#WaveAnalysis
#EURGBP reversed from support level 0.8660
Likely to rise to resistance level 0.8760
EURGBP currency pair recently reversed up from the key support level 0.8660 (which stopped the previous minor correction ii, as can be seen below).
The support level 0.8660 was strengthened by the lower daily Bollinger Band and by the 38.2% Fibonacci correction of the upward impulse from August.
EURGBP currency pair can be expected to rise further to the next resistance level 0.8760, which stopped the previous minor correction ii.
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#EURGBP reversed from support level 0.8660
Likely to rise to resistance level 0.8760
EURGBP currency pair recently reversed up from the key support level 0.8660 (which stopped the previous minor correction ii, as can be seen below).
The support level 0.8660 was strengthened by the lower daily Bollinger Band and by the 38.2% Fibonacci correction of the upward impulse from August.
EURGBP currency pair can be expected to rise further to the next resistance level 0.8760, which stopped the previous minor correction ii.
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#WaveAnalysis
#Gold broke key resistance level 2000.00
Likely to rise to resistance level 2050.00
Gold recently broke the key resistance level 2000.00 (which stopped the previous waves (1), B and 1, as can be seen below).
The breakout of the resistance level 2000.00 continues the active minor impulse wave 3 which belongs to wave (3) from the start of this month.
Gold can be expected to rise further to the next resistance level 2050.00 (former strong resistance from April and May) – from where the downward correction is likely.
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#Gold broke key resistance level 2000.00
Likely to rise to resistance level 2050.00
Gold recently broke the key resistance level 2000.00 (which stopped the previous waves (1), B and 1, as can be seen below).
The breakout of the resistance level 2000.00 continues the active minor impulse wave 3 which belongs to wave (3) from the start of this month.
Gold can be expected to rise further to the next resistance level 2050.00 (former strong resistance from April and May) – from where the downward correction is likely.
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The crypto market has lost 1.5% in the last 24 hours to capitalisation of $1.42 trillion.
Traditional markets have also seen a slight pullback from the last week’s peak. Investors appear to be looking to lock in profits after the booming gains in October and November. The rally in crypto was stronger, so the correction is deeper.
Bitcoin was down 0.5% overnight to $37.0K, approaching the lower boundary of one month's ascending channel. A classic upside correction from the October lows suggests a pullback to $34K. Higher turning points could be the $36.7K area (recent local lows) and $35.6K (76.4% support and last week's low).
According to CoinShares data, crypto fund investments rose sharply last week, by $346 million at once; significant inflows continued for the fifth week in a row and the ninth week overall. Bitcoin investments increased by $312 million, Ethereum by $34 million, and Solana by $3.5 million.
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Traditional markets have also seen a slight pullback from the last week’s peak. Investors appear to be looking to lock in profits after the booming gains in October and November. The rally in crypto was stronger, so the correction is deeper.
Bitcoin was down 0.5% overnight to $37.0K, approaching the lower boundary of one month's ascending channel. A classic upside correction from the October lows suggests a pullback to $34K. Higher turning points could be the $36.7K area (recent local lows) and $35.6K (76.4% support and last week's low).
According to CoinShares data, crypto fund investments rose sharply last week, by $346 million at once; significant inflows continued for the fifth week in a row and the ninth week overall. Bitcoin investments increased by $312 million, Ethereum by $34 million, and Solana by $3.5 million.
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The US new home sales report came out weak on several key aspects. Sales fell 5.6% m/m to 679K vs 719K a month earlier (revised from 759K). The median price of a home sold in October was 409.3K, down 3% from 422.3K a month earlier and 17.6% below the peak of 496.8K set precisely one year ago.
Previously, new home sales had been on a moderate upward trend since last July, contrary to a drop in existing home sales. Households were holding off on secondary home sales, unwilling to switch from mortgages at the low rates of the past few years. In addition, new housing was becoming a bit more modest, given falling home prices, contrary to overall inflation.
Previously, new home sales had been on a moderate upward trend since last July, contrary to a drop in existing home sales. Households were holding off on secondary home sales, unwilling to switch from mortgages at the low rates of the past few years. In addition, new housing was becoming a bit more modest, given falling home prices, contrary to overall inflation.
The latest report puts the focus on the health of the US banking sector with redoubled attention, raising the spectre of a mortgage crisis and later a global world financial crisis.
