technical point of view, the nominal CPI has broken through the resistance of the peaks at the end of 1998 and continues to rise steadily. Nevertheless, there are concerns that the monetary and fiscal authorities still need to change their policy stance.
The primary candidate for the BoJ chairmanship confirmed in his speech today that low-interest rates are now acceptable, as inflation is being driven by rising import prices rather than demand.
These comments have the potential to finally undermine hopes that the Bank of Japan has followed much of the rest of the world in turning its back on inflation. Expectations of such a turnaround have recently worked in favour of a stronger Yen. Before, in October and November, demand for the Yen was driven by verbal and actual interventions in defence of the national currency.

The USDJPY is down more than 15% from its October high of 152 and has found support on the downside at 127, where a local reversal area from last May's upward correction and a 50% retracement of the rally from the 2021 lows at 102.6 coincide.
Comments from the country's monetary authorities suggest a new wave of pressure on the yen after three months of easing or ‘recharging’. With the Bank of Japan not changing policy, the yen is potentially under pressure from an intensified interest rate differential game. And this game promises to be more aggressive now than a year ago, as yield spreads between Japan and the US have widened for both short and long-term yields.
Without a reversal by the BoJ, the USDJPY could be back around 150 by June. The yen would then be 15% lower than a year ago, which aligns with the standard depreciation rate for developed market currencies. Our observation is that officials only move from words to deeds when the exchange rate deviates by more than 20% YoY.
The current higher interest rate environment is an opportunity for Japan to competitively devalue its currency to support national exporters, which it failed to do in the last decade in the era of zero interest rates.


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Bitcoin retreats but not yet broken
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Market picture

Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin closed last week down 6.8%, ending the week at around $23K. Ethereum lost 6.7% to $1570. According to CoinMarketCap, the total capitalisation of the crypto market is $1.07 trillion at the time of writing, down from $1.13 trillion the week before.
Bitcoin fell during the week amid falling stock indices and a rising USD on expectations that the Fed will have to raise interest rates further to cool inflation. Higher interest rates hamper the availability of money and risk appetite.
Technically, bitcoin is selling off after touching its 200-week moving average. And due to the negative momentum at the end of the week, it has also fallen below the 50-week moving average. This dynamic may be a prologue to further declines, a predictable tug-of-war near trend levels.
A pullback in bitcoin to $21.5K would remain a correction within a bull market, but a sharp drop below that level could force a reassessment of whether we are out of a bear market.
Another recalculation has resulted in a 9.95% increase in the BTC mining difficulty. The figure hit an all-time high of 43.05 T. According to Glassnode, the network's smoothed 7-day moving average hash rate is close to 303 EH/s.
News background
The International Monetary Fund (IMF) has called for a "coordinated response" to cryptocurrencies. The growing acceptance of digital assets requires harmonisation of supervisory efforts across countries to regulate them, the IMF said in a statement. The fund said that cryptocurrencies should not be recognised as a means of payment.
The Fed, FDIC and OCC issued a joint statement reminding the US banks about the potential risks of crypto-services-oriented companies. The regulators cited the "unpredictable size and timing of deposit inflows and outflows" from such companies.
Treasury Secretary Janet Yellen said that while the US was not considering an outright ban on cryptocurrency activity, it was important to establish a regulatory framework for the sector. In contrast, IMF chief Kristalina Georgieva believes a cryptocurrency ban is possible.
Solana's verifiers restarted the network twice due to an unknown error, causing a complete shutdown of economic activity on the blockchain. The malfunction occurred during a node software upgrade to a newer version.
Balance of power in the oil

Alex Kuptsikevich, a senior analyst from FxPro reported that oil remains stubbornly stuck in a sideways range despite the dollar's rally and other risk assets' retreat over the past week and a half, with weekly production and commercial inventory data painting a relatively contradictory picture.
US commercial crude inventories continue to rise steadily, increasing by 7.6m barrels to 479m barrels last week. Commercial inventories have only been higher during the glut of 2016-2017 and the first, most severe cutbacks of 2020. We also pay attention to the accumulation rate, as stocks are now 15.1% higher than one year ago.
The US government has postponed its start to replenish stocks, even though it has hardly sold any oil since the beginning of the year. Price stability seems to force the US to postpone its plans to buy oil in reserve, not to push up prices and inflation further.

