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2022-06-21 09:22:05 Bitcoin’s decline is oversold, but it’s too early to talk about a new rally

Bitcoin has rebounded 5% in the past 24 hours, trading at $20,800. Ethereum has recovered 6.4% to $1130 in the same time frame. Leading altcoins in the top 10 are adding from a modest 3.5% (XRP) to an impressive 15% (Solana).

Total cryptocurrency market capitalisation, according to CoinMarketCap, rose 5% to $914bn. Tuesday, the cryptocurrency fear and greed index was unchanged at 9 points (“extreme fear”).

Bitcoin managed to hold above the $20,000 round level on Monday amid weak trading activity due to the US holidays and attracting enough speculative demand after dipping below the meaningful round level. This recovery removes some of the extreme oversold nature of the cryptocurrency. Still, it will be too early to talk about a long-term reversal: all negative fundamentals remain.

In our view, until sharp monetary policy tightening becomes the norm, financial market pressures can quickly negate bounces in cryptocurrencies. Open / Comment

2022-06-20 17:37:01 Interestingly, European markets are showing positive momentum on Monday with no fear of the ECB tightening tone. German DAX40 is gaining support for the second day after sliding below 13,000, which also passes the 61.8% retracement level of the move from the March 2020 low to the November 2021 high. This level was also a significant resistance in the second half of 2020 and is now major support.

EURUSD is back above 1.05, cementing the rebound from the 'double bottom' near 1.0350, almost repeating the lows at the turn of 2016 and 2017. However, as long as EURUSD trades steadily below the 50-day average (now at 1.0625), it will be premature to talk about a trend reversal. Open / Comment

2022-06-20 17:32:06 Still no sign of a slowdown in German inflation. Fresh data marked a 1.6% rise in producer prices for May and an acceleration to 33.6% y/y, suggesting further upward pressure on consumer inflation in the coming months.

The fresh batch of data should put the European Central Bank's focus back on fighting inflation. In previous weeks we have seen that the ECB is preparing to embark on a rate hike and is ready to move at an accelerated pace which should change the market reaction to the inflation data.

In previous months the price hike was recouped by the market through selling the euro as the real purchasing power of the single currency declined sharply. However, we can now see that the ECB's rhetoric is tightening following the price increase. The markets are setting themselves up for the first hike of 25 points in July and a 50-point hike in September. Open / Comment

2022-06-20 15:23:23 Open / Comment

2022-06-20 13:34:21 [2/2]

There is more and more oil in the USA. The Energy Agency has reported an increase in production of up to 12 million barrels per day. Active sales of crude stocks from the Strategic Reserve are helping to maintain the balance of commercial reserves.
At the same time, producers are ramping up drilling activity. Data last Friday showed an increase of 7 drilling rigs operating to 740.

The US Presidential Administration has promised to return to filling reserves in September, which looks like good news for producers, who can get a steady buyer from the government, potentially keeping the price from an uncontrollable decline.

The balance of market forces now suggests that the market has hit its high point in the trend of the last seven months. In the coming weeks, we should be prepared for a correction to $100 or even $90 with negative surprises in the global economy and a stock market crash. However, for the rest of this year and most of the next, Brent crude may stay mainly within the $90-120 range. Open / Comment

2022-06-20 13:33:15 New signs that the price of oil has passed its peak
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Friday's collapse added signs of oil's reversal to a bear market. Brent losses exceeded 5% over Friday, and the pressure continued into Monday morning. Brent dropped more than 11% from the highs of June 8 to around $110, which was last seen four weeks ago.
Several technical factors now favour oil being taken over by the bears.

Firstly, oil has been losing in seven of the last eight trading sessions, while we have seen mixed movements in the currency and equity markets. Such a single-digit drop in oil is a sure sign of a sustained sell-off, suggesting that peak oil may be behind us.

At $111, the 50-day moving average and the upside support line of the last seven months converged. Oil closed below that critical point, and intraday trades are in the area below these one-time essential support levels.

The day's close below $110 promises to be another tough reminder of the start of a deep correction in the oil market. Open / Comment

2022-06-20 10:53:07 In a 37% drop, Bitcoin closed below its 200-week moving average for the first time. Not only did we not see a rebound in retail action over the weekend, but an intensified sell-off sent the exchange rate below 2017 peak levels at $19.6K. At one point on Saturday, the price was down to $17.6K, disproving the idea that you can't lose money owning Bitcoin for over four years.

Bitcoin last week posted its highest decline since March 2020 on the back of a continuing fall in stock indices and a higher-than-expected US Federal Reserve key rate hike. At the weekend, BTC broke through the previous market cycle high of $20,000, which has never happened before.

Ethereum lost 20.5% in seven days. After bottoming at $900 on Saturday night, the second cryptocurrency has now settled near $1070.

An essential characteristic of the crypto market was that altcoins were sidelined. Except for BNB (-12% for the week), we note either flat movements (XRP, Doge) or strengthening (Solana, Polkadot). Open / Comment

2022-06-17 16:50:52 Separately, one should not overlook the influx of buyers into gold. To a large extent, it can be explained by a weaker USD and lower bond yields. But it is also psychologically crucial that gold has managed to hold above $1800 and closed above the 200-day moving average on Thursday. The long lower shadow of the weekly candlestick might precede several weeks of growth, as it was in March and August 2021. For gold, that might be enough to dislodge the aggressive sellers and attract buyers who believe the worst is over. Open / Comment

2022-06-17 16:47:40 This could manifest rising recession bets in the USA or a downgrading of long-term economic growth estimates. However, there is a positive side effect to falling yields. A peak followed a sustained yield rise over a couple of weeks in the S&P500. A sustained reversal to lower yields could also increase the equity market and restore demand for risky assets.
The dollar index is also retreating.

The Dollar Index fell sharply yesterday, hitting a sell-off during the New York session. Most of the time, DXY and stocks are moving in opposite directions. Their lockstep move rarely lasts long. Looking back at buying US bonds, it could be assumed that there is more chance of a further bounce in equities. However, there will be much more certainty for a fundamental reversal of the stock market to the upside if yields fall below 3%. Open / Comment

2022-06-17 16:46:56 The sell-off in the S&P500 has not triggered a wider risk-off

US stock markets updated multi-month lows on Thursday, pushing the S&P500 back to December 2020 and the Nasdaq back to November 2020 at one point. On Friday, before active US trading starts, we see the market attempting to form Friday’s profit from the recent sell-off.

In the meantime, it is worth paying attention to several indicators that might point to a long pause in the decline of the markets or even a probable upturn. Perhaps they will also act as a basis for a broader rally.

The yields of the 10-year Treasuries have retreated to levels below 3.4%. Yesterday we saw intense intraday swings with another attempt to break above 3.5%. However, towards the end of trading, when actively managed funds dominated the market, there were active purchases of US government bonds, which pressured the yields back to 3.2%. Open / Comment