In theory, weakness in the US housing sector brings the point of interest rate cuts closer.
But in practice, such a reason for policy easing cannot be considered favourable for markets, as it would be a reaction to a significant drop in consumer activity and tighter financial conditions - an obvious bearish sign for equities and other commodities.
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In theory, weakness in the US housing sector brings the point of interest rate cuts closer.
But in practice, such a reason for policy easing cannot be considered favourable for markets, as it would be a reaction to a significant drop in consumer activity and tighter financial conditions - an obvious bearish sign for equities and other commodities.
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The FX market is temporarily looking past the weakness in Euro area data
Worrying news on the Eurozone economy continues to come in, although this is not hurting the single currency so far, which is trading at fifteen-week highs at 1.0950.
Germany's business climate index rose from -28.3 to -27.8 in December but remains deeply negative. According to the report, Germans expect their incomes to decline slightly. Their propensity to spend is picking up slightly due to entrenched inflation expectations, but they struggle to reflect a rebound in consumer activity.
Worrying news on the Eurozone economy continues to come in, although this is not hurting the single currency so far, which is trading at fifteen-week highs at 1.0950.
Germany's business climate index rose from -28.3 to -27.8 in December but remains deeply negative. According to the report, Germans expect their incomes to decline slightly. Their propensity to spend is picking up slightly due to entrenched inflation expectations, but they struggle to reflect a rebound in consumer activity.
A separate report from the ECB noted a slowdown in loan growth in the eurozone to 0.6% y/y - the slowest in 8 years. However, the worst is apparently ahead for the indicator, judging by the dynamics of monetary aggregates. Trends in monetary aggregates M1-M3 are generally more than a year ahead of credit trends.
Monetary aggregate M1 is now 10% lower than a year earlier. It has been in negative territory so far this year. M3 in October was 1% lower than a year ago. In both cases, it is stabilising near historic lows, reflecting tightening financial conditions.
EURUSD's strength is now driven by high hopes for a Fed rate cut soon, but the weakness in Eurozone indicators should set the mood that a policy change from the ECB could be earlier and deeper, not saying that the US already has higher rates. This is a long-term negative for the single currency. However, markets prefer to play down US policy changes first.
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Monetary aggregate M1 is now 10% lower than a year earlier. It has been in negative territory so far this year. M3 in October was 1% lower than a year ago. In both cases, it is stabilising near historic lows, reflecting tightening financial conditions.
EURUSD's strength is now driven by high hopes for a Fed rate cut soon, but the weakness in Eurozone indicators should set the mood that a policy change from the ECB could be earlier and deeper, not saying that the US already has higher rates. This is a long-term negative for the single currency. However, markets prefer to play down US policy changes first.
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VIX drop: stocks collapse or boring growth ahead?
Financial market volatility has plunged to its lowest level in almost four years, according to the VIX index. This so-called "fear index" fell to 12.45 on Friday, the lowest level since January 2020. Such low levels could be both a sign of the market entering a smooth bullish trend or a lull before a sharp decline.
Low VIX values indicate weak expected market volatility in the coming months.
Sometimes, such market signals should be perceived as overconfidence by investors. And then, the calm is followed by a storm wave, knocking down everything in its path. The peak of overconfidence is usually followed by bitter disappointment in the form of a painful sell-off in stocks.
Financial market volatility has plunged to its lowest level in almost four years, according to the VIX index. This so-called "fear index" fell to 12.45 on Friday, the lowest level since January 2020. Such low levels could be both a sign of the market entering a smooth bullish trend or a lull before a sharp decline.
Low VIX values indicate weak expected market volatility in the coming months.
Sometimes, such market signals should be perceived as overconfidence by investors. And then, the calm is followed by a storm wave, knocking down everything in its path. The peak of overconfidence is usually followed by bitter disappointment in the form of a painful sell-off in stocks.
This can be a period of quiet growth in stocks. And while bears should be prepared for a reversal in stocks, they should not be in a hurry to make a quick bet on it because a rally in stocks can take an indefinitely long time while the VIX is at such low levels.
