Deceptive oil growth
Oil briefly topped $82.50 per barrel WTI on Monday, testing the highs seen in the second half of November. The bulls are betting that China's lifting of restrictions will boost global demand for commodities and energy.
Although the US became the largest oil exporter at the end of last year, commercial inventories were 8.3% higher last week than a year earlier. Production growth over the same period was barely above 5%.
Drilling activity data released on Friday evening showed a further decline in the number of oil wells to 613, down from a peak of 627 just over a month ago. This is a slight dip but an apparent stagnation from the lower levels we saw at the peaks in early 2019 (just under 900) or late 2014 (around 1600).
Oil briefly topped $82.50 per barrel WTI on Monday, testing the highs seen in the second half of November. The bulls are betting that China's lifting of restrictions will boost global demand for commodities and energy.
Although the US became the largest oil exporter at the end of last year, commercial inventories were 8.3% higher last week than a year earlier. Production growth over the same period was barely above 5%.
Drilling activity data released on Friday evening showed a further decline in the number of oil wells to 613, down from a peak of 627 just over a month ago. This is a slight dip but an apparent stagnation from the lower levels we saw at the peaks in early 2019 (just under 900) or late 2014 (around 1600).
On the other hand, this could be evidence of increasing efficiency, both on the upstream, getting more out of a well, and on the consumption side. More and more electric cars are being sold, and internal combustion engines are becoming more economical. And this is reflected in the growth in petrol inventories at the same time as the economy is growing and production is stagnating.
The chart also shows that new highs in oil are becoming harder to come by. WTI has stalled for the third time since early December and is approaching $81.50. Near that level is a 50% retracement of the decline from the October and November highs. This is the same area where oil reversed lower in October 2021. It rallied on fears that Russian Crude would be removed from the global energy market. So, a dip lower looks like a return to normal.
The Fed meeting, and the speculation surrounding it, could be an essential turning point for oil, determining whether it can continue to rise above $81.50 or reverses course. If the Fed not only reduces the pace of rate hikes but also hints that they may stop sooner than previously promised, this will boost global demand for risk assets, including oil. If the committee confirms its plans, it could deflate much of the positivity that has been pumped into the markets since the beginning of the year.
The Fed meeting, and the speculation surrounding it, could be an essential turning point for oil, determining whether it can continue to rise above $81.50 or reverses course. If the Fed not only reduces the pace of rate hikes but also hints that they may stop sooner than previously promised, this will boost global demand for risk assets, including oil. If the committee confirms its plans, it could deflate much of the positivity that has been pumped into the markets since the beginning of the year.
Strong PMIs fail to save the euro from sliding
According to Markit's preliminary estimates of business activity, the Eurozone economy has moved out of contraction and is trying to claw its way into growth. The eurozone composite PMI rose from 49.3 to 50.2, better than the expected 49.8. The rebound was driven by growth in the region's services sector, which responded positively to lower inflation and falling gas prices.
These better-than-expected data were insufficient to support further gains for the Euro. On the contrary, its put pressure on the single currency, which subsequently increased with the release of aggregate data.
We are witnessing a classic sell-off reaction as traders took profits after yesterday's touch above 1.09. It should also be noted that the
Nor can we write off the accumulated fatigue from four months of dollar depreciation. In such an environment, the market may be less sensitive to bad news for the dollar and overly sensitive to good news.
According to Markit's preliminary estimates of business activity, the Eurozone economy has moved out of contraction and is trying to claw its way into growth. The eurozone composite PMI rose from 49.3 to 50.2, better than the expected 49.8. The rebound was driven by growth in the region's services sector, which responded positively to lower inflation and falling gas prices.
These better-than-expected data were insufficient to support further gains for the Euro. On the contrary, its put pressure on the single currency, which subsequently increased with the release of aggregate data.
We are witnessing a classic sell-off reaction as traders took profits after yesterday's touch above 1.09. It should also be noted that the
Nor can we write off the accumulated fatigue from four months of dollar depreciation. In such an environment, the market may be less sensitive to bad news for the dollar and overly sensitive to good news.
