#Bitcoin continues its streak of small wins, recording its 13th consecutive day of gains on Tuesday, adding for 15 days over 16 sessions this year. The exchange rate rewrote a two-month high at $21.55K. Local overbought conditions continue to build, with help from the stock indices, where the Nasdaq100 managed to close Tuesday's trading higher.
We continue to point out that in this stage, growth is vulnerable to sharp declines. From a long-term investor perspective, we pointed out already in November that the crypto market has passed its low point.
However, the best time for speculative buying is yet to come, when there will be a FOMO stage, like we last saw from December 2020 to April 2021 and from April to December 2017. In both cases, an acceleration and near-ubiquitous rise after surpassing previous historical highs.
We continue to point out that in this stage, growth is vulnerable to sharp declines. From a long-term investor perspective, we pointed out already in November that the crypto market has passed its low point.
However, the best time for speculative buying is yet to come, when there will be a FOMO stage, like we last saw from December 2020 to April 2021 and from April to December 2017. In both cases, an acceleration and near-ubiquitous rise after surpassing previous historical highs.
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#WaveAnalysis
#GBPAUD reversed from support level 1.7525
• Likely to rise to resistance level 1.7800
GBPAUD recently reversed up from the pivotal support level 1.7525 (which stopped the previous waves A, (B) and (1)).
The upward reversal from the support level 1.7525 stopped the previous intermediate impulse wave (3) from the start of January.
Given the strongly bullish sterling sentiment and the oversold daily Stochastic, GBPAUD can be expected to rise further toward the next resistance level 1.7800.
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#GBPAUD reversed from support level 1.7525
• Likely to rise to resistance level 1.7800
GBPAUD recently reversed up from the pivotal support level 1.7525 (which stopped the previous waves A, (B) and (1)).
The upward reversal from the support level 1.7525 stopped the previous intermediate impulse wave (3) from the start of January.
Given the strongly bullish sterling sentiment and the oversold daily Stochastic, GBPAUD can be expected to rise further toward the next resistance level 1.7800.
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The Bank of Japan, which has not changed interest rates for the past six years and remains fully committed to QE, sparked a strong market reaction by leaving policy unchanged today. The Bank of Japan surprised markets at its last meeting by announcing that it would now target a range rather than a specific level. This was seen by many, including us, as a first step in the gradual abandonment of the quantitative easing and negative rate policies that the BoJ has been pursuing alone amongst large peers.
The outgoing central bank governor, Kuroda, was hesitant to change course at the end of his term, which expires in April.
This adherence to the previous course came as a surprise to the foreign exchange market. Within two hours of the announcement, the USDJPY jumped 2.5% to levels near 131.60. Despite the impressive move, it only managed to bring the exchange rate back to the levels at the end of last week. And then, we saw a sustained pair reversal towards the downside.
The outgoing central bank governor, Kuroda, was hesitant to change course at the end of his term, which expires in April.
This adherence to the previous course came as a surprise to the foreign exchange market. Within two hours of the announcement, the USDJPY jumped 2.5% to levels near 131.60. Despite the impressive move, it only managed to bring the exchange rate back to the levels at the end of last week. And then, we saw a sustained pair reversal towards the downside.
The yen market dynamics on Wednesday suggest that investors and traders remain confident that the Bank of Japan will still turn towards a tighter monetary policy.
By now, the yen has recovered about half of its losses incurred on the divergence of Fed and BoJ policy since the start of 2021. The market has gone too far in believing that Japan can make a reversal as dramatic as that of the USA or even the Eurozone.
Moreover, the bears in the USDJPY need a reset for a new downward move. From a fundamental analysis point of view, it is also more likely that the yen will return to a declining trend but not develop a rising trend.
This is doubly so when we have the reassurance of the BoJ maintaining its ultra-soft policy contrasting with Bullard's comments from the Fed that it is necessary to bring the rate above 5.0% as soon as possible (+50 points to the current level) and then watch the information coming in.
