Sharp Sell-off for Bitcoin
Bitcoin powerfully declines after WSJ rumors that SpaceX sold off entire, $373 mln Bitcoin holding
The sentiment of the cryptocurrency market has been quite weak for quite some time, and volatility remained at its lowest levels in 7 years. As expected, the period of consolidation and uncertainty ended with a spike in volatility. Bitcoin’s price dived to the vicinity of $25,000 on a wave of some negative news.
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Yesterday’s strengthening of the dollar weakened Bitcoin, which began to lose rapidly during the Wall Street session, on a wave of general risk aversion;
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A report by The Wall Street Journal indicated that Elon Musk’s SpaceX had liquidated a BTC holding worth $373 million, was met with a panic crypto market reaction, although Bitcoin had already been losing and was trading around $27,500 at the time of the news;
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At the same time, on-chain analysts point out that there is currently no evidence of a Bitcoin sale by SpaceX, and the WSJ report in fact spoke of a ‘wrote-down’ of the value of BTC held by Musk’s company in 2022;
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At the same time, the SEC has received court approval to appeal the case against Ripple Labs, leading to a dynamic near-20% discount of the Ripple crypto in just a few hours
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Liquidations of long crypto bulls positions have already amounted to more than $1 billion, according to onchain data, the largest wave of bull liquidations since June 2022, when Bitcoin’s price fell to $17,000.
Looking at BITCOIN chart, the price took a dive after the price fell below the EMA 100 average (blue line on the chart). Nevertheless, it is worth noting that the discount stopped at the level of a key support level, resulting from previous lows and the lower limit of the 1:1 system. If the level of USD 25250 is maintained, a return to growth is not excluded. On the other hand, if the price breaks below $24750 today, the downward movement may gain strength.
AUDUSD - Chart of the day
The Australian dollar is one of the worst performing G10 currencies today. AUD is underperforming following the rate decision of the People’s Bank of China. PBoC announced a 10 basis point cut to 1-year lending rate, to 3.45%, and decided to keep the 5-year rate unchanged at 4.20%. This was a disappointment as economists hoped that PBoC would decide on 15 basis point cuts to both 1- and 5-year rates. These expectations were propped up further over the weekend by reports saying that officials from People’s Bank of China and Chinese financial market regulator met with Chinese bank executives and asked them to boost credit action in order to support economic recovery.
Decision made Chinese equities clear underperformers during today’s Asia-Pacific trading session. However, it has also had a negative impact on Antipodean currencies with AUD and NZD being clear laggards among G10 currencies during the Asian session. This should not come as a surprise, especially in case of AUD, as China is a key trading partner for Antipodean countries.
Taking a look at AUDUSD chart at F1 interval, we can see that the pair has recently broken below the lower limit of the trading range, marked with 61.8% retracement of the upward impulse launched in October 2022. AUDUSD continued to move lower until the decline was halted at the 0.6400 support zone. While sellers fail to break below this hurdle, buyers also struggle to regain control and the pair continues to trade in the 0.6400 area. However, should we finally see a break below this zone, a downward move may deepen towards the textbook range of the breakout from the aforementioned trading range, which is around 0.6250.
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Economic Calendar: Second-tier US Data, Speeches from Fed members
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European indices set for higher opening.
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Second-tier data from the United States
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Possible decision on Grayscale Bitcoin ETF
Index futures point to a higher opening of the European cash session today. This comes after solid performance of tech shares fuelled gains on S&P 500 and Nasdaq during the Wall Street session yesterday and later on regional indices during the Asia-Pacific session as well. These gains come in spite of a renewed sell-off on US Treasuries market, which led 10-year yields to 16-year highs above 4.30%.
Economic calendar for the day ahead is light. Traders will be offered second-tier data from Poland and the United States. Some USD volatility may be present around 3:00 pm BST when existing home sales data for July and Richmond Fed index for August will be released. USD volatility may also be present during speeches from Fed members Barkin, Goolsebee & Bowman. Oil traders will focus on API report on inventories, which is expected to show a big draw but smaller than last week.
Also, SEC decision on Grayscale’s application to convert its Bitcoin Trust into Bitcoin Exchange-Trade Fund (ETF) is expected today, somewhere around 4:00 pm BST. However, it should be said that the timing is tentative and that the SEC has already delayed the decision twice so it may not even be announced today. Nevertheless, positive ruling could give cryptocurrencies a boost so it is worth watching.
