Robust eurozone data brought EURUSD back above 1.05
The single currency edged against most of its peers on Wednesday and managed to return to territory above 1.05, helped in no small part by published economic data.
In the morning, Germany surprised with a less sharp drop in industrial production, which fell by 0.1% in October against an expected 0.6%. France's trade deficit narrowed to 12.2bn in October from 17.2bn a month earlier.
The final Q3 GDP reading for the Eurozone showed economic growth of 0.3% QoQ and 2.3% YoY (down from 0.2% and 2.1%, respectively).
The single currency edged against most of its peers on Wednesday and managed to return to territory above 1.05, helped in no small part by published economic data.
In the morning, Germany surprised with a less sharp drop in industrial production, which fell by 0.1% in October against an expected 0.6%. France's trade deficit narrowed to 12.2bn in October from 17.2bn a month earlier.
The final Q3 GDP reading for the Eurozone showed economic growth of 0.3% QoQ and 2.3% YoY (down from 0.2% and 2.1%, respectively).
The employment growth estimate was also improved, recording job gains of 0.3% QoQ and 1.8% YoY. Employment is supported by the recovery of the economy from the coronavirus restrictions. But the fragmentation of the global economy is also likely to be a factor, forcing European companies to increase local production, reducing dependence on global supply chains (energy from Russia, goods from China).
Interestingly, in contrast to the optimistic Q3 employment estimates, Reuters published a selection of large European companies that have announced layoffs or frozen hiring recently. The dynamics in employment may have already turned from growth to decline, but last quarter's robust data buys some more time for the ECB to actively hike interest rates, which is suitable for the single currency.
Interestingly, in contrast to the optimistic Q3 employment estimates, Reuters published a selection of large European companies that have announced layoffs or frozen hiring recently. The dynamics in employment may have already turned from growth to decline, but last quarter's robust data buys some more time for the ECB to actively hike interest rates, which is suitable for the single currency.
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#WaveAnalysis
#Gold reversed from support level 1765.00
• Likely to rise to resistance level 1805.00
Gold earlier reversed up from the support level 1765.00 (former minor resistance from the end of November).
The support level 1765.00 was further strengthened by the nearby 50% Fibonacci correction of the upward impulse wave (i) from the end of last month.
Given the improving sentiment across the precious metal markets, Gold can be expected to rise further toward the next resistance level 1805.00 (former top of waves (ii) and (i)).
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#Gold reversed from support level 1765.00
• Likely to rise to resistance level 1805.00
Gold earlier reversed up from the support level 1765.00 (former minor resistance from the end of November).
The support level 1765.00 was further strengthened by the nearby 50% Fibonacci correction of the upward impulse wave (i) from the end of last month.
Given the improving sentiment across the precious metal markets, Gold can be expected to rise further toward the next resistance level 1805.00 (former top of waves (ii) and (i)).
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#WaveAnalysis
#Brent crude oil broke strong support level 82.65
• Likely to fall to support level 75.00
Brent crude oil recently broke below the strong support level 82.65 (which has been repeatedly reversing the price from the end of September, as can be seen below).
The breakout of the support level 82.65 accelerated the active short-term impulse wave (iii) – which belongs to the sharp impulse wave C from the start of November.
Given the clear multi-month downtrend, Brent crude oil can be expected to fall further toward the next support level 75.00.
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#Brent crude oil broke strong support level 82.65
• Likely to fall to support level 75.00
Brent crude oil recently broke below the strong support level 82.65 (which has been repeatedly reversing the price from the end of September, as can be seen below).
The breakout of the support level 82.65 accelerated the active short-term impulse wave (iii) – which belongs to the sharp impulse wave C from the start of November.
Given the clear multi-month downtrend, Brent crude oil can be expected to fall further toward the next support level 75.00.
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Bitcoin hits the ceiling
Crypto market capitalisation rose 2% over the past 24 hours to $858bn. Bitcoin added 2.3% to $17.2K, trading near the top of its range since November 12.
The technical picture remains the same for Bitcoin, and it will need to confirm a move out of its abnormally narrow range, whichever way it moves.
In the event of a further rise, such confirmation would see a consolidation at above $18K, near the 50-day moving average and local support from June through October. A downward move could lead to further decline if it sends the price below $16K.
Popular Twitter analyst PlanB, author of the stock-to-flow model, reiterated his confidence in the massive growth of bitcoin in 2023 or at least in 2024. According to him, BTC will be worth between $100K and $1 million after the next halving, with the first cryptocurrency expected to bottom in the next three weeks.
