Bitcoin won't give up $20K
#Bitcoin has lost 1.2% in the last 24 hours, trading at $20.1K. The plunge below a meaningful round level late Wednesday afternoon did not last long. Ethereum pulled down 0.3% to $1610 while the crypto community awaits the market's reaction to The Merge (move to PoS algorithm). We can describe sentiment across the crypto market as a cautious wait-and-see.
Short-term Bitcoin momentum indicates that sellers wanted to swing the market at the end of the day yesterday and snap stop orders, taking advantage of a period of reduced liquidity on Wednesday. As we see, it failed, and BTCUSD returned precisely to where it started its local decline.
However, the balance of power is now on the bears' side, as the global risk demand is suppressed, and critical technical levels (50- and 200-day MA, 200-week MA) are above the price.
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#Bitcoin has lost 1.2% in the last 24 hours, trading at $20.1K. The plunge below a meaningful round level late Wednesday afternoon did not last long. Ethereum pulled down 0.3% to $1610 while the crypto community awaits the market's reaction to The Merge (move to PoS algorithm). We can describe sentiment across the crypto market as a cautious wait-and-see.
Short-term Bitcoin momentum indicates that sellers wanted to swing the market at the end of the day yesterday and snap stop orders, taking advantage of a period of reduced liquidity on Wednesday. As we see, it failed, and BTCUSD returned precisely to where it started its local decline.
However, the balance of power is now on the bears' side, as the global risk demand is suppressed, and critical technical levels (50- and 200-day MA, 200-week MA) are above the price.
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US oil inventories: historic sell-off in SPR and business as usual
US commercial oil inventories rose by 2.4M barrels last week following an increase of 8.8M earlier. This dynamic fits in with seasonal trends, with inventories starting to fill at some point in September.
Around the same time and volume levels, net accumulation was reversed in 2018 and 2019. Note, however, that before 2014 (the shale boom), the fluctuations in stocks were mainly within the 300-360M range.
So, here we see some business as usual for commercial producers.
A vital point of the picture is the 30% drop in strategic reserves over the last year, almost equal to commercial reserves.
In other words, a net fall in overall inventories could have stimulated a ramp-up in production. But we see a slow increase in volumes in comparison to the 2011-2015 and 2016-2020 episodes. And there are a couple of significant reasons for this.
US commercial oil inventories rose by 2.4M barrels last week following an increase of 8.8M earlier. This dynamic fits in with seasonal trends, with inventories starting to fill at some point in September.
Around the same time and volume levels, net accumulation was reversed in 2018 and 2019. Note, however, that before 2014 (the shale boom), the fluctuations in stocks were mainly within the 300-360M range.
So, here we see some business as usual for commercial producers.
A vital point of the picture is the 30% drop in strategic reserves over the last year, almost equal to commercial reserves.
In other words, a net fall in overall inventories could have stimulated a ramp-up in production. But we see a slow increase in volumes in comparison to the 2011-2015 and 2016-2020 episodes. And there are a couple of significant reasons for this.
First, the sale of oil from reserves is aimed at bringing down the final price, which is not to the producers' liking and is holding back investment. In the last couple of weeks, the number of working rigs in the US has been falling, clearly showing that businesses are in no hurry to sell oil at a discount from the free market, topping up reserves.
Secondly, production in the Permian Basin - the main shale production region of recent years - is declining. New drilling is going to make up for the exhausted fields. Increased rates and the promise to raise more, combined with rising wages, further hold back the process.
As if that were not enough, US producers said Europe should not expect further supply increases. Perhaps this signals that companies following OPEC have switched from fighting for market share to maximising profits.
Secondly, production in the Permian Basin - the main shale production region of recent years - is declining. New drilling is going to make up for the exhausted fields. Increased rates and the promise to raise more, combined with rising wages, further hold back the process.
As if that were not enough, US producers said Europe should not expect further supply increases. Perhaps this signals that companies following OPEC have switched from fighting for market share to maximising profits.
As a result, we see gains in oil and gas prices over the last week against a general decline in financial markets. At the same time, we believe that the US government is unlikely to quickly abandon its oil price restraint policy, postponing the restocking momentum.
Investors and traders should also remember that a decisive policy tightening, by historical standards, puts additional pressure on prices. In our view, the downward momentum in oil prices is not over yet, although local attempts for WTI to exceed $91.50 and for Brent to return to $97 cannot be ruled out.
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Investors and traders should also remember that a decisive policy tightening, by historical standards, puts additional pressure on prices. In our view, the downward momentum in oil prices is not over yet, although local attempts for WTI to exceed $91.50 and for Brent to return to $97 cannot be ruled out.
