Analytical info in this article is relevant for the week 20.06.2022 - 26.06.2022.
The US Federal Reserve rate hike was above forecast, but expected. Energy markets are struggling. How did the currency, stock, commodity, and crypto markets react? Check it out.
Interact with the dashed word and green spot on images to get additional details and explanations.
Contents:
Gains on
Hundred-dollar Trades
Apple ↓9.25%
$185 gained on a x20 Up trade
USD/CAD ↑2.02%
$1,010 gained on a x500 Up trade
AUD/JPY ↓3.42%
$1,710 gained on a x500 Down trade
Overview
Forex
The Fed confirmed a 0.75 percentage point increase, the most significant move it has made in a single meeting since 1994 and signaled more rate hikes ahead as it tries to cool the US economy without causing a recession. The Swiss National Bank also raised its policy rate for the first time in 15 years, joining other central banks in tightening monetary policy and sending the safe-haven Swiss franc sharply higher. The Bank of England has raised interest rates for the fifth time in a row and expects inflation to rise slightly above 11% in October.
Stocks
U.S. stock futures slumped on Thursday, 16 June, as the post Federal Reserve rally proved short-lived as bond yields continued their upward swing and other central banks worldwide adopted a more aggressive policy stance. Tech company shares fell, with Nvidia, Amazon, and Microsoft dropping between 2% and 5% each. Twitter shares were an exception, rising 1.4% after Tesla chief executive Elon Musk is expected to confirm he wants to buy the social media company.
Commodities
Energy commodities such as Brent oil and natural gas dropped on the interest rate increase by the US Federal Reserve, but supply chains are still under pressure, so prices are expected to remain high.
Crypto
Crypto took a further plunge down on the Celsius cancel of withdrawals, and further Fed rate hike pressure remains now and in the future.
Forex
EUR/CHF Pair Sees Biggest Drop Since Brexit Vote
This week’s primary price movement expectation: Down to 1.0100
This week’s secondary price movement expectation: Up to 1.0230
The EUR/CHF pair fell the most since the results of the Brexit referendum in June 2016, sinking to as low as 1.0153 francs. With the latest decline, the price now seems to have confirmed a short-term bearish break of the 1.0230 horizontal support. Acceptance below the 1.0200 round-figure mark would reaffirm the negative bias and pave the way for further depreciation. The EUR/CHF pair could then accelerate its decline towards challenging the 1.0100 psychological mark.
USD/JPY Retreats from Multi-year Highs
This week’s primary price movement expectation: Down to 130.00
This week’s secondary price movement expectation: Up to 133.00
USD/JPY has witnessed another significant bullish run that paused briefly around the psychological 135.00 mark. Considering the drastic change in sentiment from the Bank of Japan and the overbought territory shown on the RSI, USD/JPY may be on the back of a pullback. The nearest level of support is 130.00 with 128.00 and 127.15 thereafter.
Stocks
Apple Will Probably Drop More
This week’s primary price movement expectation: Down to 123.00
This week’s secondary price movement expectation: Up to 137.00
Apple shares have plunged along with the broader market. With rates rising, it seems Apple's stock is falling even further this summer. Technical charts show that Apple may fall to around $120 in the coming weeks. The stock recently fell below a critical level of technical support around $137. Now that the support level is broken, the next significant area of support for Apple won't come until the stock hits $123. The RSI for Apple is still around 37, which indicates the stock is not yet oversold. The RSI has also been steadily trending lower over the past several months, indicating that momentum is very bearish.
Boeing Stock Soars
This weeks primary price movement expectation: Down to 140.00
This weeks secondary price movement expectation: Up to 125.00
Boeing shares rose 8% on reports that China Southern Airlines is testing flights with the manufacturer’s 737 MAX. The Chinese airline is reportedly seeking to bring the plane back online ahead of expectations, which is improving domestic demand after a two-month lockdown of Shanghai and other key Chinese markets due to COVID-19. At the moment, the price is likely to move towards the psychological level of $140. If this level is broken, the price may continue moving upwards towards $147, the closest support level is at the level of $125.