The VIX has spent most of June and July this year in the range between 13 and 14, and the S&P500 has added nearly 7.5% during that time. The S&P500 gained twice as much between October 2019 and January 2020, when we saw similar or lower VIX levels. Moreover, the VIX spent all of 2017 and early 2018 mostly below 12, dipping to 9.5 at times, and this was also a period of smooth, persistent 27% gains for the S&P500.
Thus, stocks are now close to a point where there could be both a painful switch into risk-off mode and the start of a long and boring uptrend for speculators.
In the short term, we see more bearish signals for the market as the last upside momentum in equities was extremely sharp. It looks like the market driver was closing shorts rather than building long positions. A similar amplitude rally in equities has been a sign of a reversal to growth in recent years with monetary easing, but now the pause is more of what the markets are hoping for, but the Fed is not confirming those hopes.
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The VIX has spent most of June and July this year in the range between 13 and 14, and the S&P500 has added nearly 7.5% during that time. The S&P500 gained twice as much between October 2019 and January 2020, when we saw similar or lower VIX levels. Moreover, the VIX spent all of 2017 and early 2018 mostly below 12, dipping to 9.5 at times, and this was also a period of smooth, persistent 27% gains for the S&P500.
Thus, stocks are now close to a point where there could be both a painful switch into risk-off mode and the start of a long and boring uptrend for speculators.
In the short term, we see more bearish signals for the market as the last upside momentum in equities was extremely sharp. It looks like the market driver was closing shorts rather than building long positions. A similar amplitude rally in equities has been a sign of a reversal to growth in recent years with monetary easing, but now the pause is more of what the markets are hoping for, but the Fed is not confirming those hopes.
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#WaveAnalysis
#USDCHF broke key support level 0.8900
Likely to fall to support level 0.8700
USDCHF currency pair continues to fall inside the minor impulse wave 3, which previously broke the key support level 0.8900, coinciding with the 50% Fibonacci correction of the upward wave (B) from the end of July.
The active impulse wave 3 belongs to the higher order downward impulse wave C from the start of October.
USDCHF currency pair can be expected to fall further to the next support level 0.8700, previous monthly low from August.
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#USDCHF broke key support level 0.8900
Likely to fall to support level 0.8700
USDCHF currency pair continues to fall inside the minor impulse wave 3, which previously broke the key support level 0.8900, coinciding with the 50% Fibonacci correction of the upward wave (B) from the end of July.
The active impulse wave 3 belongs to the higher order downward impulse wave C from the start of October.
USDCHF currency pair can be expected to fall further to the next support level 0.8700, previous monthly low from August.
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#WaveAnalysis
#EURUSD broke resistance level 1.0950
Likely to rise to resistance level 1.1065
EURUSD currency pair recently broke the key resistance level 1.0950, intersecting with the 61.8% Fibonacci correction of the downward impulse from July.
The breakout of the resistance level 1.0950 should further increase the bullish pressure on this currency pair.
Given the continuation of the strong US dollar sales seen today, EURUSD currency pair can be expected to rise further to the next resistance level 1.1065, former top of wave (2) from August.
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#EURUSD broke resistance level 1.0950
Likely to rise to resistance level 1.1065
EURUSD currency pair recently broke the key resistance level 1.0950, intersecting with the 61.8% Fibonacci correction of the downward impulse from July.
The breakout of the resistance level 1.0950 should further increase the bullish pressure on this currency pair.
Given the continuation of the strong US dollar sales seen today, EURUSD currency pair can be expected to rise further to the next resistance level 1.1065, former top of wave (2) from August.
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The crypto market added 2.4% in 24 hours to $1.43 trillion and went back to test highs since May 2022. Bitcoin added 3% during this time, #Ethereum 2.75%, and #Solana was the top performer among the major coins, adding 8.4%. #Toncoin was on a back foot with its 0.4% gain.
#Bitcoin has been floundering inside the upward range for more than five weeks now. On Monday, the price reversed to the upside from the lower boundary at $36.7K. On Tuesday evening, Bitcoin's price briefly exceeded $38.4K but pulled back down after failing to find solid ground to accelerate gains.
The positive sentiment extends well beyond the first cryptocurrency, as altcoins reversed to growth in a broad front on Tuesday. This could be investors' reaction to a weakening dollar on expectations of an imminent Fed interest rate cut.
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#Bitcoin has been floundering inside the upward range for more than five weeks now. On Monday, the price reversed to the upside from the lower boundary at $36.7K. On Tuesday evening, Bitcoin's price briefly exceeded $38.4K but pulled back down after failing to find solid ground to accelerate gains.