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Eurozone trade deficit calls for a stronger euro
According to a new Eurostat publication, the eurozone's seasonally adjusted foreign trade deficit widened to 40bn in July. Since last October, the region has found itself in the unfamiliar role of a net importer. That is a notable reversal after about ten years of exports significantly exceeding imports. From 1999 to 2012, exports and imports held together even in the crisis period of 2008-2009.
Following a series of energy shocks, imports have been growing faster than exports for the last 18 months, in 10 of which there is a ballooning deficit. It is interesting that during this whole time, i.e., since the start of 2021, the EURUSD has been systematically falling.
In the case of Europe, it is not yet possible to say that a currency depreciation improves foreign trade performance, it is instead the opposite. The falling Euro is inflating energy import bills.
According to a new Eurostat publication, the eurozone's seasonally adjusted foreign trade deficit widened to 40bn in July. Since last October, the region has found itself in the unfamiliar role of a net importer. That is a notable reversal after about ten years of exports significantly exceeding imports. From 1999 to 2012, exports and imports held together even in the crisis period of 2008-2009.
Following a series of energy shocks, imports have been growing faster than exports for the last 18 months, in 10 of which there is a ballooning deficit. It is interesting that during this whole time, i.e., since the start of 2021, the EURUSD has been systematically falling.
In the case of Europe, it is not yet possible to say that a currency depreciation improves foreign trade performance, it is instead the opposite. The falling Euro is inflating energy import bills.
We are also seeing signs of a peak in exports, which have been falling for the past two months despite the import jump. The reason on the surface is the loss of competitiveness of the region's goods, as energy costs Europe more than some competing regions, such as the US.
Surging energy prices are responsible for a rise in EU imports from Norway (+151% between January and July) and Russia (+70%). Still, there is also an increase in the trade deficit with China of over 100 billion and sizeable increases in imports from the UK and India, suggesting a weaker competitive position of European goods.
The latter should be a wake-up call for eurozone monetary authorities, as soft policies are now working against the economy by depreciating the single currency and inflating import costs.
It may sound a bit unusual, but the eurozone should adopt the policies of emerging economies, which are fighting the economic crisis by supporting the national currency and trying to keep capital in.
Surging energy prices are responsible for a rise in EU imports from Norway (+151% between January and July) and Russia (+70%). Still, there is also an increase in the trade deficit with China of over 100 billion and sizeable increases in imports from the UK and India, suggesting a weaker competitive position of European goods.
The latter should be a wake-up call for eurozone monetary authorities, as soft policies are now working against the economy by depreciating the single currency and inflating import costs.
It may sound a bit unusual, but the eurozone should adopt the policies of emerging economies, which are fighting the economic crisis by supporting the national currency and trying to keep capital in.
More and more ECB officials may share this thought, so the resolution to raise rates we saw last week might be a long-term shift rather than a passing episode. If that is the case, we should expect a tightening of the monetary authority's tone and more overt moves to protect the Euro from declining.
However, traders and investors should be aware that such political shifts will not be able to reverse the exchange rate in one go. At best, a slowdown in the Euro depreciation can become the case in the coming months, not days. That said, we believe a EURUSD initial decline towards 0.95 is likely before the Euro gains a solid footing.
However, traders and investors should be aware that such political shifts will not be able to reverse the exchange rate in one go. At best, a slowdown in the Euro depreciation can become the case in the coming months, not days. That said, we believe a EURUSD initial decline towards 0.95 is likely before the Euro gains a solid footing.
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#WaveAnalysis
#Gold under bearish pressure
• Likely to fall to support level 1650.00
Gold under the bearish pressure after the price broke the pivotal support level 1690.00 (which has been reversing Gold from the middle of July).
The breakout of the support level 1690.00 continues the clear multi-month downtrend that can be seen on the daily Gold charts.
Gold can be expected to fall further in the active impulse waves (iii), 3 and (3) toward the next support level 1650.00.
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#Gold under bearish pressure
• Likely to fall to support level 1650.00
Gold under the bearish pressure after the price broke the pivotal support level 1690.00 (which has been reversing Gold from the middle of July).
The breakout of the support level 1690.00 continues the clear multi-month downtrend that can be seen on the daily Gold charts.
Gold can be expected to fall further in the active impulse waves (iii), 3 and (3) toward the next support level 1650.00.
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#WaveAnalysis
#NZDJPY reversed from resistance level 87.30
• Likely to fall to support level 85.00
NZDJPY currency pair recently reversed down from the key resistance level 87.30 (which has been reversing the price from the end of March), standing above the upper daily Bollinger Band.
The downward reversal from the resistance level 87.30 started the active short-term correction (ii).
NZDJPY can be expected to fall further toward the next support level 85.00 (target for the completion of the active wave (ii).
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#NZDJPY reversed from resistance level 87.30
• Likely to fall to support level 85.00
NZDJPY currency pair recently reversed down from the key resistance level 87.30 (which has been reversing the price from the end of March), standing above the upper daily Bollinger Band.
