Markets are increasingly looking into the likelihood of further rate hikes and the phasing out of emergency stimulus measures. Meanwhile, there has been a significant inflow of funds into Bitcoin, which is updating its all-time highs. What happened over the past week and what to expect in the future? Read about all this and more in our digest.
- Tesla +9.25%. Trading up with $100 and a multiplier of X20 could have earned you $185.
- Alibaba +6.38%. Trading up with $100 and X20 multiplier could have earned you $127.60.
- ETH/USD +7.19%. You could have earned $71.90 by trading up with $100 and a multiplier of X10.
This week, currency pairs moved in different directions. Against the backdrop of relatively vital inflation statistics, the New Zealand dollar performed well. The data, published for the third quarter of this year, showed an increase in the consumer price index by 2.2% and 4.9% in annual terms. Keep in mind that the inflation target for the RBNZ is 2%.
Inflation in New Zealand, like the rest of the world now, is primarily supply inflation. The country imports a reasonably large amount of oil (in 2020, crude oil imports exceeded 4% of total imports) and vehicles (over 11% of the total import structure). Against the background of the energy crisis in the form of an increase in energy prices (the price of Brent oil increased by more than 22% over the past two months), we also saw a rise in commodity prices, leading to an increase in prices for vehicle components. Therefore it is not surprising that the consumer price index jumped so much. According to data from BBG, markets are setting a 90% probability for an interest rate hike in November of this year. Therefore, the growth of the NZD is fully justified.
The moment of truth is coming for the NZD/USD pair – whether the bulls will be able to overcome the local maximum of 0.71710 or not. From the technical analysis point of view, the pair forms a classic bearish candlestick pattern at the resistance level. While the big question is whether we will see a bearish engulfing or a veil of dark clouds, nevertheless, both of these patterns are pretty strong. Also, pay attention to the RSI indicator, which barely entered its “oversold” zone but reversed.
If we pay attention to vanilla options, the delta of weekly call options with a strike price of 0.72000 is 0.36. Market participants do not believe in further movement closer to parity. Considering that the market has a rule “buy on the rumor and sell on the facts,” we think that the monetary policy tightening by the RBNZ may play a negative role for the national currency.
The American stock market continued to rise during the week of October 18-22. The Dow Jones index crossed the 35,500 mark. The Nasdaq 100 index closed several gaps at once and continued to grow. The technical target for the index may become 15,600 points. The S&P 500 broke through 4500 points and continued to rise. The growth of stock exchanges continues against the backdrop of rising yields on US Treasuries, which means that the markets are already planning a rate hike shortly, or at least a stricter rhetoric on abandoning QE.
According to sentiment, markets are fully pricing in as many as two Fed rate hikes by the end of 2022. At the same time, according to BBG estimates, the markets are 50% confident that the Fed will raise the rate by 25bp as early as June of next year. Experts argue that the debt securities market cannot decline alone and that the stock market may follow soon, which means that any growth now needs to be looked at critically.
Traders should be prepared for a possible reversal. In the meantime, the most substantial growth for the week was demonstrated by shares of Nvidia, adding more than 5.5%.
Alibaba grew by almost 6% – the company’s growth is also because Jack Ma left China on vacation to Majorca, thereby demonstrating to investors that the Chinese authorities were not going to persecute him. This served as an impetus for growth of the company’s shares.
Facebook added 5%. Exciting news about the company is related to its rebranding, which should be announced on 28.10.
Apple‘s capitalization also grew quite well (the shares rose by 5.93%). Apple shares are currently in a bullish price channel. The lower border of the channel (support level) is located at around $140. The upper boundary of the channel or resistance level is situated just above $160. According to technical analysis, for the growth to the channel’s upper border to continue, the stock must overcome the significant mark of $150 (Fibonacci retracement level of 61.8%).
According to the fundamental analysis, the situation looks somewhat different – according to the constructed model for discounting cash flows (DCF model), the fair valuation of the company was slightly more than $2 trillion, while the current capitalization is 2.5 trillion, meaning that it is overpriced.
