Market News from FxPro

[FxPro_2022]

The Canadian Dollar at extremums

Alex Kuptsikevich, a senior analyst from FxPro reported that USDCAD has been rallying this week, gaining 1.4% since Tuesday and testing the five-month high of 1.38. The pair looks vulnerable to both a short-term correction and the potential for a longer-term reversal.
The US Dollar has enjoyed gains after Powell's hawkish rhetoric forced the markets to seriously consider a 50-point rate hike on 22 March. This is significant because, before that, the markets were pricing in 2-3 more 50-point hikes. And even earlier in the year, they were already pricing in a rate cut before the end of the year.
Almost simultaneously, the Bank of Canada avoided surprises by leaving its policy rate unchanged, as it had warned in its commentary on the January decision. This starkly contrasts the Fed's stance, which changed after strong reports on employment and consumer spending inflation.

The only change the Bank of Canada decided to make was to warn at the end of the commentary on the decision that further hikes from the current 4.5% were possible. Canada's reluctance is easy to understand as it has only been at the current rate since 2001, from July to October 2007, when it was cut to 0.25%.
The acceleration of rate hikes in the US and the pause after the slowdown in Canada is a major driver for the USD against the CAD. This difference promises to be unprecedented in modern history, with the G7 central banks acting almost in sync and moving in the same direction.
The divergence may exist only in the minds of currency speculators, not central bankers. Powell's speech contained the typical caveats used by the Fed since Greenspan, leaving the door open for future action. The actual actions of the US and Canadian central banks have at least in the same direction, if not identical.
The USDCAD has reached overbought territory in the currency market on the daily RSI. The exchange rate has now reached levels where selling intensified in October and November last year. The pair have not traded consistently above 1.40 USD CAD in the past 20 years. Short rallies have only been associated with periods of extreme market volatility and plunging oil prices, which is not the case here.
A pullback from current levels means the pair could slide as low as 1.36, completely erasing the latest growth impulse. However, it is unlikely that the pair will stop there, as it will be a move from the top of the multi-year trading range to its bottom around 1.20-1.25.

 

[FxPro_2022]

Bitcoin fell back to critical technical levels

Market picture
Alex Kuptsikevich, a senior analyst from FxPro reported that the crypto market is suffering impressive losses, mirroring traditional markets flee from risk, which has mainly hit the financial and tech sectors—total crypto capitalisation is down 6.5% in the last 24 hours to 930 billion.
Bitcoin fell below $20K (-7.9% in the last 24 hours), an emotionally significant level for the first cryptocurrency. As expected, the drop below $21.5K accelerated the sell-off. Bitcoin is currently testing its 200-day moving average, which appears to be the last line of defence on the way to $18K. Further decline in risk-sensitive assets can punish early crypto optimists and raise questions about whether we are in the ‘crypto spring’.
The bulls have technically oversold, and the fact that markets rarely quickly abandon 200-day MA.
News Background
US authorities have moved to the Coinbase around 10,000 BTCs seized from the Silk Road darknet marketplace. Market participants fear that the US authorities will start selling off the bitcoins seized from cybercriminals.
Another reason for the decline in the crypto market was the closure of Silvergate Bank. Previously, there had been rumours that Silvergate Bank might reopen, but management decided to close the bank and return deposits to customers.
The head of the Commodity Futures Trading Commission (CFTC), Rostin Behnam, said that the agency, not the SEC, should regulate Ethereum and stablecoins because they are commodities. According to Behnam, he would only have allowed the launch of ETH futures if he was firmly convinced that it was a commodity. Previously, SEC chief Gary Gensler argued that all crypto assets except bitcoin are securities.

 

[FxPro_2022]

A bullish pause of the Crypto

Market picture
Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin is swimming in the troubles of the US banking industry, gaining 9% in the last 24 hours and over 25% from Friday's lows. Remember that bitcoin was created in 2008 to respond to distrust in the global financial system. This function of bitcoin as capital preservation was recalled over the weekend and worked out on Monday.
BTCUSD returned strongly above its 50-day moving average, indicating that long and medium-term sentiment remains bullish.
At the same time, the short-term sentiment is more wait-and-see. Since last night, bitcoin has been bouncing around the 24.5 level. About a month ago, selling pressure prevented the price from going higher. The latest stop is an attempt to breathe before a new surge.
On the weekly timeframe, bitcoin has passed the 50-week mark and is testing the 200-week mark. After the pullback of the past three weeks, the chances of a breakout have increased significantly.
Fundamentally, cryptocurrencies are being helped by a change in monetary policy expectations. In less than a week, the markets have gone full circle on expectations, from a 25-point hike to a 50-point hike and back. In addition, expectations for further hikes later this year fell on Monday and Friday, which is positive for cryptocurrencies, the Nasdaq index and gold.
Another recalculation resulted in a 1.16% increase in the bitcoin mining difficulty. The index hit an all-time high of 43.55T.
News background
According to CoinShares, investment in crypto funds fell by a record $255 million last week, the fifth consecutive week of outflows. Bitcoin fell by $244 million and Ethereum by $11 million.
According to Santiment, cryptocurrency "whales" and "sharks" have started to accumulate extremely fast. Major BTC holders added $821 million to their accounts in just one week.
Another bank has been closed in the US. The Fed shut down Signature Bank, one of the largest lenders in the cryptocurrency industry. The regulator stressed that all of Signature's deposits would be returned to its owners and the Silicon Valley bank's customers. Against this backdrop, the USDC and DAI stablecoin exchange rates have almost returned to $1.
Changpeng Zhao, chief executive of the Binance exchange, said banks had become a risk to stablecoins backed by fiat currencies. And fiat currencies themselves, he said, could pose risks to cryptocurrencies, stablecoins and financial stability in general.