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9:00 am BST - Poland, retail sales for July. Expected: 2.5% YoY. Previous: 2.1% YoY
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3:00 pm BST - US, existing home sales for July. Expected: 4.15 million. Previous: 4.16 million
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3:00 pm BST - US, Richmond Fed index for August. Expected: -8. Previous: -9
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9:40 pm BST - API report on US oil inventories. Expected: -2.9 mb. Previous: -6.19 mb
Central bankers’ speeches
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12:30 pm BST - Fed Barkin
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7:30 pm BST - Fed Goolsebee
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8:30 am BST - Fed Goolsebee & Bowman
US100 - Chart of the Day
Nasdaq-100 futures (US100) are attempting to climb above the 15,000 pts mark this morning. The index has been enjoying strong gains since Friday evening and the move higher accelerated yesterday. Sentiment towards the tech sector seems to be improving as Nvidia earnings releases approaches (Wednesday after session close). Results from Nvidia are expected to be a test for the AI-related bull market in tech shares. Investors seem to be optimistic with Nvidia shares rallying over 8% yesterday. Previous earnings release from the company triggered an around 25% jump in share price and launched a strong upward impulse on the broad market.
Taking a look at US100 chart at H4 interval, we can see that the index was pulling back during the first half of August, but declines were halted at the 14,625-pts support zone last week. The ongoing rebound push the index into an area, where the downward trendline as well as the upper limit of the Overbalance structure can be found. A break above the 15,045-pts zone could hint that the correction is over, and the index will resume gains. In such a scenario, the 15,400-pts zone is the next resistance to watch.
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Silver Gains 1.7%
Silver traders’ position for a pause in rate hike cycle
Silver is trading around 1.7% higher today and almost 5% higher week-to-date. In spite of Chinese economy struggling, we have been observing gains not only on the precious metals markets recently but also on industrial metals markets. The latest rate cut from People’s Bank of China was somewhat surprising with many being disappointed by a minor scale of the cut to 1-year lending rate and leaving the 5-year rate unchanged.
There has been a lot of speculation over a possible end of the rate hike cycle not only in the United States but also in euro area. While bond yields remain elevated, we can observe a small pullback in market rates today. Meanwhile, silver enjoyed a strong upward move that led to a break above the 50% retracement of the latest downward impulse. Silver bounced off the 22.20 area - a local low from June - and is now trading almost at $24 per ounce - above 50- and 200-session moving average. It should be noted that silver has been one of the best performing commodities over the 12-months but at the same time trades slightly lower year-to-date.
US100 - Morning Wrap
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US indices ended yesterday’s session with solid gains. The Nasdaq 100 Index gained 1.60%, while the S&P 500 was up 1.10%. The Dow Jones was the day’s worst performer, rising only 0.54%.
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Asian equities and US futures rallied, driven by rising US tech shares and signs that the Federal Reserve’s rate-hiking campaign is coming to an end. Stocks in Japan, Australia, and South Korea climbed, with Hong Kong’s tech-led surge marking its best performance in a month.
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The upbeat mood in the Asia-Pacific markets followed the Wall Street session, with the Nikkei rising by 0.92%, the Kospi by 1.12%, the Nifty 50 by 0.39%, and the S&P/ASX 200 by 0.21%.
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Chinese indices performed exceptionally well after a prolonged period of being strongly oversold. The Hang Seng gained 2.30%.
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Regarding a potential Australia-EU trade deal, Trade Minister Dan Tehan shared optimism about forthcoming discussions with the EU trade commissioner, emphasizing enhanced access to essential minerals for Europe as one of the strongest positives.
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The CEO of National Australia Bank, one of Australia’s ‘big four’, believes the country won’t face a recession, highlighting the resilience of the housing market despite interest rate hikes by the Reserve Bank of Australia.
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Nvidia (NVDA.US) shares rose over 6.50% in pre-market trading after surpassing analyst earnings estimates and offering a positive future outlook.
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Nvidia reported revenues of $13.51 billion versus a $11.04 billion forecast, a 101% year-on-year growth. Earnings per share (EPS) stood at $2.7, compared to a forecast of $2.07 and $0.51 in Q2 2022. Data center revenues reached $10.32 billion against a $7.99 billion forecast, marking a 171% year-on-year surge.