By now, the yen has recovered about half of its losses incurred on the divergence of Fed and BoJ policy since the start of 2021. The market has gone too far in believing that Japan can make a reversal as dramatic as that of the USA or even the Eurozone.
Moreover, the bears in the USDJPY need a reset for a new downward move. From a fundamental analysis point of view, it is also more likely that the yen will return to a declining trend but not develop a rising trend.
This is doubly so when we have the reassurance of the BoJ maintaining its ultra-soft policy contrasting with Bullard's comments from the Fed that it is necessary to bring the rate above 5.0% as soon as possible (+50 points to the current level) and then watch the information coming in.
Bitcoin retreats for reset
Bitcoin has lost 2% over the past 24 hours, pulling back to $20.77K, almost $1K below Wednesday's peak. The first cryptocurrency followed stock indices, which turned sharply lower on Fed officials' hawkish rhetoric simultaneously with growing signals of weakness in consumer demand and business activity.
Technical analysis suggests that the latest pullback is a legitimate correction to the accumulated short-term overbought conditions after the rally since the beginning of the year.
The correction can only be reclassified as a new downturn only after the BTCUSD consolidates below $19.5K, as the 200-day moving average and the 61.8% Fibonacci retracement level from the rally since the beginning of the year pass just above that level.
Bitcoin has lost 2% over the past 24 hours, pulling back to $20.77K, almost $1K below Wednesday's peak. The first cryptocurrency followed stock indices, which turned sharply lower on Fed officials' hawkish rhetoric simultaneously with growing signals of weakness in consumer demand and business activity.
Technical analysis suggests that the latest pullback is a legitimate correction to the accumulated short-term overbought conditions after the rally since the beginning of the year.
The correction can only be reclassified as a new downturn only after the BTCUSD consolidates below $19.5K, as the 200-day moving average and the 61.8% Fibonacci retracement level from the rally since the beginning of the year pass just above that level.
Fed is in no hurry to soften its position despite contracting activity
U.S. statistics released on Wednesday signalled a decline in economic activity towards the end of the year, but the Fed maintained its hawkish rhetoric. Such a toxic mix turned markets lower towards the end of the day, causing the Dow Jones to fall 1.8% and the Nasdaq100 to drop 1.2%. The VIX fear index returned to above 20, a sign of a wave of selloffs in the equity market more than once during the previous year.
For December, retail sales fell by 1.1%, following a 1.0% decline a month earlier. Excluding cars, the drop was also 1.1%, more than double the 0.5% decline expected after a 0.6% decline in November. US retail sales at face value were released, adding 6.7% y/y, just 0.2 percentage points above the latest inflation figure. This is sharply below the 10-year average through February 2020, when lockdowns triggered sales turbulence, making such a comparison unrepresentative.
U.S. statistics released on Wednesday signalled a decline in economic activity towards the end of the year, but the Fed maintained its hawkish rhetoric. Such a toxic mix turned markets lower towards the end of the day, causing the Dow Jones to fall 1.8% and the Nasdaq100 to drop 1.2%. The VIX fear index returned to above 20, a sign of a wave of selloffs in the equity market more than once during the previous year.
For December, retail sales fell by 1.1%, following a 1.0% decline a month earlier. Excluding cars, the drop was also 1.1%, more than double the 0.5% decline expected after a 0.6% decline in November. US retail sales at face value were released, adding 6.7% y/y, just 0.2 percentage points above the latest inflation figure. This is sharply below the 10-year average through February 2020, when lockdowns triggered sales turbulence, making such a comparison unrepresentative.
Producers’ inflation was also weaker than forecast. For December, the overall index lost 0.5% (the most substantial decline since April 2020), and the annual rate fell to 6.2%. The core index, which excludes food and energy, slowed to 5.5%. The yearly comparison of producer prices has already hit a high base: In November 2021, prices started to rise sharply, and now we see a natural deceleration of the annual rate, although monthly declines are rare.