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Crypto market capitalisation rose 2% over the past 24 hours to $858bn. Bitcoin added 2.3% to $17.2K, trading near the top of its range since November 12.
The technical picture remains the same for Bitcoin, and it will need to confirm a move out of its abnormally narrow range, whichever way it moves.
In the event of a further rise, such confirmation would see a consolidation at above $18K, near the 50-day moving average and local support from June through October. A downward move could lead to further decline if it sends the price below $16K.
Popular Twitter analyst PlanB, author of the stock-to-flow model, reiterated his confidence in the massive growth of bitcoin in 2023 or at least in 2024. According to him, BTC will be worth between $100K and $1 million after the next halving, with the first cryptocurrency expected to bottom in the next three weeks.
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US indices have rallied impressively in October and November, but the start of December is still heavy. And now is the right time to figure out whether the previous two months were a bear market rally or the beginning of a new bull market.
Right now, there is no answer to that question. It may not be until after the Fed meeting on December 14, as the markets need a strong signal to move from the current point.
The move up in the last two months was initially due to a correction after oversold conditions and then on speculation that the Fed will slow the pace of tightening. We consider a further retreat in commodities to be another supportive factor, lowing consumers' and companies' spending.
The two-month rally in S&P500 has stalled near the 200-day MA. The close of October above this curve triggered a sell-off momentum from the first days of December. It would have looked like technical profit-taking if not for the disturbing analogies, as the market reversed from this line in April and August.
Right now, there is no answer to that question. It may not be until after the Fed meeting on December 14, as the markets need a strong signal to move from the current point.
The move up in the last two months was initially due to a correction after oversold conditions and then on speculation that the Fed will slow the pace of tightening. We consider a further retreat in commodities to be another supportive factor, lowing consumers' and companies' spending.
The two-month rally in S&P500 has stalled near the 200-day MA. The close of October above this curve triggered a sell-off momentum from the first days of December. It would have looked like technical profit-taking if not for the disturbing analogies, as the market reversed from this line in April and August.
Another worrying signal is the performance of the VIX. It has reversed upwards twice since the beginning of the year from the 20 levels, almost coincidentally with the reversal of the S&P 500. By early December, this story repeats as the VIX have reversed to growth after briefly dipping below 20.
During the 2000-2003 bear market, to which we often compare the current situation, it was prudent to remain bearish while the index was steadily below its 200-day average and the VIX fear index bounced back from 20.
These correlations could still work now, although they give a buy signal with an impressive delay. It is also important to note that after the volatility of 2008, the buy signal from the VIX came a year late after the market bottomed in March 2009. This is understandable, as the Fed’s QE supported the market and suffered another three years of sharp corrections.
During the 2000-2003 bear market, to which we often compare the current situation, it was prudent to remain bearish while the index was steadily below its 200-day average and the VIX fear index bounced back from 20.
These correlations could still work now, although they give a buy signal with an impressive delay. It is also important to note that after the volatility of 2008, the buy signal from the VIX came a year late after the market bottomed in March 2009. This is understandable, as the Fed’s QE supported the market and suffered another three years of sharp corrections.
Our days, market participants may postpone the decision about the future market regime until the Fed's official comments and press conference next Wednesday. Further assurances from the world's biggest central bank that the decline in inflation is sustainable and a slower rate hike is to be expected further, despite indications that the economy and labour market are still better than market expectations, will be required for continued gains in equities.
However, when the market is determined, we may see a strong trend in one direction within a few weeks, so remember the importance of the current momentum. Looking at the market levels, an S&P500 rally above 4050 would open the way to 4300 within 4-6 weeks and to 4600 by the middle of next year.
If the bears prevail, the S&P500 could make a new local low around 3600 before the end of January, and it will start making regular lows in the first quarter of next year.
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However, when the market is determined, we may see a strong trend in one direction within a few weeks, so remember the importance of the current momentum. Looking at the market levels, an S&P500 rally above 4050 would open the way to 4300 within 4-6 weeks and to 4600 by the middle of next year.
If the bears prevail, the S&P500 could make a new local low around 3600 before the end of January, and it will start making regular lows in the first quarter of next year.
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#WaveAnalysis #NatGas
Natural gas reversed from strong support level 5.350
• Likely to rise to resistance level 6.5000
Natural gas recently reversed up from the strong support level 5.350 (which has been repeatedly reversing the price from the start of July) – intersecting with the lower daily Bollinger Band.