#WaveAnalysis
#AUDJPY reversed from key resistance level 92.00
• Likely to fall to support level 90.00
AUDJPY currency pair recently reversed down from the key resistance level 92.00 (which stopped the two of the previous minor waves -1 and b) intersecting with the upper daily Bollinger Band and the 50% Fibonacci correction of the previous sharp downward impulse from October.
The downward reversal from the resistance level 92.00 stopped the earlier minor impulse wave 3 of wave (C) from December.
Given the strength of the resistance level 92.00, AUDJPY currency pair can be expected to fall further toward the next round support level 90.00.
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#AUDJPY reversed from key resistance level 92.00
• Likely to fall to support level 90.00
AUDJPY currency pair recently reversed down from the key resistance level 92.00 (which stopped the two of the previous minor waves -1 and b) intersecting with the upper daily Bollinger Band and the 50% Fibonacci correction of the previous sharp downward impulse from October.
The downward reversal from the resistance level 92.00 stopped the earlier minor impulse wave 3 of wave (C) from December.
Given the strength of the resistance level 92.00, AUDJPY currency pair can be expected to fall further toward the next round support level 90.00.
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Despite positive performance in US stock indices, #Bitcoin continued its unsuccessful attempts to consolidate above $23,000 on Wednesday. The crypto market has, at least, paused after rallying since the beginning of the year.
Total capitalisation is down 2.9% over the last 24 hours but remains just above $1 trillion. Among the top altcoins, Ethereum loses 4.9%, while the rest are down between 2.9% (Litecoin) and 6% (Solana).
In Bitcoin, today's lows at $22.3K are part of a typical correction from the momentum of last week's lows. A break below $ 22.2K suggests a deeper correction to the $20.5-21.0K area.
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Total capitalisation is down 2.9% over the last 24 hours but remains just above $1 trillion. Among the top altcoins, Ethereum loses 4.9%, while the rest are down between 2.9% (Litecoin) and 6% (Solana).
In Bitcoin, today's lows at $22.3K are part of a typical correction from the momentum of last week's lows. A break below $ 22.2K suggests a deeper correction to the $20.5-21.0K area.
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#WaveAnalysis
#WTI crude oil reversed from resistance level 81.6
• Likely to fall to support level 78.0
WTI crude oil recently reversed down from the pivotal resistance level 81.6 (which has been reversing the price from the end of November) intersecting with the 50% Fibonacci correction of the previous downward impulse from November.
The downward reversal from the resistance level 81.6 stopped the earlier minor ABC correction 2.
Given the persistent daily downtrend, WTI crude oil can be expected to fall further toward the next support level 78.0.
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#WTI crude oil reversed from resistance level 81.6
• Likely to fall to support level 78.0
WTI crude oil recently reversed down from the pivotal resistance level 81.6 (which has been reversing the price from the end of November) intersecting with the 50% Fibonacci correction of the previous downward impulse from November.
The downward reversal from the resistance level 81.6 stopped the earlier minor ABC correction 2.
Given the persistent daily downtrend, WTI crude oil can be expected to fall further toward the next support level 78.0.
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This morning the FX market focused on a surprise out of Australia, where the CPI growth rate for the 4Q22 accelerated from 7.3% to 7.8% y/y, against the expected 7.5%. Inflation hit its highest level since 1990. Moreover, a 1.9% rise in prices in the final three months of last year shows that inflationary pressures have stayed the same.
The significant outperformance of the data compared to expectations triggered a wave of Aussie buying. AUDUSD climbed to 0.7120 by the start of the European session as traders reassessed the outlook for policy tightening, suggesting a higher interest rate.
From a broader perspective, the Australian data and today's stronger-than-expected numbers from New Zealand and earlier from Japan should remind the market that inflation is sticky. This is true now that employment levels in the developed world have been near their highest for decades. If high inflation is a global phenomenon, it has the potential to regain some of the traction the dollar has lost since October.
The significant outperformance of the data compared to expectations triggered a wave of Aussie buying. AUDUSD climbed to 0.7120 by the start of the European session as traders reassessed the outlook for policy tightening, suggesting a higher interest rate.