All the economic indicators listed indicate sharper-than-expected cooling of the economy. But at the same time, Fed spokespersons continued to assure that they would not cut rates before the end of the year as the markets expected. The divergence of opinion amongst the governing council is just what the next move will be. At least two now support an increase of another 50-points hike at the start of February, but markets see just a 5% chance of this move. The reassessment of these expectations could be a new driver for the market.
All the economic indicators listed indicate sharper-than-expected cooling of the economy. But at the same time, Fed spokespersons continued to assure that they would not cut rates before the end of the year as the markets expected. The divergence of opinion amongst the governing council is just what the next move will be. At least two now support an increase of another 50-points hike at the start of February, but markets see just a 5% chance of this move. The reassessment of these expectations could be a new driver for the market.
It is important to remember that in April and August last year, the Fed broke down overly dovish investor expectations and turned the index downwards. In recent weeks we have seen a particularly striking difference between the Fed's stated stance and the expectations of market participants.
The Nasdaq100 index returned under the 200-week moving average, failing to stay above that line and reversing back down from the December 2021 downtrend line for the fifth time. Without an easing in the rhetoric of the monetary authorities by the February meeting, Nasdaq100 runs the risk of not only retesting the 10600 area, from where it has been repeatedly ransomed since October, but also of updating, heading towards 10,000.
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The Nasdaq100 index returned under the 200-week moving average, failing to stay above that line and reversing back down from the December 2021 downtrend line for the fifth time. Without an easing in the rhetoric of the monetary authorities by the February meeting, Nasdaq100 runs the risk of not only retesting the 10600 area, from where it has been repeatedly ransomed since October, but also of updating, heading towards 10,000.
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The US number of building permits fell by 1.6% in December to 1,330k, the lowest since May 2020 and -30% from the peak in March 2022. Housing starts fell by 1.4% to 1,382k, down 23% from the peak in April 2022.
The construction market volume is shrinking at about the same pace as it did during the housing bubble's collapse in 2006-2008. On the other hand, construction volumes are now about the same as we saw before the beginning of 2020. So far, we are seeing nothing more than the deflation of excess volumes but not the start of a collapse.
The same observation is borne out by the comparative stability of new house prices in recent months (published in a separate report). The summer price volatility was not the start of a collapse.
A fall of another 5% in buildings or permits issued over the next couple of months would be well within the range of normalising the market to pre-pandemic levels. But a sustained fall below that would already signal an alarming slowdown in demand and the economy.
The construction market volume is shrinking at about the same pace as it did during the housing bubble's collapse in 2006-2008. On the other hand, construction volumes are now about the same as we saw before the beginning of 2020. So far, we are seeing nothing more than the deflation of excess volumes but not the start of a collapse.
The same observation is borne out by the comparative stability of new house prices in recent months (published in a separate report). The summer price volatility was not the start of a collapse.
A fall of another 5% in buildings or permits issued over the next couple of months would be well within the range of normalising the market to pre-pandemic levels. But a sustained fall below that would already signal an alarming slowdown in demand and the economy.
#WaveAnalysis
#CADCHF reversed from support level 0.679
• Likely to rise to resistance level 0.6916
CADCHF today reversed up from the key support level 0.679 (which has been stopping all downward impulses from December).
The support zone near the support level 0.679 was strengthened by the lower daily Bollinger Band.
Given the bullish divergence on the daily Stochastic indicator, CADCHF can be expected to rise further toward the next resistance level 0.6916.
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#CADCHF reversed from support level 0.679
• Likely to rise to resistance level 0.6916
CADCHF today reversed up from the key support level 0.679 (which has been stopping all downward impulses from December).
The support zone near the support level 0.679 was strengthened by the lower daily Bollinger Band.
Given the bullish divergence on the daily Stochastic indicator, CADCHF can be expected to rise further toward the next resistance level 0.6916.
