The dollar continues to strengthen. Stock markets are correcting after setting new highs. Bitcoin and other cryptocurrencies have also set new historical quotes. And Elon Musk brought down Tesla shares. Read on to learn all about this and more in today’s digest.
- Tesla -12.98%. Trading for a fall with $100 and a multiple of X20 could have made you $259.6.
- BTC/USD +4.51%. Trading up with $100 and a multiple of X10 could have earned you $45.1.
- EUR/USD -0.96%. You could have earned $96.0 by trading short at $100 and a multiple of X100.
The dollar continues to strengthen despite the inflation in the United States. In October, annual consumer price growth of 6.2% was a record set back in August 1990, and core inflation hit a 4.6% high, not seen since 1991. Moreover, the growth was quite rapid from 5.4% to 6.2%.
Some analysts believe that it was this sharp rise that helped strengthen the dollar. Such a surge in inflation greatly increases the likelihood of an interest rate hike next year. The Fed announced that it would do it in an emergency, and such sharp inflationary growth could just become the reason for a revision of the current monetary policy.
At the same time, the ECB does not exactly plan to raise rates in 2022. Christine Lagarde believes that the criteria necessary for raising rates will not be met next year. The divergence in the monetary policies of the US and EU can only strengthen the current downtrend in EUR/USD.
Despite good data on retail sales in the Eurozone (growth from 1.5% to 2.5%), EUR/USD impulsively broke through the strongest daily support level at 1.15300 last week. The crossing of the MACD indicator lines also indicates the continuation of the local trend.
The asset has continued to move in a falling wedge since May this year and this trend looks incredibly stable. Most likely, the downward movement will touch the level of 1.14100, after which a correction is likely to take place.
The US stock market was correcting at the end of the week, following last Monday’s highs including:
- S&P 500 hit a new record at 4,719 before adjusting 1.5% at the end of last week.
- The Dow Jones reached 36,568 points and then corrected by 1.2%.
- The Nasdaq 100 index reached 16,450, after which it fell 2.2%.
There are several reasons for refreshing highs and renewing optimism on the US stock exchanges:
- The $1 trillion infrastructure plan adopted by the House of Representatives.
- Optimistic economic forecasts amid Pfizer’s successful tests of a new drug for COVID-19.
The correction began after the publication of US inflation data and additional info about the bankruptcy of the Chinese developer Evergrande.
However, the main event on the stock market was Elon Musk’s sale of Tesla shares to meet his tax obligations. He sold nearly $5 billion worth of shares, although he still owns over 166 million shares.
Musk planned to sell 930,000 shares worth $1.1 billion back in September of this year. As a result, he sold $3.88 billion more. Before doing this, Elon conducted a survey among his Twitter followers. He asked if he should sell part of the shares. An incomprehensible flirtation with a 62.5 million audience despite the knowledge that he was going to do it anyway.
Following a Twitter poll, Tesla shares plummeted more than 15% last Monday and Tuesday but recovered 4% towards the end of the week. In addition to Musk, his brother Kimbal appears to have been involved in an insider sale. He sold his $109 million worth of shares the day before his brother’s Twitter poll and this trade was not among the planned stock sales.
Brent crude oil is correcting after a new high. A falling wedge has formed on the daily timeframe. From the point of view of technical analysis, if it breaks upward, oil will continue the upward trend. Therefore, the current state of the market can be called consolidation before further development of the movement. Local support is at the level of $80.50 per barrel.
In the last meeting, the OPEC+ countries decided to stick to the previously agreed plan, despite pressure from a number of consumer countries. In December, the cartel will produce 400,000 more barrels per day.
Total production amounted to 27.5 million barrels per day, which is 254 thousand barrels less than the volume allowed by the agreement. If the dynamics continue, the total supply deficit by the end of this year will exceed 1 million barrels per day. This should support the current rally.
In addition to speculative profit-taking, the US government is also working to drop prices. It continues to add oil from its strategic reserve. Over the past two months, the decline in inventories averaged 1.1 million barrels per week.
In addition, oil quotes are still subject to gas quotes. But the gas price continues to decline. The market is expecting an increase in flows from Russia. This should reduce the increased correlation between gas and oil.
Natural gas returned back to the uptrend line, where the asset was traded back in April. Local support is at $4,800 per million BTU.
Gas is close to reversing the trend, but this has not happened yet. In addition to the speculative component, the quotes are under pressure from data on US natural gas reserves.
For several weeks in a row, indicators have continued to exceed expectations. Last week was no exception as reserves increased by 7 billion cubic feet instead of the projected 10 billion.
Bitcoin has renewed its all-time high again. This time the ATH was fixed at around $69,000. After updating the maximum, the asset corrected to the level of $65,000 – the April local maximum. Since the end of July, BTC has risen in price by more than double and so far everything indicates that this is far from the limit.
The capitalization of the entire cryptocurrency market reached $3 trillion. The daily trading turnover has once again renewed its historical maximum and is more than $181 billion.
The new maximum is accompanied by a continuation of the outflow of funds from centralized exchanges. CEX reserves fell below 12.9% of the circulating supply, according to Glassnode.
Ethereum also updated its all-time high as the price broke the $4,800 mark. The price is also pushed up by the burning of most of the commissions, which reduces emissions.
The index of fear and greed has surpassed all the previous limits and is now in a state of Extreme Greed at 77 points. Retail traders are more inclined towards the growth of BTC, which is quite understandable in this situation.
BTC’s dominance index will stabilize around 42.5%. Altcoins are starting to take over again.
Last weekend, the US House of Representatives passed a $1.2 trillion infrastructure plan. Why is this important for the cryptocurrency market? Now, miners who manage nodes, crypto wallets and liquidity providers in DeFi protocols must report to the tax authorities on user transactions over $10,000.
In the meantime, Mastercard will begin issuing Bitcoin-linked cards in the Asia-Pacific region. This will allow you to make payments in cryptocurrency.
The US dollar continues to strengthen against all currencies, and above all against the EUR, despite the record inflation in the country.
The stock market is in a correction after the establishment of new ATHs amid further rumors about the bankruptcy of Evergrande.
The commodity market is also correcting after new highs. The price of natural gas is still volatile and impacts oil but to a lesser extent.
Bitcoin has set a new all-time high and doesn’t seem to have plans to stop there.