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2022-06-21 16:24:49 The bear market in the USA will likely continue until we hear from the Fed the first hints of a halt to aggressive policy tightening. Until then, a bear market with occasional corrective bounces is likely.

History also tells us that after entering a bear market phase and losing 20%, the market loses about another 20% on average (about 2900 for the S&P500) before it finds its footing. This scenario looks especially relevant when the Fed is not at all concerned about markets correcting, as it did at the beginning of the pandemic.

But it is too early for the bears to celebrate because they have yet to break the emerging rebound and push the S&P500 below 3500, significant psychological support, where the 200-week moving average and critical support/resistance levels of the second half of 2020 are located. Our pessimistic scenario could be reversed if the S&P500 exceeds the 3900 mark during the emerging rebound. In that case, a reversal of the equity market to the upside would have to be considered. Open / Comment

2022-06-21 16:24:22 The weakening of the traditional shelter currencies - JPY, CHF - is setting a positive tone. The USDJPY has updated to a new high since 1998, above 136, indicating a return of risk appetite in some financial market segments. USDCHF settled near 0.9660, stopping the decline after last week’s unexpected SNB rate hike.

The euro and the pound are also gaining against the dollar, signalling a recovery in risk appetite. However, it is essential to note the fragility of the current rebound. Most likely, we will see a corrective bounce after the worst week in equities in more than two years.

However, finding medium-term reasons to buy “risk” is still tricky. Aside from the BoJ, the main central banks are tightening policy or promise to do so as soon as next month. And so far, we see no sign that this trend is about to end or reverse.

Thus, cautious investors can still only tune in for a short-term bounce but do not hold out hope that the markets have bottomed out. Open / Comment

2022-06-21 16:22:05 S&P500 bounces back from oversold, but what’s around the corner?

The US market opens later today after a long weekend. S&P500 futures indicate a 1.5% gain to Friday’s closing level, playing off the positive outperformance on the outside. The currency market has also swung towards buying risky assets, reinforcing hopes of at least a rebound in the coming days after a 13.5% dip from the highs to the lows of the month in the first two weeks of June.

In equities, the positive tone is set by the performance of Asian equities and the recovery of major European indices from oversold territory. The DAX40 and FTSE100 are recovering from their lows of March. Both indices have stuck within the Fibonacci retracement pattern and got support at 61.8% for DAX and 76.4% for FTSE from the pandemic amplitude. Open / Comment

2022-06-21 12:17:21 But so far, we have seen a significant outperformance of inflation over key rates, and comments from FOMC members indicate a willingness to stop with a tightening in the 3.5-4.0% area, with no attempt to ride out inflation and a reversal to a rate cut as early as 2024. Such outlooks are keeping long-term bond yields in check and, at the same time fuelling interest in a strategy of buying gold during intense downturns.

Locally, creeping upward bond yields are working for sellers of gold. This also has a bearish signal in the form of consolidation below the 200-day moving average.

However, gold’s resilience drew attention when markets overestimated expectations of a rate hike from 50 to 75 points and multiple buying gains on dips under the 200-day moving average since December last year. Open / Comment

2022-06-21 12:17:01 In other words, an active capital outflow from gold only occurs when yields decline sharply, whereas the long-term trend favours the shiny metal. This correlation can easily be explained by inflation, which eats into the purchasing power of money in the long term.

Secondly, 10-year yields are not so much influenced by short-term Fed interest rates as economic growth forecasts. Increased chances of a recession in the foreseeable future have dampened long-term yields. In addition, there are signs that the upward movement in UST yields was too fast, setting up a corrective pullback in the near term.

In our opinion, the potential danger for gold is a further tightening of the Fed’s tone, i.e. hints of new steps of a 75-point rate hike and a willingness to keep rates above inflation. Open / Comment

2022-06-21 12:16:23 Local retreat in gold

Despite attempts at rebounding equity markets, moderate pressure on gold has persisted for the third consecutive trading session. This pressure is directly linked to rising long-term bond yields on US debt and several other developed countries.

Bonds and gold work like communicating vessels: rising real long-term yields draw capital to the debt markets away from gold. Over the last two years, the inverse correlation between gold and US 10-year Treasury yields has been very strong: gold prices peaked in August 2020, while yields rose from 0.5%.

Last week, when the 10-year Treasury yield was rising temporarily to 3.5%, it tested the $1800 area.

However, there are several essential points to understand in this correlation.
First, the 10-year Treasury yields touched 11-year highs last week, while gold has retreated only to the levels last seen at the start of the year. Open / Comment

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2022-06-21 10:42:01 #WaveAnalysis

#USDCAD reversed from resistance level 1.3075
• Likely to fall to support level 1.2940

USDCAD currency pair just reversed down from the strong resistance level 1.3075 (former top of the impulse wave 1 from the start of May) – standing well above the upper daily Bollinger Band.

The downward reversal from the resistance level 1.3075 stopped the previous impulse waves 3 and (3).

Given the strength of the resistance level 1.3075 and the overbought daily Stochastic, USDCAD currency pair can be expected to fall further toward the next support level 1.2940.

Trade responsibly at fxpro.com Open / Comment

2022-06-21 10:22:19 #WaveAnalysis

#EURJPY reversed from support level 139.30
• Likely to rise to resistance level 144.00

EURJPY currency pair just reversed up from the key support level 139.30 (former strong resistance from the middle of April).

The upward reversal from the support level 139.30 stopped the previous minor ABC correction (ii) .

EURJPY currency pair can be expected to rise further toward the next resistance level 144.00 (top of wave (i) from the start of June).

Trade responsibly at fxpro.com Open / Comment

2022-06-21 09:23:04 Even if we have seen a bottom, it could still be months before the next sustained rally.

Bitcoin’s return above $20,000 does not mean it has hit “the bottom”, warned renowned cryptocurrency critic and gold supporter Peter Schiff.

Kraken exchange marketing director Dan Held said bitcoin had chosen the most pessimistic scenario possible amid rising inflation and an impending recession. According to him, “those who survive will get HODLer status”.

El Salvador President Nayib Bukele urged the cryptocurrency community not to panic as the market falls. According to him, the decline is relatively standard, and market participants must be patient.

JPMorgan Bank said that the rising share of stable coins in the total market capitalisation of the crypto market indicates its growth potential.

Changpeng Zhao, chief executive of cryptocurrency exchange Binance, denied media reports that the platform bought more than 100,000 BTC on a falling market. Open / Comment