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#WaveAnalysis
#NZDUSD reversed from resistance level 0.6460
• Likely to fall to support level 0.6300
NZDUSD recently reversed down from the major resistance level 0.6460 (which has been reversing this currency pair from August).
The resistance level 0.6460 was strengthened by the upper daily Bollinger Band and by the 61.9% Fibonacci retracement of the strong downtrend from last April.
Given the clear daily downtrend, NZDUSD can be expected to fall further toward the next support level 0.6300.
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#NZDUSD reversed from resistance level 0.6460
• Likely to fall to support level 0.6300
NZDUSD recently reversed down from the major resistance level 0.6460 (which has been reversing this currency pair from August).
The resistance level 0.6460 was strengthened by the upper daily Bollinger Band and by the 61.9% Fibonacci retracement of the strong downtrend from last April.
Given the clear daily downtrend, NZDUSD can be expected to fall further toward the next support level 0.6300.
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#WaveAnalysis
#Palladium reversed from major support level 1675.00
• Likely to rise to resistance level 1840.00
Palladium today reversed up from the major support level 1675.00 (which has been revering the price from the end of 2019, as can be seen below).
The support zone near the support level 1675.00 was strengthened by the lower weekly Bollinger Band.
Given the strength of the support level 1675.00 and the bullish sentiment seen across the precious metal markets today, Palladium can be expected to rise further toward the next resistance level 1840.00.
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#Palladium reversed from major support level 1675.00
• Likely to rise to resistance level 1840.00
Palladium today reversed up from the major support level 1675.00 (which has been revering the price from the end of 2019, as can be seen below).
The support zone near the support level 1675.00 was strengthened by the lower weekly Bollinger Band.
Given the strength of the support level 1675.00 and the bullish sentiment seen across the precious metal markets today, Palladium can be expected to rise further toward the next resistance level 1840.00.
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The cryptocurrency market has added 0.75% in the last 24 hours to 976bn, with Bitcoin rising by the same amount, testing $21K again.
The first cryptocurrency has corrected to 76.4% of the rally from December lows to this week's highs. It cannot be ruled out that this is the end of the shakeout. Such shallow pullbacks are normal for strong bull markets in stocks or other assets. Confirmation that Bitcoin, with the crypto market, is once again bullish will be a recent high of $21.6K, clearing the way for $24.6K 161.8% Fibonacci, where the 200-week moving average also passes.
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The first cryptocurrency has corrected to 76.4% of the rally from December lows to this week's highs. It cannot be ruled out that this is the end of the shakeout. Such shallow pullbacks are normal for strong bull markets in stocks or other assets. Confirmation that Bitcoin, with the crypto market, is once again bullish will be a recent high of $21.6K, clearing the way for $24.6K 161.8% Fibonacci, where the 200-week moving average also passes.
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#Gold has made an impressive rally in the last 11 weeks, adding 19.9% from early November lows to this morning's highs at $1937. While maintaining a bullish outlook on gold, we focus on short-term overbought and a high chance of correction.
Late last year, gold turned upwards after getting methodical support on declines under the 200-week moving average, correcting half of the gains from the lows of 2018 to the 2020 and 2022 peaks.
Fundamentally, gold was pulled down by an appreciating dollar and a tightening of US monetary policy.
A 20% rally from the lows will allow us to name it a new bull market for gold, suggesting further gains. We saw similar situations in late 2002 and 2008 and the second half of 2018. This historical proximity sets up a further multi-year rally in gold with a renewal of historical highs above 2630 – 161.8% of initial climbing from 2018 to 2020.
Late last year, gold turned upwards after getting methodical support on declines under the 200-week moving average, correcting half of the gains from the lows of 2018 to the 2020 and 2022 peaks.
Fundamentally, gold was pulled down by an appreciating dollar and a tightening of US monetary policy.