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The Japanese Yen underperformed today, with USDJPY rising to 145.1. Conversely, after a period of lagging, the EUR emerged as the top performer, with EURUSD advancing 0.12% to 1.0815.
After strong increases yesterday, the US100 has once again broken above the support line of the upward trend that was recently breached. Good results from Nvidia will likely support the index today, and further increases may continue.
US 100 - Chart of the Day
Just two days ago, we wrote that the main tech companies index, Nasdaq 100, was striving to break the 15,000-point level. After a strong nearly 8.0% correction that began at the end of July, the index rebounded with significant gains last Friday. At the beginning of this week, the mood in the tech sector started to improve, and in yesterday’s session, the index gained a staggering 1.60%, returning again above the support line of the upward trend. After the close, Nvidia’s results were published, further solidifying the optimistic sentiment for the Nasdaq 100. Despite the return to euphoric growth, investors should remain focused. The Jackson Hole symposium begins today, where market leaders and bankers are expected to signal the end of the interest rate hike cycle. Reality might again prove different. Recent comments from Federal Reserve members and the Fed’s stance suggest that the Fed might not give in so easily, especially since the job market remains strong, and the latest inflation readings were higher than the previous ones, 3.2% year-on-year versus 3.0% year-on-year.
Nasdaq 100 (US100), after four days of gains, continues to rise today, gaining 0.40% before the Wall Street opening. The index has returned above the support line of the rising trend marked on the chart with a navy line. Currently, the bulls are battling resistance at the 15,400-point level. If the momentum isn’t halted, it’s conceivable the index might aim to retest the peaks at 15,900-16,000 points. However, if hawkish remarks are made during Jerome Powell’s speech at Jackson Hole tomorrow, the market might once again retreat below the support line currently at around 15,100 points.
USDTRY Surges After Massive Interest Hike
Central Bank of Republic of Turkey (CBRT) announced its latest monetary policy decision today at 12:00 pm BST. CBRT was expected to deliver a 250 basis points rate hike, bring the 1-week repo rate to 20.00%. However, the actual hike turned out to be much bigger than expected with 1-week repo rate being hiked to 25%!
Turkish lira surged following the decision as it looks like new Turkish monetary authorities are indeed taking inflation fight seriously. Increase in underlying inflation trend was given as a reason behind such a massive hike. USDTRY and EURTRY plunged more than 2% following the decision.
USDTRY plunged after a bigger-than-expected CBRT rate hike and is attempting to break below the 50-session moving average (green line).
EURUSD
The value of the EURUSD is at a 2.5-month low as people wait for speeches from Christine Lagarde, the President of the European Central Bank, and Jerome Powell, the Chairman of the Federal Reserve. The US economy is doing well and there are no signs of a recession, which makes the US Dollar stronger and the Euro weaker.
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Earlier in the day, Joachim Nagel from the European Central Bank and Boris Vujčić from the Croatian National Bank said that they think interest rates should stay high. However, there are concerns that the economy might slow down, which could mean that interest rates will have to be lowered.
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In the US, James Bullard and Susan Collins from the Federal Reserve said that they think interest rates should stay high. Patrick Harker from the Federal Reserve in Philadelphia said that interest rates might not go up anymore.
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The value of US government bonds is going up, which makes the US Dollar stronger. People think that Jerome Powell will say that interest rates will stay high for a long time.
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The US economy is doing well. There are more orders for durable goods and more jobs. This makes the US Dollar stronger.
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The value of the US Dollar is at its highest since June 07. The value of stocks is going down. The interest rate on 10-year US government bonds is going up.
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In Germany, there will be new information about how well the economy did in the second quarter of this year. There will also be new information about how people feel about the economy. This will affect the value of the Euro compared to the US Dollar.
Speeches from Christine Lagarde and Jerome Powell will be important to watch.
In technical analysis, if the value of the Euro compared to the US Dollar goes below 1.0765, it could decline more. If it doesn’t break the 1.0765 barrier, it could return to 1.0805.
The impact of the US economic crisis on businesses and families
The US economy is in a state of crisis. The Federal Reserve and the Administration are not taking the economic slowdown seriously. They do not understand that it will not be easy to reverse or slow down. The slowdown is gathering unstoppable speed.
The key data released yesterday shows that the economy is crumbling. Durable goods orders fell 5.2%, the biggest decline since 2020. Mortgage rates also hit a 22-year high.