The sharp rise in inventories has been seen while production has stabilised at 12.3m BPD for the past three weeks. Compared to how America ramped up output from mid-2011 to mid-2015 and from October 2016 to March 2020, we now see a creeping increase. Judging by this dynamic, the US is in no hurry to regain the oil market share that Russia and OPEC are losing.
An even more cautious view on the outlook for oil demand suggests a trend in the number of rigs in operation. According to Friday's Baker Hughes report, the number of oil rigs fell to 600 last week, down slightly from a peak of 627 in early December last year.

The conventional wisdom is that the trend in drilling activity is 6-9 months ahead of the direction in production. Still, a gradual increase in production efficiency can explain the slight current reversal. Only catastrophic collapses in this indicator, such as in 2014-15 and 2020, are worth paying attention to.
The long-term price trend, in turn, determines the dynamics of drilling activity. Over the past three months, WTI crude oil has been bought on declines towards $73, driven by both OPEC+ production cuts and signs of a stronger economy. However, suppose the Fed does indeed cool the economy to the point of lower demand. In that case, local support is unlikely to withstand selling pressure, opening the way for prices to fall until a change in Fed policy is announced.
Eurozone credit slowdown

Alex Kuptsikevich, a senior analyst from FxPro reported that money supply and lending in the eurozone are slowing faster than expected, indicating an imminent economic contraction.
Data released on Monday morning pointed to a slowdown in new lending, coinciding with the start of the euro zone's interest rate hike cycle. Loans rose by 3.6% year-on-year, compared with 3.8% in the previous month and an expected acceleration to 3.9%.
The annualised growth rate of M3 slowed to 3.5% yoy from 4.1% at the end of last year. The deceleration was stronger than the expected 3.9%. The money supply in Europe is not keeping pace with inflation, which was 8.6% in January and is expected to slow to 8.2% in February.

For the first time since 1981, the monetary aggregate M1 declined year-on-year. Such a development is often seen as an anti-inflationary indicator.
At the same time, the ECB continues to reduce its balance sheet by 962 billion or 11% since its peak in June. The most significant contributor to the decline in central bank assets has been the completion of regular liquidity programmes. The Fed's balance sheet was 6.3% below its peak.
For the economy, falling credit and a slowdown in lending are essential signals of an economic downturn.
From a fundamental point of view, this is negative data for the euro as it could lead the ECB to start easing policy sooner. However, this data has little impact on the currency as most traders await the release of February inflation estimates later in the week.
The crypto market bides its time

Market Picture

Alex Kuptsikevich, a senior analyst from FxPro reported that over the past 24 hours, Bitcoin has fallen 0.25% to $23.4K. The total capitalisation of the crypto market has fallen 0.3% to $1.07 trillion. The slight decline came despite a rebound in global stock indices. The crypto market has seen minimal changes since the start of the day, indicating a wait-and-see attitude.
The short-term technical picture is bullish for Bitcoin, with the price above its 50-day average and near late January's local highs. Ethereum's uptrending 50-day twice acted as support in February. Resistance since last October remains at the 1700 level. ETHUSD is selling off from here.
According to CoinShares, investments in cryptocurrencies decreased by $2 mln last week, the third consecutive week of declines. Investments in bitcoin fell by $12 mln and Ethereum by $0.2 mln. Investments in funds that allow shorts on bitcoin increased by $10 mln.
Over the past few weeks, Santiment has seen a slowdown in bitcoin whales’ activity. There has also been a decrease in activity among mid-sized addresses controlling between 10 and 100 BTC.