A 20% rally from the lows will allow us to name it a new bull market for gold, suggesting further gains. We saw similar situations in late 2002 and 2008 and the second half of 2018. This historical proximity sets up a further multi-year rally in gold with a renewal of historical highs above 2630 – 161.8% of initial climbing from 2018 to 2020.
Often, the market needs short-term corrections to get fuel for gains, allowing it to lock in profits and join the movement on a pullback. And such a pullback seems to be imminent.
During the four weeks since December 19, the amplitude of the move-up was also increasing. But this movement lost momentum this week. Despite the new price high, the RSI on the daily chart has stalled just on the verge of an overbought area. We had seen something similar at the beginning of the rally, when the powerful momentum of early November wore off by the middle of the month, taking the gold back from $1785 to $1735 – perfectly within the Fibonacci retracement pattern.
A repeat of this pattern from the highs set earlier this morning ($1937) would suggest a return to the $1860 area. This is also where the local tops of June are concentrated, which adds to the importance of support. The gold could be there by the end of the month and return to the upside as early as February.
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During the four weeks since December 19, the amplitude of the move-up was also increasing. But this movement lost momentum this week. Despite the new price high, the RSI on the daily chart has stalled just on the verge of an overbought area. We had seen something similar at the beginning of the rally, when the powerful momentum of early November wore off by the middle of the month, taking the gold back from $1785 to $1735 – perfectly within the Fibonacci retracement pattern.
A repeat of this pattern from the highs set earlier this morning ($1937) would suggest a return to the $1860 area. This is also where the local tops of June are concentrated, which adds to the importance of support. The gold could be there by the end of the month and return to the upside as early as February.
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#WaveAnalysis
#Nikkei225 broke resistance level 26500.00
• Likely to rise to resistance level 27000.00
Nikkei 225 index continues to rise after the earlier breakout of the resistance level 26500.00 (which stopped the previous waves 4 and (1)).
The breakout of the resistance level 26500.00 coincided with the breakout of the 38.2% Fibonacci correction of the previous downward impulse from December.
Nikkei 225 index can be expected to rise further toward the next resistance level 27000.00 (former monthly low from November).
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#Nikkei225 broke resistance level 26500.00
• Likely to rise to resistance level 27000.00
Nikkei 225 index continues to rise after the earlier breakout of the resistance level 26500.00 (which stopped the previous waves 4 and (1)).
The breakout of the resistance level 26500.00 coincided with the breakout of the 38.2% Fibonacci correction of the previous downward impulse from December.
Nikkei 225 index can be expected to rise further toward the next resistance level 27000.00 (former monthly low from November).
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#WaveAnalysis
#EURJPY reversed from support level 137.90
• Likely to rise to resistance level 142.60
EURJPY recently reversed up from the support level 137.90 (former monthly low from September), intersecting with the lower daily Bollinger Band.
The upward reversal from the support level 137.90 created the second consecutive Japanese candlesticks reversal pattern Piercing Line.
EURJPY can be expected to rise further toward the next resistance level 142.60 (which stopped the previous waves 4 and (B)).
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#EURJPY reversed from support level 137.90
• Likely to rise to resistance level 142.60
EURJPY recently reversed up from the support level 137.90 (former monthly low from September), intersecting with the lower daily Bollinger Band.
The upward reversal from the support level 137.90 created the second consecutive Japanese candlesticks reversal pattern Piercing Line.
EURJPY can be expected to rise further toward the next resistance level 142.60 (which stopped the previous waves 4 and (B)).
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#WaveAnalysis
#CHFJPY reversed from support level 138.00
• Likely to rise to resistance level 142.50
CHFJPY recently reversed up from the key support level 138.00 (which has been revering the price from June), intersecting with the lower daily Bollinger Band and the support trendline of the daily down channel from September.
The upward reversal from the support level 138.00 started the active primary impulse wave ③.
CHFJPY can be expected to rise further toward the next resistance level 142.50 (previous minor reversal high).