This is a major turning point for the economy. The Federal Reserve and the Administration are now facing a choice: they can either take action to slow down the economy, or they can let it collapse.
If they do nothing, the economy will likely enter a recession. This would have a devastating impact on businesses and families across the country.
The Federal Reserve has a limited number of tools to slow down the economy. They can raise interest rates, which will make it more expensive for businesses to borrow money. They can also sell assets from their balance sheet, which will reduce the amount of money in the economy.
However, these measures will also slow down economic growth. The Federal Reserve will need to carefully balance the risks of a recession with the risks of inflation.
The Administration also has a role to play in preventing a recession. They can provide tax breaks and other stimulus measures to help businesses and families. They can also work to address the supply chain disruptions that are causing inflation.
The next few months will be critical for the US economy. The Federal Reserve and the Administration need to take action to prevent a recession. If they do not, the economy could collapse, with devastating consequences for businesses and families across the country.
Chart of the Day - CNH Cash
Chinese equities were outperformers during today’s Asia-Pacific session and there was a good reason behind this outperformance. A number of measures was announced over the weekend by Chinese authorities with an aim of supporting domestic equity markets. Those measures include:
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Halving stamp tax on securities trading (from 0.10% to 0.05%).
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Relaxing deposit requirements while trading at margin (from 100 to 80%).
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Imposing limits on stock selling by some institutions.
While the first two measures listed are clearly positive for stock markets and have a potential to boost liquidity as well as encourage more investors to trade, the impact of the third measure is not so simple. Of course, putting restrictions on stock selling by major shareholders will reduce downward pressure on prices but it is a short-term measure. After all, putting restrictions on how investors can manage their portfolios is not a move that inspires confidence. It looks like that after an initial euphoria, the market seems to have realized it and started to shed gains.
Taking a look at Chinese index CHN.cash chart at H4 interval, we can see that the index launched today’s trading with a big bullish price gap (over 3.5%) and traded near the downward trendline at the start of today’s trading. However, no breakout above the trendline occurred and gains started to be trimmed after session launch. Price dropped back below the 6,300-pts price zone and reduced daily gain to below 1%. The key question now is whether the sell-off will continue and the stock drops below the 6,150-pts zone.
Germany Consumer Sentiments - Lower GFK Reading
A recent report shows that German consumers are feeling less confident about the economy. The GfK, a market research company, found that consumer sentiment in Germany is lower than expected and has decreased from the previous reading. This has caused a slight drop in the value of futures contracts on the DAX, a stock market index in Germany.
This decrease in consumer confidence could be a sign that the German economy is weakening. The European Central Bank (ECB) has been tightening its monetary policy, but with this new information, there may be pressure to keep interest rates unchanged at their next meeting in September.
According to the GfK, the chances of a strong economic recovery before the end of the year are decreasing. It is unlikely that private consumption in Germany will have a positive impact on the economy in 2023. This means that people may not be spending as much money, which could slow down economic growth.
Fundamental Outlook
The US dollar has risen slightly after a strong run, but traders are waiting for more economic data before making any big bets. The Japanese yen, on the other hand, is near levels that triggered intervention last year.
The dollar index is up over 2% this month and has had six weeks of gains due to strong US economic data. This has led to expectations that interest rates may stay higher for longer. Federal Reserve Chairman Jerome Powell suggested that further rate increases may be needed to control inflation, but he also promised to move with care.
This week, there will be several important economic data releases, including personal consumption expenditure data and non-farm payrolls. Markets are currently pricing in a 78% chance that the Fed will not change interest rates next month, but the odds of a hike by November have increased.
In Europe, the euro zone CPI report will be released on Thursday and is expected to have a big impact on the market. The euro is currently flat at $1.081.
The yen has been under pressure due to the widening gap in interest rates between Japan and the US. The currency is currently at 146.69 per dollar, near its weakest level since November 9th. Traders are watching for any signs of intervention from Japanese authorities.
If US data continues to be strong, there could be more pressure on the yen. However, the threat of intervention has retreated at sub-150 levels due to a lack of comments from Bank of Japan Governor Kazuo Ueda and no signs of verbal intervention yet.
Euro’s Recovery Hinges on Inflation Data and US PCE Price Index
The Euro is trying to recover against the US Dollar and British Pound before the release of Euro area inflation data and US core PCE price index data. The Euro area economy has had some recent positive surprises, while the US economy has been less overwhelming. However, there is a risk that activity in the Euro area could contract again due to a drop in services PMI.
