While the Russia-Ukraine conflict keeps escalating, observers comment on the capital flight from the EU to the U.S. and the growth of the US dollar. Find out in the digest what is going on.
Interact with the dashed blue word and green spot on images to get additional details and explanations.
A term definition or explanation will be here.
Chevron ↑ 15.92%
Trading up with $100 and a X20 multiplier on Forex Olymp Trade, you could have easily made $318.4.
AUD/CAD ↑ 2%
Trading up with $100 and a X500 multiplier on Forex Olymp Trade, you could have easily made $1000.
EUR/USD ↓ 2.36%
Trading down with $100 and a X500 multiplier on Forex Olymp Trade, you could have easily made $1180.
Incredibly High Inflation in the EU
The U.S. Dollar continued to rise over the week.
The growth is due to increased geo-tensions, namely the Russia-Ukraine conflict. In addition, there are also technical factors. Due to increasing risks, energy prices also spiked, which supports USD.
This week, data was published for the ISM Manufacturing PMI. The index rose to 58.6 points. Remember, the higher the index, the better the economy is doing. Moreover, the level of inflation in the Eurozone rose to a staggering +5.8%. Apparently, this trend will continue. It would seem that this should have a positive effect on the EUR, but the main currency pair EUR/USD continues to decline. The reason is the disproportions in the causal relationship owing to risks. The target for EUR/USD becomes the level of 1.1000.
Withdrawal of Capital from Europe to the U.S.
We expect that EUR/CHF will continue to decline in the next few weeks.
Due to growing inflation in the EU and geopolitical tensions, capital from the EU is starting to transfer to the United States. A marker of this movement can be seen in the dynamics of the EUR/CHF currency pair.
U.S. Markets Rose During the Week
The U.S. stock market slightly improved over the past week.
The Dow Jones and S&P 500 indices gained 3.2%, and the NASDAQ100 added 3.1%. Tech stocks and the consumer cyclical sector were the leaders.
It is important to understand that at the moment it is only a bounce, and not a complete reversal. According to Goldman Sachs, financial conditions in the U.S. are currently being tightened. This means that it is becoming more difficult for companies to get money or refinance existing loans.
Microsoft May Bounce
The price of Microsoft broke the local trend line up.
Most likely the upside target will be the level of $305.
Commodities Markets Continue to Break Records
Brent oil is not even thinking of a correction.
The price was up more than 15% over the past week and reached a new local high of $118.3 per barrel. Such prices were last recorded in May 2012. The new high corresponds to the 2.618 Fibo level of the current uptrend, which is now growing almost vertically.
Daily RSI reached 84%. The last time the indicator reached this value was February of 2021. The higher the indicator is in the overbought zone, the more likely we'll see a local correction.
The U.S. is considering additional sanctions against Russia's energy sector. They should not affect the current supply, but they could affect future production and investment in the Russian energy sector. Nevertheless, if the Biden administration takes this step, prices are likely to spike again.
OPEC+, as usual, decided to increase production quotas beginning in April by 400 thousand barrels per day and set the next meeting for March 31. Given the distancing of most governments and organizations from Russia, it will be interesting to see if the cartel will follow suit. This is unlikely, but would be a very painful outcome for Russia.
According to a weekly report from the U.S. Department of Energy, the country's crude oil inventories unexpectedly fell by 2.6 million barrels to their lowest level since 2018. The strategic oil reserve declined to its lowest level since 2002. At the same time, fuel exports rose strongly by 1.4 million barrels per day, thereby demonstrating increased U.S. activity in foreign trade.
Geopolitical instability is gaining momentum
Due to this, Gold continues to grow.
The asset failed to secure near the local maximum of the week before last at $1974.5/oz., but last week it continued to grow. It is reasonable to say that the local target for bulls will be a return to this price level.
Statistically, March is considered one of the most unfavorable months for gold, and there is usually only minimal changes in prices. 28 times in the last 52 years (54% of cases) the month ended with negative results for the precious metal. Nevertheless, in the current geopolitical instability, we can expect the continuation of growth with high probability.
Ronald Peter Stöferle from Incrementum expects gold to reach a new ATH in 2022, noting that after reaching the last historical high, resistance will be weak. He estimates that gold could easily reach $2,300 an ounce within a year.
Bitcoin Locally Surpassed $45,000
Bitcoin has strengthened over the past week, adding 24% and locally touching $45,000.
Bearish liquidations in the market, according to Coinglass, amounted to more than $300 million.
The asset broke through the downtrend line, in which it has been trading since November. However, for a full-fledged reversal, it needs to break through the $45,000-46,000 area. In early February, bulls made an attempt to strengthen above these levels, but failed to succeed.
Local resistance is at the SMA with a period of 100. The price touched the indicator several times and a breakout of the 100 SMA will serve as an additional signal for a trend reversal, along with the price reaching above $46,000.
The capitalization of the crypto market is back to $1.92 trillion with a daily trading turnover of $86 billion.
The Fear and Greed Index recovered to 39 points, but remains in a state of Fear. Retail traders are optimistic that there is a clear bullish advantage. Risk appetite is not seen yet with the BTC Dominance Index rising to 41.8%. This suggests that altcoins were less actively bought than Bitcoin during the week.
Local Crypto News
Low Cost Ethereum Transactions
The average cost of gas on the network dropped to a six-month low. It now costs about $2.5 to transfer online. By comparison, only recently you had to pay $30 to $40 for a transaction. At the same time, the daily number of blockchain transactions fell to 1.47 million, down by 1.1 million transactions in the past four months.
Bitcoin Miner Income Fell by 13%
BTC mining revenue amounted to $1.06 billion, down by 13% from January. The figure is down more than 60% in the last four consecutive months after peaking last October at $1.72 billion.
More Exchanges are Blocking Russian Accounts
Gopax, Kuna, WhiteBIT, and CEX.io decided to block the accounts of Russian citizens due to the start of military operations in Ukraine. Larger exchanges are also considering this issue, but waiting for tougher sanctions or clearer regulatory requirements.
Risk warning: The content of the article does not constitute investment advice and you are solely responsible for your trading activity and/or trading results.
The ISM manufacturing index, also known as the purchasing managers' index (PMI), is a monthly indicator of U.S. economic activity based on a survey of purchasing managers at more than 300 manufacturing firms. It is considered to be a key indicator of the state of the U.S. economy.
Inflation is the decline of purchasing power of a given currency over time.
A bear market is when a market experiences prolonged price declines.
A trend is the overall direction of a market or an asset's price.
The Dow Jones Industrial Average (DJIA), also known as the Dow 30, is a stock market index that tracks 30 large, publicly-owned blue-chip companies trading on the New York Stock Exchange (NYSE) and the Nasdaq.
The relative strength index (RSI) is a technical analysis indicator that shows the strength of a trend and evaluates overbought or oversold zones in the price of an asset.
OPEC+ is an extended format of OPEC countries, which was expanded in November 2016 due to the discontent of oil-producing countries with prices on the global oil market. It now includes 10 additional countries including Russia.
All time high.
The simple moving average (SMA) is a technical analysis indicator that smooths out price data by creating a constantly updated average price.
Standard and Poor’s 500 is a primary stock market index that reflects the collective performance of the 500 largest US corporations.
The index measures the sentiment of the cryptocurrency market, analyzing emotions and sentiments from different sources. A value of 0 means "Extreme Fear" while a value of 100 represents "Extreme Greed".