The downward reversal from the resistance level 87.30 started the active short-term correction (ii).
NZDJPY can be expected to fall further toward the next support level 85.00 (target for the completion of the active wave (ii).
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#WaveAnalysis #ADBE
• Adobe broke multi-month support level 350.00
• Likely to fall to support level 300.00
Adobe today opened with the sharp downward gap, which broke below the key multi-month support level 350.00 (which stopped wave (5) in the middle of June).
The breakout of the support level 350.00 accelerated the active intermediate impulse wave (3), which then broke the daily down channel from February.
Adobe can be expected to fall further toward the next round support level 300.00 (target for the completion of the intermediate impulse wave (3)).
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• Adobe broke multi-month support level 350.00
• Likely to fall to support level 300.00
Adobe today opened with the sharp downward gap, which broke below the key multi-month support level 350.00 (which stopped wave (5) in the middle of June).
The breakout of the support level 350.00 accelerated the active intermediate impulse wave (3), which then broke the daily down channel from February.
Adobe can be expected to fall further toward the next round support level 300.00 (target for the completion of the intermediate impulse wave (3)).
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Ether lost support but not the advantage, yet
Bitcoin has lost 1.6% over the last 24 hours to $19,777 amid renewed pressure on risk-sensitive assets. BTC remains just under the critical $20K round level, where it got support for the past three months.
Ethereum lost the speculative support it received before the move to PoS. Over the last day, Ether lost 8.6%, more than three times more than the 2.6% reduction in overall crypto capitalisation.
Weakness of this kind is an almost inevitable consequence of a previous period of overperformance, much of the gains of which have yet to be erased.
Trading at $1500, Ether is now almost 50% above the area of the June-July lows, while Bitcoin has rolled back to its lows of that period.
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Bitcoin has lost 1.6% over the last 24 hours to $19,777 amid renewed pressure on risk-sensitive assets. BTC remains just under the critical $20K round level, where it got support for the past three months.
Ethereum lost the speculative support it received before the move to PoS. Over the last day, Ether lost 8.6%, more than three times more than the 2.6% reduction in overall crypto capitalisation.
Weakness of this kind is an almost inevitable consequence of a previous period of overperformance, much of the gains of which have yet to be erased.
Trading at $1500, Ether is now almost 50% above the area of the June-July lows, while Bitcoin has rolled back to its lows of that period.
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China’s weaker currency for stronger economy
China’s data package released this morning exceeded expectations in countering the worsening market sentiment.
Official data showed a 5.4% y/y rise in retail sales in August compared to the expected 3.8%. The retail sector has benefitted from pent-up demand after a sluggish 2.7% MoM. Industrial production added 4.2% YoY against expectations of 3.8%.
These improvements are mainly attributable to the easing of coronavirus restrictions but may also be a reaction to the stimulus package implemented last month.
The recent economic acceleration may also be linked to the weaker renminbi, which has lost 4.7% against the dollar in less than a month.
The USDCNH gained 11.5% from March local lows. In contrast to Europe, where a weak Euro is becoming a brake on the economy, the weaker renminbi may be warmly greeted by the authorities.
China’s data package released this morning exceeded expectations in countering the worsening market sentiment.
Official data showed a 5.4% y/y rise in retail sales in August compared to the expected 3.8%. The retail sector has benefitted from pent-up demand after a sluggish 2.7% MoM. Industrial production added 4.2% YoY against expectations of 3.8%.
These improvements are mainly attributable to the easing of coronavirus restrictions but may also be a reaction to the stimulus package implemented last month.
The recent economic acceleration may also be linked to the weaker renminbi, which has lost 4.7% against the dollar in less than a month.
The USDCNH gained 11.5% from March local lows. In contrast to Europe, where a weak Euro is becoming a brake on the economy, the weaker renminbi may be warmly greeted by the authorities.
China’s consumer and producer prices growth is close to 2.5% y/y, compared with 9% CPI growth in the Eurozone and 8.3% in the USA.
The weaker yuan supports Chinese exports’ competitiveness and slightly boosts domestic consumption but has not yet provoked excessive pressure on prices.
Yesterday the Chinese offshore yuan crossed the 7.0 per dollar line and is trading at 7.03 today. A significant psychological level in the past forced the authorities to step in to defend their currency in 2016 and 2018.
In 2019 and 2020, the turning points have been higher, close to 7.15. It is well worth being prepared that we will not see any meaningful action or serious verbal interventions by the Chinese or US authorities up to these levels.
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The weaker yuan supports Chinese exports’ competitiveness and slightly boosts domestic consumption but has not yet provoked excessive pressure on prices.