The key focus is on Euro area inflation data and US core PCE price index data. If the data meets expectations, the Euro’s rebound could struggle. However, if the US core PCE figure is lower than expected and the drop in Euro area inflation is smaller than expected, it could be a bonus for the Euro.
There is still resistance for the Euro to clear before its short-term outlook turns positive again. The immediate hurdle is at last week’s high of 1.0930, followed by a stronger barrier at the early-August high of 1.1065. A break below 1.0500-1.0600 area is needed to pose a threat to the multi-month uptrend.
CPI in France Significantly Higher
France inflation data for August was published at 7:45 am BST time today:
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CPI: actual 4,8% y/y; expected 4,6% y/y; previously 4,3% y/y
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HICP: actual 5,7% y/y; expected 5,4% y/y; previously 5,1% y/y
Inflation data came in worse than expected. France is the only country among major EU members today that was expected to publish higher CPI data. Later today, investors will be presented with HICP and HICP core inflation data from the EU. EUR is clearly appreciating after the publication and EURUSD is trading higher.
Chart of the Day - USDCAD
This week, there have been several important reports about the economy of the United States, and more are expected. One report showed that the number of new job openings is decreasing, which means the job market is not as strong as it was. Another report showed that the growth of the US economy was lower than expected. If future reports show that the job market and economy are getting weaker, the value of the US dollar could decrease. This could also mean that the Federal Reserve will stop increasing interest rates. On the other hand, the Canadian dollar is doing well because of high oil prices and good economic data. The Canadian economy is strong, and inflation has decreased to 3.3%.
From a technical standpoint, USDCAD reacted to the key resistance zone around 1.365. This level has repeatedly thwarted growth in this currency pair in the past, and it was the same this time. If USDCAD returns to growth and breaks this level, we may see a sharp rise, at least in the short term—historically, USDCAD hasn’t stayed above this level for long. Otherwise, if the current trend continues, the next support zones worth noting are 1.335 and 1.308, marked on the chart with a green line.
WTI is testing $83 per barrel area amid expectations of further supply cuts
WTI (West Texas Intermediate) is a type of crude oil that is used as a benchmark for oil prices. It is currently trading at around $83 per barrel, which is higher than usual. This is happening even though the US dollar has become stronger, which usually causes oil prices to go down.
The main reason for the increase in WTI price is that people are worried that OPEC+ countries will reduce the amount of oil they produce. Saudi Arabia has already said that it might continue to produce 1 million fewer barrels of oil per day until October. Russia might also continue to produce 0.5 million fewer barrels of oil per day until October.
Another thing that could affect oil production is the hurricane season in the Gulf of Mexico. This area produces around 2 million barrels of oil per day, but if there are hurricanes, production could be reduced. The Gulf of Mexico also has many natural gas drilling rigs, so the price of natural gas (NATGAS) could also be affected.
Barclays thinks that the reduction in oil production by OPEC+ countries is more important than any changes in demand for oil in China. They expect the price of Brent (another type of crude oil) to go up to $97 per barrel next year.
Finally, it’s worth noting that a recent report from the US showed that there are 10.5 million fewer barrels of crude oil in storage than there were before. This means that there is less oil available, which could also cause prices to go up.
Chart of the Day - USDCAD
The value of the US dollar compared to the Canadian dollar (USDCAD) might change a lot today in the early afternoon. This is because two important reports will be released at 1:30 pm BST. One report is about jobs in the US for August and the other is about Canada’s economy for April-June 2023. People will pay more attention to the US jobs report.
The US jobs report for August is one of the last two important reports before a meeting on September 20, 2023. The other report is about US prices for August and will be released on September 13, 2023. The jobs report today is expected to show that 170,000 more people have jobs, and that the unemployment rate and how much people earn did not change (3.5% and 4.4% more than last year). If the report shows fewer new jobs, it would mean that the job market in the US is not doing well.
For Canada, people expect that the economy grew less from April-June 2023 (1.2%) than from January-March 2023 (3.1%).
If we look at a chart of USDCAD, we can see that it is close to an important value of 1.3500. If it goes below this value, it could mean that the value of the US dollar will keep going down compared to the Canadian dollar. We will know more around 1:30 pm BST when the reports are released.