Commodities
Brent Oil
Brent oil drops on FED rate hike and stronger USD, but supply chains remain tight.
This week’s primary price movement expectation: Up to $120
This week’s secondary price movement expectation: Down to $114
Last week, after the United States Federal Reserve raised the key interest rate by 75 basis points, the highest increase since 1994. The price of Brent dropped to previous week’s support level around $114 per barrel. The FED also stated that another 75bp rate hike might come in July followed by a possible 50bp hike in September. Remember that as the interest rate rises, USD strengthens, which makes the price of Brent more expensive for countries buying in other currencies, which may lower the demand.
In the meantime, demand is strong as the summer kicks off and people start to travel. At the same time, gasoline prices are at extremely high levels. The Biden administration is considering taking steps to either ban or restrict export of oil from the US in an attempt to lower gasoline prices. However many analysts believe that further disruptions of supply chains may only increase the price of oil. Considering all of these factors, it is hard to say how the price of Brent will react in the mid to long term. In the short term, we expect prices to remain elevated with an average target of $120 per barrel.
Last week on Wednesday, the price broke the uptrend line as a support level down and reached as low as $114 per barrel. $114 is a strong level that has been used a support and resistance level since the beginning of March. We expect that the price will reach back up to the $120 resistance level followed by $127. There is also a secondary potential breakdown to the support level around $112.
Natural Gas
Europe is heading for a cold winter with gas disruptions from both the West and the East.
This week’s primary price movement expectation: Up to $8.5
This week’s secondary price movement expectation: Down to $7
Last week on Tuesday, the price of natural gas broke and closed below the trend line support level from 15.03.22. The price reached the resistance turned support trend line from 28.03.22 at the level of $7 MMBTU. The price soon thereafter was trying to recover to about $8, from the midrange of $8.5 and highs in the vicinity of $9.5. The background for this volatility is mixed.
In the West, there was an explosion in the US that damaged export terminals in the state of Texas to Europe. On the one hand, this is good for the US as supplies are gathering for the winter in the United States, on the other hand, this is damaging to Europe as they struggle to fill up their storage.
From the East, Russia has also cut exports of natural gas to Germany via the Nord Stream 1 pipeline and blames the delay on Siemens Energy equipment due to maintenance in Canada.
Therefore, while natural gas prices in the US dropped on supply increase, the price in Europe soared on the deficit, which is why we are seeing such volatility. As the price of energy commodities remains under pressure, we expect the price of natural gas to keep the support level of around $7 MMBTU, the average range to be around $8.5, and the resistance target at $9.5.
Crypto
Bitcoin Crashes to $20,000
This week’s primary price movement expectation: Down to $17,500
This week’s secondary price movement expectation: Up to $23,000
Last week the crypto world was also on a wild ride with Bitcoin spiraling down to $20,000.
One of the main reasons that Bitcoin continues to crash is FUD: fear, uncertainty, and doubt. Last week, Bitcoin took a plunge close to $20,000, down from $48,000 in late March and the beginning of April 2022. The previous week's drop was sparked by the Celsius network.
Early last week, the Celsius network announced that it would halt all withdrawals, swaps, and transfers on its lending platform, due to “extreme market conditions” and a need to “stabilize liquidity.” Additionally, the US Federal Reserve rate hike of 75 basis points also affected crypto assets as they correlate with the stock market. As they dropped on the rate hike with further hints of tightening, so did cryptocurrencies.
With the continued political and financial market difficulties, it’s hard to say where the world of crypto is going. We have identified the next support level at $17,500 from December 2020 and a resistance target at $28,000. The average is $23,000.
As you can see, the crypto winter is evolving, commodities keep going crazy amid the geopolitical and economic events, and some currency pairs surge with lightning speed… These events aren’t just facts. These are the opportunities to level up your trading experience and profit.
Keep a closer eye on the news because that’s one of the key sources of the hints to forecast the changes and react quickly to them. Here is more info on how following news help traders. Be sure to follow our Analytics section to see experts' conclusions from the market situation. Also, practice on Olymp Trade with your free demo account if you’re not 100% confident in your trading skills and want to train or head directly to a real account if you’re ready to profit now.
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