From a broader perspective, the Australian data and today's stronger-than-expected numbers from New Zealand and earlier from Japan should remind the market that inflation is sticky. This is true now that employment levels in the developed world have been near their highest for decades. If high inflation is a global phenomenon, it has the potential to regain some of the traction the dollar has lost since October.
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#WaveAnalysis
#EURNZD reversed from support level 1.670
• Likely to rise to resistance level 1.7000
EURNZD currency pair recently reversed up from the key support level 1.670 (which stopped the previous waves (a), A and (2)) intersecting with the lower daily Bollinger Band and the 38.2% Fibonacci correction of the previous sharp upward impulse (1) from December.
The upward reversal from the support level 1.670 continues the active intermediate impulse wave (C)
EURNZD currency pair can be expected to rise further toward the next resistance level 1.7000 (top of the sideways price range inside which the pair has been moving from December).
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#EURNZD reversed from support level 1.670
• Likely to rise to resistance level 1.7000
EURNZD currency pair recently reversed up from the key support level 1.670 (which stopped the previous waves (a), A and (2)) intersecting with the lower daily Bollinger Band and the 38.2% Fibonacci correction of the previous sharp upward impulse (1) from December.
The upward reversal from the support level 1.670 continues the active intermediate impulse wave (C)
EURNZD currency pair can be expected to rise further toward the next resistance level 1.7000 (top of the sideways price range inside which the pair has been moving from December).
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#WaveAnalysis
#GBPNZD reversed from support level 1.9000
• Likely to rise to resistance level 1.9330
GBPNZD currency pair recently reversed up from the round support level 1.9000 (which has been reversing the price from December) intersecting with the lower daily Bollinger Band and the 61.8% Fibonacci retracement of the previous upward impulse from September.
The upward reversal from the support level 1.9000 stopped the B-wave of the previous ABC correction (B).
GBPNZD currency pair can be expected to rise further toward the next resistance level 1.9330 (which stopped the previous waves (ii) and A).
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#GBPNZD reversed from support level 1.9000
• Likely to rise to resistance level 1.9330
GBPNZD currency pair recently reversed up from the round support level 1.9000 (which has been reversing the price from December) intersecting with the lower daily Bollinger Band and the 61.8% Fibonacci retracement of the previous upward impulse from September.
The upward reversal from the support level 1.9000 stopped the B-wave of the previous ABC correction (B).
GBPNZD currency pair can be expected to rise further toward the next resistance level 1.9330 (which stopped the previous waves (ii) and A).
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Pound hits ceiling
The British Pound is testing the $1.2400 level this week, above which it failed to consolidate in the middle of last month. The GBPUSD has yet to trade consistently higher since last June.
Looking at the entire rally from September's historic lows at 1.0327, the retreat from December's highs to 1.19 is a fairly common Fibonacci retracement to the 76.4% area of the original move, though not the classic 61.8%.
Technically, two important moving averages, the 50- and 200-day moving averages, acted as support in early January, preventing the pair from falling any further while allowing it to take some profits from the initial rally.
The pattern now suggests that GBPUSD has the potential to rise to 1.37-1.38, where the highs of last January and the 161.8% level of the first wave of the rally are concentrated. A move in this direction has every chance of becoming the main trend this year, although we expect a very significant battle for 1.300 over the next few quarters.
The British Pound is testing the $1.2400 level this week, above which it failed to consolidate in the middle of last month. The GBPUSD has yet to trade consistently higher since last June.
Looking at the entire rally from September's historic lows at 1.0327, the retreat from December's highs to 1.19 is a fairly common Fibonacci retracement to the 76.4% area of the original move, though not the classic 61.8%.
Technically, two important moving averages, the 50- and 200-day moving averages, acted as support in early January, preventing the pair from falling any further while allowing it to take some profits from the initial rally.
The pattern now suggests that GBPUSD has the potential to rise to 1.37-1.38, where the highs of last January and the 161.8% level of the first wave of the rally are concentrated. A move in this direction has every chance of becoming the main trend this year, although we expect a very significant battle for 1.300 over the next few quarters.
However, the tactical stance is more cautious. The pound has been hitting a glass ceiling just above 1.2430 for over a week now. The inability to rewrite the previous highs is not a formal signal for further growth.