The upward reversal from the support level 5.350 created the daily Japanese candlesticks reversal pattern Bullish Engulfing – which started the active minor correction 2.
Natural gas can be expected to rise further toward the next resistance level 6.5000 (former strong support from the middle of November).
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Natural gas reversed from strong support level 5.350
• Likely to rise to resistance level 6.5000
Natural gas recently reversed up from the strong support level 5.350 (which has been repeatedly reversing the price from the start of July) – intersecting with the lower daily Bollinger Band.
The upward reversal from the support level 5.350 created the daily Japanese candlesticks reversal pattern Bullish Engulfing – which started the active minor correction 2.
Natural gas can be expected to rise further toward the next resistance level 6.5000 (former strong support from the middle of November).
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#WaveAnalysis
#Tesla reversed from support level 179.20
• Likely to rise to resistance level 200.00
Tesla recently reversed up from the long-term support level 179.20 (which has been reversing the price from the start of 2021).
The support level 179.20 was further strengthened by the lower weekly Bollinger Band.
Given the strength of the support level 179.20 and the oversold daily and weekly Stochastic, Tesla can be expected to rise further toward the next round resistance level 200.00.
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#Tesla reversed from support level 179.20
• Likely to rise to resistance level 200.00
Tesla recently reversed up from the long-term support level 179.20 (which has been reversing the price from the start of 2021).
The support level 179.20 was further strengthened by the lower weekly Bollinger Band.
Given the strength of the support level 179.20 and the oversold daily and weekly Stochastic, Tesla can be expected to rise further toward the next round resistance level 200.00.
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#WaveAnalysis
#AUDJPY reversed from support level 91.00
• Likely to rise to resistance level 94.00
AUDJPY recently reversed up from the multi-month support level 91.00 (which has been reversing the price from the start of August).
The support level 91.00 was further strengthened by the lower daily Bollinger Band and by the 38.2% Fibonacci correction of the extended upward impulse from last February.
Given the predominant uptrend, AUDJPY can be expected to rise further toward the next resistance level 94.00 (top of wave (iv) from last month).
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#AUDJPY reversed from support level 91.00
• Likely to rise to resistance level 94.00
AUDJPY recently reversed up from the multi-month support level 91.00 (which has been reversing the price from the start of August).
The support level 91.00 was further strengthened by the lower daily Bollinger Band and by the 38.2% Fibonacci correction of the extended upward impulse from last February.
Given the predominant uptrend, AUDJPY can be expected to rise further toward the next resistance level 94.00 (top of wave (iv) from last month).
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Volatility in #Bitcoin and the crypto market remains as squeezed as possible. Continuing to hover near $17K, the price of the first cryptocurrency loses 1.5% in 24 hours, 2.5% in 7 days and is up 1.1% in 30 days.
On intraday time frames, Bitcoin price remains near the upper end of last week’s range, maintaining (in our view) an equal chance of exiting the corridor in either direction. In both cases, it is prudent to wait for confirmation in the form of a rejection of 1000 one way or the other.
On the bulls' side is that Bitcoin has been falling for more than a year, having lost three-quarters of its peak price in that time. That is a very attractive disposition for long-term buyers.
On the bears' side is that cryptocurrency is mainly interesting for speculators. With narrowing volatility and no growth, the exit of speculators from the market reduces liquidity, which puts additional pressure on prices on top of caution due to recent major crypto firms’ busts.
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On intraday time frames, Bitcoin price remains near the upper end of last week’s range, maintaining (in our view) an equal chance of exiting the corridor in either direction. In both cases, it is prudent to wait for confirmation in the form of a rejection of 1000 one way or the other.
On the bulls' side is that Bitcoin has been falling for more than a year, having lost three-quarters of its peak price in that time. That is a very attractive disposition for long-term buyers.
On the bears' side is that cryptocurrency is mainly interesting for speculators. With narrowing volatility and no growth, the exit of speculators from the market reduces liquidity, which puts additional pressure on prices on top of caution due to recent major crypto firms’ busts.
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#WaveAnalysis
#Gold reversed from key resistance level 1800.00
• Likely to fall to support level 1765.00
Gold previously reversed down from the major resistance level 1800.00 (which has been steadily reversing the price from May, when it served as the strong support).