Brent crude oil continues to grow, having updated a new maximum at $ 85.52 per barrel. A bit short of the seven-year $86.70 highs. The current bullish trend continues, with local support at $83.60. At the end of last week, the asset began to correct, but it is still too early to discuss a global trend reversal.
The crisis in the energy sector is getting worse. In many areas, there is a shortage of supply along with an increase in demand. If we talk about oil, its price is supported by excessively high quotes on gas and coal, which increases demand for “black gold.” Add the cautious policy of OPEC+, which is in no hurry to increase production despite the current price situation. Therefore, we have an ideal problem for a continuation of price growth.
Futures in thermal coal in September rose to $218.65 per ton. In early October, it broke the 2008 maximum. The price surpassed $224 and reached a new high of $280. At the moment, the price has corrected, but coal is still costly for consumers.
After Russia flexed its muscles, which ultimately led to a deal on the gas issue, the price of gas began to adjust. Natural gas struck a local ascending trend line that started in late August at the level of$ 5.450 per million British thermal units. Now, this level acts as resistance. Local support is at $5,200.
Nevertheless, it is too early to talk about a change in the trend. To do this, quotes must fall below $4,500 and break through the long-term trend line. However, before that, quotes should break through the strong support level at $4,800.
The statistics from the USA did not support the quotes. Data from the EIA said that US gas growth over the last week grew by 92 billion while the forecast was 90 billion. It is also worth noting that the United States is ending maintenance of terminals, and LNG exports are beginning to return to typical values.
Bitcoin renewed its all-time high near $ 67,000! The asset broke the previous April high, which was at $ 65,000. This level now acts as local support. Within a week, BTC rose in price by more than $10,000, and this is probably not the end. Some analysts’ predictions that the cost of the leading cryptocurrency will reach $100,000 by the end of this year no longer look so optimistic.
Bitcoin capitalization exceeded $1.2 trillion, and the cryptocurrency market $2.6 trillion. The daily trading turnover also renewed its all-time high and is above $132 billion.
Unlike most other trends, this one was caused by severe fundamental factors. What traders have been waiting for since 2017 has finally happened! On October 15, the SEC approved the first US Bitcoin ETF on request of ProShares. The instrument received the ticker BITO and started trading on NYSE on October 19. The trading turnover on the very first day amounted to almost $1 billion. BITO became the first ETF in the world to overcome $1 billion in asset value in 2 days.
SEC chief Gary Gensler commented on the event in an interview with CNBC. He believes the ProShares ETF is based on a “highly speculative asset class” with tremendous volatility. However, this did not stop the SEC from approving another application for the launch of two more bitcoin futures ETFs:
- from VanEck. The decision came into force on October 23. Trading on the new instrument under the ticker XBTF on the Cboe BZX platform is scheduled to start on October 25.
- from Valkyrie Investments. The ETF began trading on October 22 under the ticker BTF.
Of course, updating the all-time high has increased the appetite of crypto traders. The Fear and Greed Index went into the Extreme state and reached 84 points. Retail traders were evenly divided on the short-term outlook for BTC helping bullish sentiment prevail last week.
The BTC Dominance Index has been growing all week along with the price but then corrected to 46%. This happened against the background of the growth of altcoins, which, of course, began to increase in price. ETH also renewed its all-time high at $4375.
The strongest currency of the week was the New Zealand dollar, which rose on expectations of a monetary tightening by the Reserve Bank of New Zealand at its next meeting in November. However, an obstacle for further NZD/USD growth is the level of 0.72000, which will be quite difficult for the bulls to overcome.
The stock market is in a dual state. On the one hand, we see an increase in UST yields, which means a decline in prices in the debt market, and on the other, we see a reversal of stock indices. Most likely, the fall in bond prices may be a harbinger of a further decline in the stock market. We do not entirely trust the current growth in the capitalization of stock exchanges.
The commodity market is correcting slightly after the recent highs made by several assets. The most considerable correlation is observed in natural gas, while oil is only gaining strength.
Bitcoin has hit its all-time high amid ETF approval from the SEC. The leading cryptocurrency will not stop there, having received a decent inflow of capital and a positive sentiment background.