At the same time, a divergence with the Relative Strength Index is forming on the daily timeframe, as the price's repeated highs are coming from the index's lower local peaks, which is a bearish signal.
Without a strong rally above 1.2430, we should be prepared for a deeper local correction. The area of the January lows, also crossed by the 200 SMA, looks like a good target for another pullback.
A deeper correction towards 1.1630, where 61.8% of the recent rally and last October's local peak are located, cannot be ruled out. Such a full-blown correction would fully recharge the pound bulls and pave the way for further growth.
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At the same time, a divergence with the Relative Strength Index is forming on the daily timeframe, as the price's repeated highs are coming from the index's lower local peaks, which is a bearish signal.
Without a strong rally above 1.2430, we should be prepared for a deeper local correction. The area of the January lows, also crossed by the 200 SMA, looks like a good target for another pullback.
A deeper correction towards 1.1630, where 61.8% of the recent rally and last October's local peak are located, cannot be ruled out. Such a full-blown correction would fully recharge the pound bulls and pave the way for further growth.
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The preliminary estimate for the 4Q22 GDP showed annualised growth of 2.9%. This is a slowdown from the previous period (3.2%) but better than expected (2.6%).
Compared to the same quarter a year ago, the economy grew by only 1.0%, after 1.9% in the previous quarter. This growth is well below the trend rate (around 2% on average since 2000), reflecting the difficulties of growth in an environment of sharply rising interest rates.
Stronger-than-expected GDP growth could be seen as good news for the stock market.
Compared to the same quarter a year ago, the economy grew by only 1.0%, after 1.9% in the previous quarter. This growth is well below the trend rate (around 2% on average since 2000), reflecting the difficulties of growth in an environment of sharply rising interest rates.
Stronger-than-expected GDP growth could be seen as good news for the stock market.
Investors can bet that the economy is adjusting relatively well to monetary tightening. But this is a very fragile hypothesis, as strong growth in the current monetary cycle will allow the Fed to raise rates faster or further than previously expected. Much of the rise in the Nasdaq100 since the start of the year has been driven by expectations that rates will be cut before the end of the year, despite assurances of the contrary from Fed officials.
In addition, the dollar index is hitting multi-month lows in the currency market, confirming that expectations of Fed dovishness are the main driver. The norm, in this case, would be for the dollar to strengthen in response to better-than-expected GDP growth data.
The combination of data and market reaction makes it necessary to pay close attention to what signals the Fed will send out after next Wednesday's meeting.
In addition, the dollar index is hitting multi-month lows in the currency market, confirming that expectations of Fed dovishness are the main driver. The norm, in this case, would be for the dollar to strengthen in response to better-than-expected GDP growth data.
The combination of data and market reaction makes it necessary to pay close attention to what signals the Fed will send out after next Wednesday's meeting.
#WaveAnalysis #XOM
• ExxonMobil broke key resistance level 114.00
• Likely to rise to resistance level 120.00.
ExxonMobil recently broke above the key resistance level 114.00 (which reversed the price multiple times during the last November).
The breakout of the resistance level 114.00 accelerated the active impulse waves (iii) and 3 – which belong to wave (3) from December.
Given the overriding daily uptrend, ExxonMobil can be expected to rise further toward the next resistance level 120.00.
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• ExxonMobil broke key resistance level 114.00
• Likely to rise to resistance level 120.00.
ExxonMobil recently broke above the key resistance level 114.00 (which reversed the price multiple times during the last November).
The breakout of the resistance level 114.00 accelerated the active impulse waves (iii) and 3 – which belong to wave (3) from December.
Given the overriding daily uptrend, ExxonMobil can be expected to rise further toward the next resistance level 120.00.
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#WaveAnalysis
#EURCAD reversed from pivotal resistance level 1.4595
• Likely to fall to support level 1.4400
EURCAD currency pair recently reversed down from the pivotal resistance level 1.4595 (which stopped the sharp uptrend in the middle of December).
The resistance level 1.4595 was further strengthened by the upper daily Bollinger Band.