The resistance level 1800.00 was further strengthened by the intersecting upper daily Bollinger Band and by the 50% Fibonacci correction of the downward impulse from April.
Gold gas can be expected to fall further toward the next support level 1765.00 (low of the earlier Morning Star from the start of December).
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#Gold reversed from key resistance level 1800.00
• Likely to fall to support level 1765.00
Gold previously reversed down from the major resistance level 1800.00 (which has been steadily reversing the price from May, when it served as the strong support).
The resistance level 1800.00 was further strengthened by the intersecting upper daily Bollinger Band and by the 50% Fibonacci correction of the downward impulse from April.
Gold gas can be expected to fall further toward the next support level 1765.00 (low of the earlier Morning Star from the start of December).
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#WaveAnalysis
#GBPNZD reversed from key support level 1.9135
• Likely to rise to resistance level 1.9400
GBPNZD today reversed up from the key support level 1.9135 (which has been repeatedly reversing the pair from the start of November) – intersecting with the lower daily Bollinger Band.
The upward reversal from the support level 1.9135 will form the daily Japanese candlesticks reversal pattern Bullish Engulfing – if the pair closes today near the current levels.
GBPNZD gas can be expected to rise further toward the next resistance level 1.9400 (top of the earlier minor correction (ii) from the start of this month).
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#GBPNZD reversed from key support level 1.9135
• Likely to rise to resistance level 1.9400
GBPNZD today reversed up from the key support level 1.9135 (which has been repeatedly reversing the pair from the start of November) – intersecting with the lower daily Bollinger Band.
The upward reversal from the support level 1.9135 will form the daily Japanese candlesticks reversal pattern Bullish Engulfing – if the pair closes today near the current levels.
GBPNZD gas can be expected to rise further toward the next resistance level 1.9400 (top of the earlier minor correction (ii) from the start of this month).
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Bitcoin recouped all its early-day losses in the US session on Monday amid rising stock indices. BTC climbed above the $17,000 level, extending a period of almost no change in price that has become particularly pronounced this month.
Weekly trading volumes hit a new two-year low of $677.
It would be incorrect to say that nothing is happening in crypto. There is plenty of negative news.
The WSJ and Reuters criticised Binance on Monday - a rare synchronisation by the iconic financial media. The exchange had to defend itself and publish evidence that Reuters had misinterpreted its words.
Nevertheless, it is reported that more than $1.4bn has been withdrawn in 24 hours, and as of Tuesday morning, Binance has paused the USDC withdrawal. The reason cited is that New York banks were closed. Traditional banks in such circumstances could not withstand the onslaught of deposits run as they did not have as much liquidity.
As it turned out, FTX did not have the liquidity either. Will Binance withstand this test?
Weekly trading volumes hit a new two-year low of $677.
It would be incorrect to say that nothing is happening in crypto. There is plenty of negative news.
The WSJ and Reuters criticised Binance on Monday - a rare synchronisation by the iconic financial media. The exchange had to defend itself and publish evidence that Reuters had misinterpreted its words.
Nevertheless, it is reported that more than $1.4bn has been withdrawn in 24 hours, and as of Tuesday morning, Binance has paused the USDC withdrawal. The reason cited is that New York banks were closed. Traditional banks in such circumstances could not withstand the onslaught of deposits run as they did not have as much liquidity.
As it turned out, FTX did not have the liquidity either. Will Binance withstand this test?
UK labour market reversal
UK data released today marked a sharp rise in jobless claims, marking a turnaround in employment recovery after covid restrictions.
The ONS reported a 30.5K increase in claimant count for November after a 6.5K decline a month earlier and a sharply stronger-than-expected 3.5K. Previously there had been a trend of slowing job growth over the months, but new jobs were still being created.
The labour market often acts as a leading indicator for the economy, overshadowing the positive surprise from the GDP data released the previous day.
UK data released today marked a sharp rise in jobless claims, marking a turnaround in employment recovery after covid restrictions.
The ONS reported a 30.5K increase in claimant count for November after a 6.5K decline a month earlier and a sharply stronger-than-expected 3.5K. Previously there had been a trend of slowing job growth over the months, but new jobs were still being created.
The labour market often acts as a leading indicator for the economy, overshadowing the positive surprise from the GDP data released the previous day.
Interestingly, steady buying in the currency market has continued, with the pound rising against the dollar for the fifth consecutive trading session, testing the 1.23 level.