Yesterday the Chinese offshore yuan crossed the 7.0 per dollar line and is trading at 7.03 today. A significant psychological level in the past forced the authorities to step in to defend their currency in 2016 and 2018.
In 2019 and 2020, the turning points have been higher, close to 7.15. It is well worth being prepared that we will not see any meaningful action or serious verbal interventions by the Chinese or US authorities up to these levels.
📣Trade responsibly with fxpro.com
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The Pound's demise probably forces BoE to tighten harder
A package of retail sales statistics in Britain appears to have removed the last layer of support for the Pound, sending it into a dive. GBPUSD earlier today renewed its lows since 1985, dropping to 1.1350.
Fresh data showed a 1.6% m/m and 5.4% y/y drop in sales, which was noticeably weaker than the expected 0.5% m/m and 4.2% y/y decline. This upsetting surprise has added to the pressure on Pound, which has been losing 0.9% against the dollar and yen and 0.6% against the euro after the report.
A package of retail sales statistics in Britain appears to have removed the last layer of support for the Pound, sending it into a dive. GBPUSD earlier today renewed its lows since 1985, dropping to 1.1350.
Fresh data showed a 1.6% m/m and 5.4% y/y drop in sales, which was noticeably weaker than the expected 0.5% m/m and 4.2% y/y decline. This upsetting surprise has added to the pressure on Pound, which has been losing 0.9% against the dollar and yen and 0.6% against the euro after the report.
There has been an almost non-stop, albeit very measured, sell-off in the Pound since August 11, with a brief pause for a shake-out of the dollar bulls' positions. In turn, this momentum looks to be part of a downward wave since March. In that case, the GBPUSD can fall to 1.06, where the 161.8% Fibonacci mark passes from the February peaks to the July lows. It is also worth noting that this technical target is very close to the historical lows of the GBPUSD at 1.0520, which only adds to its attractiveness for the rest of the year.
Due to inflation being off the charts by historical standards, the Bank of England has much more motive to make currency or verbal interventions to buy the collapse of the Pound. This is especially true given the recent one-way movement in the British currency. As such, traders and investors should be prepared for a rate hike of more than 50 points next week, as previously done and expected. A tightening of monetary authority rhetoric is also likely.
Due to inflation being off the charts by historical standards, the Bank of England has much more motive to make currency or verbal interventions to buy the collapse of the Pound. This is especially true given the recent one-way movement in the British currency. As such, traders and investors should be prepared for a rate hike of more than 50 points next week, as previously done and expected. A tightening of monetary authority rhetoric is also likely.
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US Inflation expectations drop gives markets a chance for a breather
Preliminary estimates from the University of Michigan indicate that inflation expectations in the USA continue to normalise in September. Inflation in the "coming year" is estimated at 4.6% compared to 4.8% a month earlier and a peak of 5.4% in July. People's expectations correlate closely with current inflation levels and are therefore seen by many traders and investors as an early inflation indicator.
Potentially even more encouraging news from this front is that five-year inflation expectations have returned to 2.8% - close to the multi-year average until the middle of last year.
This shift indicates that inflation expectations are unanchored, which will give the Fed some room and allow it not to push the monetary brake pedal to the floor. Americans accustomed to low inflation quickly returned their expectations to the multi-year norm when they saw gasoline prices slip and import prices fall.
Preliminary estimates from the University of Michigan indicate that inflation expectations in the USA continue to normalise in September. Inflation in the "coming year" is estimated at 4.6% compared to 4.8% a month earlier and a peak of 5.4% in July. People's expectations correlate closely with current inflation levels and are therefore seen by many traders and investors as an early inflation indicator.
Potentially even more encouraging news from this front is that five-year inflation expectations have returned to 2.8% - close to the multi-year average until the middle of last year.
This shift indicates that inflation expectations are unanchored, which will give the Fed some room and allow it not to push the monetary brake pedal to the floor. Americans accustomed to low inflation quickly returned their expectations to the multi-year norm when they saw gasoline prices slip and import prices fall.
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Although the Nasdaq100 index is now at its lowest level in about a month, the pressure on markets early next week could subside if market players discount the chances of a 100-point rate hike. They now stand at 16% versus 23% the day before. Zeroing in on this probability could support risk assets early next week.
Bank Holiday for the State Funeral of Queen Elizabeth II👑
September 19th is an official bank holiday in the UK, in remembrance of The Queen, whose funeral will take place today. As a result, the UK stock exchange will be closed, meaning that all UK shares, Indices & Index futures will be closed for trading.
More information can be found here: https://www.fxpro.com/trading-tools/market-holidays
September 19th is an official bank holiday in the UK, in remembrance of The Queen, whose funeral will take place today. As a result, the UK stock exchange will be closed, meaning that all UK shares, Indices & Index futures will be closed for trading.
More information can be found here: https://www.fxpro.com/trading-tools/market-holidays