EURCAD currency pair can be expected to fall further toward the next support level 1.4400 (which reversed the price sharply earlier this month).
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#EURCAD reversed from pivotal resistance level 1.4595
• Likely to fall to support level 1.4400
EURCAD currency pair recently reversed down from the pivotal resistance level 1.4595 (which stopped the sharp uptrend in the middle of December).
The resistance level 1.4595 was further strengthened by the upper daily Bollinger Band.
EURCAD currency pair can be expected to fall further toward the next support level 1.4400 (which reversed the price sharply earlier this month).
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#WaveAnalysis #NatGas
Natural gas broke support zone
• Likely to fall to support level 2.5000
Natural gas recently broke the support zone lying between the round support level 3.000 and the support level 3.500, which started the sharp uptrend at the end of 2021.
The breakout of these support levels accelerated the active impulse waves (iii) and C.
Natural gas can be expected to fall further toward the next support level 2.5000 (target price for the completion of the active impulse wave C).
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Natural gas broke support zone
• Likely to fall to support level 2.5000
Natural gas recently broke the support zone lying between the round support level 3.000 and the support level 3.500, which started the sharp uptrend at the end of 2021.
The breakout of these support levels accelerated the active impulse waves (iii) and C.
Natural gas can be expected to fall further toward the next support level 2.5000 (target price for the completion of the active impulse wave C).
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#Bitcoin is currently trading at around $23.0K. Spikes to $23.7K and down to $22.5K leave their mark on the chart but do not move the market's balance point. Interestingly, this oscillation occurs with a rising equity market in the background and a moderately weaker dollar, although this environment often feeds demand for risk.
This buyer passivity may be a consequence of fatigue after the 44% rally since the start of the year, but it may also reflect an internal pull to sell on the upside. This applies to the crypto market, whose capitalisation has stabilised at just over $1 trillion.
It is worth being prepared that there may be a lack of major moves until the Fed's decision next Wednesday.
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This buyer passivity may be a consequence of fatigue after the 44% rally since the start of the year, but it may also reflect an internal pull to sell on the upside. This applies to the crypto market, whose capitalisation has stabilised at just over $1 trillion.
It is worth being prepared that there may be a lack of major moves until the Fed's decision next Wednesday.
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A bullish picture is forming on the #Nasdaq100, suggesting that we see the beginning of a bull market and not just a rally in a bear market. If the index can close above 12000 by the end of next week, it would pave the way for 13000 by the end of the first quarter and 13600 by the end of the year.
Last week the index closed above the most important long-term trend line (200-week moving average). The price was also above the downside resistance line, which the index had reversed several times last year.
These long-term signals looked rather weak as the move was very formal. But this week, the rally has continued, confirming buyers’ confidence at current levels.
Moreover, yesterday the Nasdaq100 closed above its 200-day moving average, further confirming the long-term trend reversal. As with last week's close, the excess is nominal, leaving room for doubt.
Last week the index closed above the most important long-term trend line (200-week moving average). The price was also above the downside resistance line, which the index had reversed several times last year.
These long-term signals looked rather weak as the move was very formal. But this week, the rally has continued, confirming buyers’ confidence at current levels.
Moreover, yesterday the Nasdaq100 closed above its 200-day moving average, further confirming the long-term trend reversal. As with last week's close, the excess is nominal, leaving room for doubt.
And those doubts have something to fall back on. The index is up around 13% in three weeks, back to the highs of last December, where the gains have slowed considerably: Wednesday's dip has been bought off, but the swings around 12,000 continue. The 200-day average has been largely breached by the fall.
The index is also close to the over-bought territory on the daily RSI. This indicator is a good predictor of technical corrections, although it sometimes signals too early.
However, our main concern is the extent to which market expectations diverge from the Fed's rhetoric. The build-up of expectations that the Fed will cut rates this year has been the main driver of growth in the high-tech sector.
The index is also close to the over-bought territory on the daily RSI. This indicator is a good predictor of technical corrections, although it sometimes signals too early.
However, our main concern is the extent to which market expectations diverge from the Fed's rhetoric. The build-up of expectations that the Fed will cut rates this year has been the main driver of growth in the high-tech sector.