The positive sentiment extends well beyond the first cryptocurrency, as altcoins reversed to growth in a broad front on Tuesday. This could be investors' reaction to a weakening dollar on expectations of an imminent Fed interest rate cut.
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NZD is tired of flying
The Reserve Bank of New Zealand left its key rate unchanged at 5.5%, the highest in 15 years, but on hold for six months now. The decision was in line with market expectations. However, the NZDUSD rallied, adding over 1.2% at one point and touching 0.6200, a 4-month high. The buying impulse came from the CB’s vocal preparedness to raise rates if needed. The RBNZ’s rate forecasts became more hawkish, confirming a willingness to act. The committee revised its August forecast expecting a higher rate in a year than it does now, fitting in with the latest Central Bank’s mantra “higher for longer”.
The Reserve Bank of New Zealand left its key rate unchanged at 5.5%, the highest in 15 years, but on hold for six months now. The decision was in line with market expectations. However, the NZDUSD rallied, adding over 1.2% at one point and touching 0.6200, a 4-month high. The buying impulse came from the CB’s vocal preparedness to raise rates if needed. The RBNZ’s rate forecasts became more hawkish, confirming a willingness to act. The committee revised its August forecast expecting a higher rate in a year than it does now, fitting in with the latest Central Bank’s mantra “higher for longer”.
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But at the height of morning trading in Europe, #NZDUSD erased all gains following the publication of the RBNZ decision, pulling back to 0.6150. The sell-off so far looks like profit-taking after rallying 5.8% in a fortnight following a weak US CPI report.
On the higher timeframes, NZDUSD almost touched the upper boundary of the descending corridor, which the pair has mainly followed since March 2021. This year, the pair have spent a lot of time near the lower boundary, while reversals down from the upper boundary have been swift.
During the period of this channel, it took only 5-6 weeks to move from the upper boundary of the range to the lower boundary. If the pattern repeats for the sixth time, NZDUSD could reach the 0.5750 level in early January.
The alternative bullish scenario will become mainstream only if NZDUSD can stay within the short-term growth momentum and overcome the previous local top at 0.6400.
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On the higher timeframes, NZDUSD almost touched the upper boundary of the descending corridor, which the pair has mainly followed since March 2021. This year, the pair have spent a lot of time near the lower boundary, while reversals down from the upper boundary have been swift.
During the period of this channel, it took only 5-6 weeks to move from the upper boundary of the range to the lower boundary. If the pattern repeats for the sixth time, NZDUSD could reach the 0.5750 level in early January.
The alternative bullish scenario will become mainstream only if NZDUSD can stay within the short-term growth momentum and overcome the previous local top at 0.6400.
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#WaveAnalysis
#AUDJPY reversed from resistance level 98.40
Likely to fall to support level 96.00
AUDJPY currency pair recently reversed down from the long-term resistance level 98.40, which stopped the sharp weekly uptrend in the middle of 2022, as can be seen below.
The resistance level 98.40 was further strengthened by the upper weekly Bollinger Band.
Given the strength of the resistance level 98.40 and the overbought weekly Stochastic, AUDJPY currency pair can be expected to fall further to the next support level 96.00.
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#AUDJPY reversed from resistance level 98.40
Likely to fall to support level 96.00
AUDJPY currency pair recently reversed down from the long-term resistance level 98.40, which stopped the sharp weekly uptrend in the middle of 2022, as can be seen below.
The resistance level 98.40 was further strengthened by the upper weekly Bollinger Band.
Given the strength of the resistance level 98.40 and the overbought weekly Stochastic, AUDJPY currency pair can be expected to fall further to the next support level 96.00.
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#WaveAnalysis
#GBPCHF reversed from resistance level 1.1130
Likely to fall to support level 1.1050
GBPCHF currency pair recently reversed down from the pivotal resistance level 1.1130, which stopped the previous minor correction 2 at the start of this month, as can be seen below.
The resistance level 1.1130 was strengthened by the upper daily Bollinger Band and by the 50% Fibonacci correction of the previous downtrend from June.
Given the overbought daily Stochastic, strong downtrend and the widespread Swiss franc inflows, GBPCHF currency pair can be expected to fall further to the next support level 1.1050.