The rise in the pound is now mainly due to a reassessment of key rate expectations, where the market is raising the forecast terminal level of the key Bank Rate. This reassessment is linked to still building up inflationary pressures and the fact that the Bank of England focuses on this rather than labour market indicators.
However, in the medium term, investors should still consider the labour market's weakness, as in Britain, this often quickly becomes a pressure in the real estate and services sector. If that is the case this time, too, the Bank of England will be quicker than currently expected to complete its policy tightening cycle and turn back to stimulative policy. We also note that the rise in unemployment caused by the economic problems of 2022 is well in line with the trend that started in 2016 and is likely to be
The rise in the pound is now mainly due to a reassessment of key rate expectations, where the market is raising the forecast terminal level of the key Bank Rate. This reassessment is linked to still building up inflationary pressures and the fact that the Bank of England focuses on this rather than labour market indicators.
However, in the medium term, investors should still consider the labour market's weakness, as in Britain, this often quickly becomes a pressure in the real estate and services sector. If that is the case this time, too, the Bank of England will be quicker than currently expected to complete its policy tightening cycle and turn back to stimulative policy. We also note that the rise in unemployment caused by the economic problems of 2022 is well in line with the trend that started in 2016 and is likely to be
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Another inflation release below expectations – another rally
US consumer prices added 0.1% for November, significantly weaker than the expected 0.3%. The annual price growth rate slowed to 7.1% YoY against expectations of 7.3%, 7.7% a month earlier and two percentage points below the June peak.
An important factor was the release of a lower-than-expected Core-CPI, which decreased to 6.0% YoY. This strongly indicates that the fall in commodity prices is also spreading rapidly across the basket.
For market players, such data reinforces expectations that inflation has proved more responsive to rate hikes and less sticky than warned at the Fed and feared by markets in previous months. The weak inflation strengthens hopes that Powell's tone tomorrow will be more amicable than in the last few months.
In terms of interest rates, this means that after three 75-point hikes, the main scenario is another 50-point increase, followed by two 25-point hikes.
US consumer prices added 0.1% for November, significantly weaker than the expected 0.3%. The annual price growth rate slowed to 7.1% YoY against expectations of 7.3%, 7.7% a month earlier and two percentage points below the June peak.
An important factor was the release of a lower-than-expected Core-CPI, which decreased to 6.0% YoY. This strongly indicates that the fall in commodity prices is also spreading rapidly across the basket.
For market players, such data reinforces expectations that inflation has proved more responsive to rate hikes and less sticky than warned at the Fed and feared by markets in previous months. The weak inflation strengthens hopes that Powell's tone tomorrow will be more amicable than in the last few months.
In terms of interest rates, this means that after three 75-point hikes, the main scenario is another 50-point increase, followed by two 25-point hikes.
If the inflation rate continues to react "favourably" to high-interest rates, the central bank's QE policy could already end at the end of 2023.
However, such expectations are very fragile constructions. Producer prices rise did not slow in November, adding 0.3% m/m for the 3rd month in a row. The annual growth rate is falling due to a high base effect but not due to a fall in prices. At the same time, the labour market remains "tight", suggesting further pressure on prices due to wages.
Thus, it may be too premature to celebrate victory over inflation and bet on an end to policy tightening by the Fed or other central banks.
However, such expectations are very fragile constructions. Producer prices rise did not slow in November, adding 0.3% m/m for the 3rd month in a row. The annual growth rate is falling due to a high base effect but not due to a fall in prices. At the same time, the labour market remains "tight", suggesting further pressure on prices due to wages.
Thus, it may be too premature to celebrate victory over inflation and bet on an end to policy tightening by the Fed or other central banks.
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#WaveAnalysis
#CADJPY reversed from round support level 100.00
• Likely to rise to resistance level 101.60
CADJPY recently reversed up once again from the round support level 100.00, intersecting with the 50% Fibonacci correction of the upward impulse from February.
The upward reversal from the support level 100.00 started the active short-term ABC correction 4.
CADJPY can be expected to rise further toward the next resistance level 101.60 (former strong support from June, August and November).
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#CADJPY reversed from round support level 100.00
• Likely to rise to resistance level 101.60
CADJPY recently reversed up once again from the round support level 100.00, intersecting with the 50% Fibonacci correction of the upward impulse from February.
The upward reversal from the support level 100.00 started the active short-term ABC correction 4.
CADJPY can be expected to rise further toward the next resistance level 101.60 (former strong support from June, August and November).
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