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#CHFJPY reversed from support level 138.00
• Likely to rise to resistance level 142.50
CHFJPY recently reversed up from the key support level 138.00 (which has been revering the price from June), intersecting with the lower daily Bollinger Band and the support trendline of the daily down channel from September.
The upward reversal from the support level 138.00 started the active primary impulse wave ③.
CHFJPY can be expected to rise further toward the next resistance level 142.50 (previous minor reversal high).
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Britons tighten their belts
UK retail sales fell by 1% in December, excluding fuel by 1.1%. The data surprised analysts who had, on average, expected an increase of 0.5% last month. Sales were 5.8% lower than in the same month a year earlier, when they were 0.7% below December 2020.
The retail sales index has been on a downward trend since April 2021 and, in that time, has returned to pre-pandemic levels, breaking a natural multi-year upward trend with such a sharp decline that Britain did not even see during the Great Recession. Other reports from the Office for National Statistics also point to a steady decline in industrial production, although it is smoother now than in some episodes from 2007 to 2011.
Surprisingly, the labour market remains strong. A similar picture can be seen in the USA, for which we received news earlier this week. In both countries, central bankers are signalling further rate hikes and preparing for a "mild recession".
UK retail sales fell by 1% in December, excluding fuel by 1.1%. The data surprised analysts who had, on average, expected an increase of 0.5% last month. Sales were 5.8% lower than in the same month a year earlier, when they were 0.7% below December 2020.
The retail sales index has been on a downward trend since April 2021 and, in that time, has returned to pre-pandemic levels, breaking a natural multi-year upward trend with such a sharp decline that Britain did not even see during the Great Recession. Other reports from the Office for National Statistics also point to a steady decline in industrial production, although it is smoother now than in some episodes from 2007 to 2011.
Surprisingly, the labour market remains strong. A similar picture can be seen in the USA, for which we received news earlier this week. In both countries, central bankers are signalling further rate hikes and preparing for a "mild recession".
This similarity in macroeconomic conditions makes the GBPUSD dynamics a tug-of-war. However, there are more downside risks in the pair now, given how it has stalled on the approach to the highs of December and the pressure on the stock indices with which the pound has a direct correlation. GBPUSD may correct into the 1.20-1.21 range before the end of the month. This would return the pound to a test of its 200-day average, where it could either get support from long-term buyers or return to the downtrend.
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#Bitcoin is up 7.7% over the past week, trading at $22.7K on Monday morning. Ethereum added less - only 4.1% to $1640. Other leading altcoins in the top 10 have gained between 0.4% (BNB) and 12.7% (Shiba Inu). The exception was Polygon (-1.8%).
The total capitalisation of the crypto market, according to CoinMarketCap, rose 5.1% to $1.045 trillion during the week. The bitcoin rally pulled up the entire crypto market.
Like in the good old days, the crypto market is feeding off the rise in stock indices but growing ahead of the curve. Moreover, at the expense of reduced liquidity, the price surpassed $23K for the first time since August last year.
Bitcoin has started a new bull market and is headed for $24.8K, where the psychologically important 200-week moving average and the 161.8% Fibonacci level of the momentum from the December lows are concentrated. The 50-week MA is headed to the same area. The market may need a long recharge and consolidation before a new upside wave begins.
The total capitalisation of the crypto market, according to CoinMarketCap, rose 5.1% to $1.045 trillion during the week. The bitcoin rally pulled up the entire crypto market.
Like in the good old days, the crypto market is feeding off the rise in stock indices but growing ahead of the curve. Moreover, at the expense of reduced liquidity, the price surpassed $23K for the first time since August last year.
Bitcoin has started a new bull market and is headed for $24.8K, where the psychologically important 200-week moving average and the 161.8% Fibonacci level of the momentum from the December lows are concentrated. The 50-week MA is headed to the same area. The market may need a long recharge and consolidation before a new upside wave begins.