News background

Michaël van de Poppe, Eight platform founder, remains bullish, saying the bear phase is over, and Bitcoin is about to break out.
According to IntoTheBlock, 39% of Ethereum's total supply is concentrated on the balance sheets of a limited number of addresses. This starkly contrasts Bitcoin, where whales account for no more than 11% of the total.
The ongoing cryptocurrency crisis and tighter regulation have had no impact on interest in digital assets. According to Morning Consult, 20% of US adults (over 50 million people) own cryptocurrencies.
Gold and silver have room to fall

Alex Kuptsikevich, a senior analyst from FxPro reported that Gold continues to test the bottom and today fell back below $1810. Since the beginning of February, the dynamics suggest an almost perfect reversal of the uptrend, where the initial sharp pullback on the 2nd and 3rd was followed by a downtrend with nearly daily updates of intraday lows.
Until the middle of last week, gold's decline fit into a typical technical correction, but it is now trading below the 61.8% level of the rally from $1617 in early November to a high of $1960 on the 2nd.
Gold's reversal began after touching the overbought region on the weekly RSI, and the latest pullback has brought the index back into the mid-range.

Technically, gold's sustained decline could continue to the $1775-1787 area for some time. The lower boundary is the 200-day moving average, while the upper boundary is the 50% retracement of the last few months' gains. The RSI on the daily timeframe has yet to enter the oversold territory, suggesting that there is room for further declines.
Although the $1800 level looks like a nice round level, there were no meaningful stops and reversals near it in December, increasing the chances that there will not be this time around.

A key indicator for the gold market is silver. The pullback towards $20.60 has brought the price back below the 200 SMA, which could put additional pressure on the market. On the weekly timeframe, a death cross has formed as the 50-week moving average is below the 200-week moving average. This technical picture suggests the possibility of a decline to $18.50. This is where silver could find support from buyers, as it did last August. It is also the former multi-year resistance that turned into support last year.
Inflation surprise - now in Europe

Alex Kuptsikevich, a senior analyst from FxPro reported that Spain's CPI rose by 1% in February, and annual inflation accelerated from 5.9% to 6.1%. In France, prices rose 0.9% m/m, accelerating to 6.2% y/y. For forex traders, it is also important to note that the figure was higher than forecast, forcing a reassessment of expectations for Thursday's release of the region's overall index.
Although inflation in France has not reached the double digits for the whole Euro region, it still shows no signs of reversing. It will not be easy for the ECB to get inflation back to its "close but below 2%" target.
The higher-than-expected inflation rate supported Euro buying on Tuesday, pushing EURUSD back above 1.06 after a long downtrend triggered by strong US inflation. This currency tug-of-war has every chance of continuing as the labour market remains strong in both cases, creating a price spiral.
Challenging March for Bitcoin

Market picture

Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin ended February slightly higher (+0.9%, to $23,200). March is off to a buying start, pushing the price up to $23.7K at the time of writing.
March is considered an unpromising month of the year for the top cryptocurrency, having fallen in eight of the last 12 years with an average decline of about 15%, an average gain of 16%.
The strong growth momentum in January and the renewal of local highs in February suggest that the bulls prevail. At the same time, the technical picture on the weekly timeframe suggests that only a consolidation above $25K will strengthen the bullish view of the market.
Bernstein noted that cryptocurrencies' correlation with the US stock market and macroeconomic events is weakening amid BTC's current flat move, which is a bullish signal.

News background
Ethereum developers have completed the Shanghai-Capella (Shapella) hard fork on the Sepolia test network. An update to the second cryptocurrency's main network should occur as early as March. The main change after the update will be the ability to withdraw ETH from stakes.
Reuters reported that payment giants Visa and MasterCard had put plans for cryptocurrency integration on hold after a series of bankruptcies rocked the industry in 2022. The payment companies want to wait for market conditions and the regulatory environment to improve.
Coinbase, the largest US cryptocurrency exchange by trading volume, issued a notice of impending delisting of the Binance USD stablecoin. Investors began withdrawing funds from BUSD in early February after Paxos announced it would stop issuing the stablecoin under pressure from US authorities.
The Tel Aviv Stock Exchange is set to launch cryptocurrency trading. One of the largest local banks, Leumi Bank, has also agreed to start trading digital assets.
China opens to recovery; Yuan moves up