 

[FxPro_2022]

The UK labour market remains strong

Alex Kuptsikevich, a senior analyst from FxPro reported that unemployment claims in the UK fell by 11.2k in February, against analysts' average forecast of a rise of 12.5k. Jobless claims have fallen by nearly 50,000 over the past three months after a sustained period of stabilisation, a sure sign that the economy is firmer than previously thought.
Unemployment remained at 3.7% in the three months to January, close to a nearly 50-year low. Demand in the labour market continues to push up wages. In the three months to January, total wages and salaries, including bonuses, were 5.7% higher than a year earlier - below last year's peak but well above the inflation target.

A very high earnings growth reinforces the expectation of further policy tightening by the Bank of England. Short-term market liquidity concerns drove yesterday's repricing of market expectations for the rate. A surge in demand for short-term gilts indicates that markets are waiting for a significant tone softening.
Robust employment data provides local support for the Pound, fueling the rally. The technical picture for the GBPUSD remains bullish. Late last week, the pair was bought on a break below the 200-day moving average, potentially ending a shallow correction and consolidation in the pair since the beginning of the year.

The pair closed above its 50-day average on Monday, confirming a bullish medium-term sentiment. The Pound may now have an open path to 1.2400, repeating the December and February highs. However, a solid move higher will likely require a divergence in monetary policy between the Bank of England and the Fed. We may get that divergence in the next few weeks if the UK continues struggling with inflation and the Fed suddenly shifts to banking sector problems.

 

[FxPro_2022]

US inflation sparks risk appetite

Alex Kuptsikevich, a senior analyst from FxPro reported that the US consumer price index rose 0.4% in February, slowing the annual rate to 6.0%, in line with economists' expectations. The core price index, which excludes food and energy, rose 0.5% for the month (0.4% expected) and slowed slightly to 5.5% for the year from 5.6%.
It is important to note that the monthly price increase remains above the 0.17% needed to reach an annual inflation rate of 2%. This is despite falling commodity prices. Technically, the latest figures do not support the hypothesis of a sustained slowdown in inflation.

Nevertheless, price increases are not out of control, and the effects of the previous policy tightening are not yet fully reflected in the economic data. The robust labour market data of the last two months has not led to a significant acceleration in the rate of price and wage increases, and this seems to be a good reason for the Fed to raise rates by 25 points and not 50 as feared a week ago, but also not to abandon the rate hike altogether, as was almost done at the height of the banking mini-panic on Monday.
The inflation data did not initially trigger a strong reaction in the currency market. However, in the last few minutes there was some demand for the dollar and for equities, as we see a return of capital to US assets after yesterday's near-panic selling. Looking beyond the next few minutes, it is worth remembering that the recovery in risk demand (stock buying) is also feeding a weaker dollar and supporting commodity prices.

 

[FxPro_2022]

Bitcoin is not spooked by banking chaos

Market picture
Alex Kuptsikevich, a senior analyst from FxPro reported that Bitcoin was approaching $26.5K on Tuesday but almost nullified the rise by the end of the day. On Wednesday, we still see a tug-of-war near $25.0K. Bitcoin got a pull on a wave of fears around the banking system - markets shifted sharply to the problems at Credit Suisse today, causing a sell-off in the euro and a jump in gold and silver.
Moving away from the news backdrop, Bitcoin prices are returning under the 200-week average, failing to go immediately higher. Technically, an important signal of a return to a long-term bullish trend would be a consolidation above $25K at the end of the week.
Nevertheless, keeping the price above 20K and the 200-day average looks like a sufficient condition that Bitcoin is not ready to sharply decline further and remains interesting for buying on declines. Not least because of large investors' distrust of the banking system.
News background
The Chicago Mercantile Exchange (CME Group) has launched "event-based contracts" for bitcoin futures. The deal is capped at $20 and allows betting on an event at the end of each trading session. The new product will give the platform's clients "a cheaper way to trade BTC", the CME stressed.
Meta has announced discontinuing support for non-exchangeable tokens (NFT) on its Facebook and Instagram social media platforms. These options were added just ten months ago.
Cryptocurrency conglomerate Digital Currency Group (DCG) reported that big banks are not refusing to work with cryptocurrency companies, although they may impose restrictions.