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#GBPCHF reversed from resistance level 1.1130
Likely to fall to support level 1.1050
GBPCHF currency pair recently reversed down from the pivotal resistance level 1.1130, which stopped the previous minor correction 2 at the start of this month, as can be seen below.
The resistance level 1.1130 was strengthened by the upper daily Bollinger Band and by the 50% Fibonacci correction of the previous downtrend from June.
Given the overbought daily Stochastic, strong downtrend and the widespread Swiss franc inflows, GBPCHF currency pair can be expected to fall further to the next support level 1.1050.
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The crypto market cap fell 0.5% in 24 hours to $1.42 trillion, showing another pullback as part of a broader uptrend that started in mid-October but has slowed in the last couple of weeks.
#Bitcoin underwent a sell-off on Wednesday afternoon from the upper end of an upward range above $38.4K. Countless times, the market has proven that it's not ready to accelerate, but it hasn't found any reason to go deep down either.
Only a failure below $36.7K will confirm that $38K is a solid horizontal resistance. Without this confirmation, the working scenario remains in the upward range.
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#Bitcoin underwent a sell-off on Wednesday afternoon from the upper end of an upward range above $38.4K. Countless times, the market has proven that it's not ready to accelerate, but it hasn't found any reason to go deep down either.
Only a failure below $36.7K will confirm that $38K is a solid horizontal resistance. Without this confirmation, the working scenario remains in the upward range.
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Disappointing growth adds to pressure on the yuan
There is a new batch of weak data from China, whose economy has so far failed to respond meaningfully to government stimulus.
Official PMI (Purchasing Managers’ Survey) estimates noted that the manufacturing sector remained in contraction mode in November, while growth in the services sector approached zero.
The manufacturing PMI fell from 49.5 to 49.4 instead of the expected rise to 49.8. The simultaneous decline in the orders component and purchase prices is alarming. Manufacturing employment is in contractionary territory (48.1 in November and 48.0 in October).
The services PMI fell from 50.6 to 50.2 instead of forecasts of a 50.9 rise, with export sales falling from 49.1 to 46.8 and weakness in employment (46.9 vs. 46.5 previously).
It is clear from such data that the economy’s vivid upturn has not yet occurred. This is causing pressure on the markets where the need to build up support is being discussed.
There is a new batch of weak data from China, whose economy has so far failed to respond meaningfully to government stimulus.
Official PMI (Purchasing Managers’ Survey) estimates noted that the manufacturing sector remained in contraction mode in November, while growth in the services sector approached zero.
The manufacturing PMI fell from 49.5 to 49.4 instead of the expected rise to 49.8. The simultaneous decline in the orders component and purchase prices is alarming. Manufacturing employment is in contractionary territory (48.1 in November and 48.0 in October).
The services PMI fell from 50.6 to 50.2 instead of forecasts of a 50.9 rise, with export sales falling from 49.1 to 46.8 and weakness in employment (46.9 vs. 46.5 previously).
It is clear from such data that the economy’s vivid upturn has not yet occurred. This is causing pressure on the markets where the need to build up support is being discussed.
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Meanwhile, the #USDCNH pair has been moving around 7.1450 for more than a week.
Technically, the yuan has found support on the decline towards the 200-day moving average and accumulated oversold on the RSI on the daily timeframes.
This is roughly the same area where the yuan was completing its corrective recovery in July. Therefore, it would not be surprising to see USDCNH rise in the coming days.
Fundamentally, selling the yuan against the dollar may also make sense due to the weakness in the economy. Managed RMB weakness may be in the Politburo’s interest as a measure to support exports.
In addition, China’s price growth rate is close to zero, so the authorities are not afraid of fuelling inflation through a weaker currency.
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Technically, the yuan has found support on the decline towards the 200-day moving average and accumulated oversold on the RSI on the daily timeframes.
This is roughly the same area where the yuan was completing its corrective recovery in July. Therefore, it would not be surprising to see USDCNH rise in the coming days.
Fundamentally, selling the yuan against the dollar may also make sense due to the weakness in the economy. Managed RMB weakness may be in the Politburo’s interest as a measure to support exports.
In addition, China’s price growth rate is close to zero, so the authorities are not afraid of fuelling inflation through a weaker currency.
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