Alex Kuptsikevich, a senior analyst from FxPro reported that lifting the lockdown and the end of the Lunar New Year celebrations led to a strong rebound in Chinese economic activity. The manufacturing PMI jumped to 52.6 in February from 50.1 the previous month, according to an official release from the CFLP. MarkIt's manufacturing PMI (which conducts similar surveys worldwide) rose from 49.2 to 51.6 last month.
In both cases, we see a move from stagnation or a slight contraction to a growth rate that the official report has not seen since 2017. This can easily be explained by a low base, as the survey assesses the dynamics of the reporting month compared to the previous month.
The acceleration in the services sector is also impressive. The non-manufacturing PMI jumped to 56.3 in February, up from 54.4 in January. Growth in the services sector was the fastest since March 2021.
While China's main challenge will be maintaining this growth rate, such a sharp turnaround surprised economists. They had expected a much smoother return to growth.
Markets have also underestimated China's 'vibrant' reopening, with the renminbi up 1.4% against the dollar today, its strongest since late November.
The rise in the Yuan is important from a technical point of view, as it sets the USDCNH up for further declines. The pair's rally in February from 6.70 to 6.99 appears to have been a corrective bounce from the October high of 7.35. Since the beginning of this week, the pair has fallen from the 61.8% Fibonacci retracement level and failed to reach the psychologically important 7.0 level, where it had a prolonged consolidation in December.

A complete realisation of the above formation implies that USDCNH would fall to 6.28-6.30. This is the crucial area of the cyclical lows of February last year and April 2018. In both cases, the USD/Juan reversed to the upside on the back of cooling rhetoric from the US and European authorities towards China and an impressive revision of the country's economic outlook. It would be premature to bet on a return of the renminbi to those heights. For the renminbi bulls, a return to 6.7, where the pair was a month ago, may be challenging.
However, the 200 SMA indicates that it could change its trend, as we could see an abrupt move below this line today, which would be a strong sign that the USD buyers will capitulate from this critical level that the big banks are looking for. The Yuan is working very dutifully through the 200 SMA. Consolidation below 6.9 today (now 6.86) could repeat the situation in mid-2020 when such a breakout was a prologue for a big dip. There is also a counterexample from February 2019, when a break of this support line led to a horizontal consolidation but not the trend reverse.
Macroeconomic data and some dollar weakness in recent days suggest that the renminbi will continue to strengthen in the coming weeks and test 6.7 by the end of March, leaving the potential for a move lower.
The crypto market tries to buck negative
Market Picture

Alex Kuptsikevich, a senior analyst from FxPro reported that Cryptocurrency market capitalisation fell 1.2% overnight to $1.07 trillion. This level has been the focus of attention since Sunday, reflecting the consolidation of the participant’s strengths. The cryptocurrency fear and greed index is back in the 50s. Since January, periods of greed are alternating with a neutral sentiment, not fear.
Bitcoin continues to find support as it falls to 23k, an impressive result amid falling markets and a stronger dollar. The first cryptocurrency remains virtually unchanged, effectively fighting off the strong headwinds that pushed the Nasdaq100 back five weeks ago.

Significant signal levels on the way down for Bitcoin appear to be around $22.7K, where the 50-day moving average and the local lows from late last week are concentrated. If this support fails to hold, the next major stop is not expected until $21.5K, negating February’s bullish momentum.
Ethereum is sandwiched between resistance in the 50-week average (near $1690) and the 50-day average (near $1600). A bearish victory in this local battle could trigger a quick pullback to $1400.

Background news

France is set to tighten licensing rules for cryptocurrency companies. The country’s lower house of parliament has approved a set of new regulations for the licensing and registration of cryptocurrency companies. If the bill is passed, the changes will take effect from July 2023.
Major stablecoin issuers, united in the Stablecoin Standard group, have announced work to create a common set of standards to increase consumer confidence in digital assets.
The Gamium blockchain project’s GMM token surged 650% after it announced a partnership with Meta and Telefonica as part of the Metaverse Activation Programme initiative. The joint programme between the giants aims to empower and scale startups in the Metaverse and Web3 space.