Analytics

Expert Review: Commodity Market Thrives While Bitcoin, and Oil Face Trouble

Mid-term Analytics by Olymp Trade Experts


The past week saw a lot of activity, especially in the Cryptocurrency market. What happened, and what kind of impact will it have? Read our review, and we will reveal everything you need to know.

 

Weekly Trends

  • BTC/USD  -4.88%. Trading for a fall with $100 and a multiple of X10, you could have earned $48.8.
  • Tesla  +2.64%. Trading up with $100 and a multiple of X20 could have made you $52.8.
  • Netflix  +2.74%. You could have earned $54.8 by trading to the topside with $100 and a multiple of X20.

 

Currency Markets

Over the past week, we observed the most significant movements in the New Zealand dollar. The NZD/USD currency pair, which grew during the week from 30.08 to 03.09 on Monday 06.09, turned around and began to decline. The cross-rate of NZD/CHF went flat after the growth. The NZD/CAD rate continued to climb, breaking the 0.90000 mark. No major economic news was released in New Zealand this week.

We can assume that the current situation with the New Zealand dollar this week is a usual corrective rebound. Last week, a representative of the RBNZ said that there is no reason to change anything in monetary policy yet. At the same time, the most significant Australian bank, Westpac, announced that the Central Bank of New Zealand would not raise the rate due to the new wave of COVID-19. Against this background, the NZD dipped slightly, but a new local bullish trend began after that. The NZD/USD rate forms a classic technical “flag” pattern, which does not leave any chances for the bears. We believe that the NZD/USD will continue to grow.

The leading currency pair on the FOREX market – EUR/USD turned down on 06.09 and began to decline. The pair broke down the trend line and took by storm two Fibonacci retracement levels – 23.6% (1.18500) and 38.2% (1.18160). Now, from a technical point of view, the target is a 50% retracement to 1.17870. Next week, the key fundamental news will be US and EU inflation data sets and US consumption data (August retail sales). The forecasts are very mixed, but the chances that Retail sales will turn out to be higher than expected are pretty high (Redbook research showed promising results in August.)

 

Stock Markets

The American stock market this week behaved in a bipolar fashion. On September 6 was USA Labor Day, and the stock markets were closed, but at the opening on September 7, the Dow Jones index slipped down, falling below 35,100 points, the S&P 500 also fell.

Olymp Trade - S&P 500 chart - Expert Review 2021.09.13
S&P 500 chart

The strongest movements over the past week occurred in Apple shares (which is on the NASDAQ) – the share price exceeded $157. Netflix shares – the share price increased significantly, updating its all-time high and reached $610. Tesla shares also showed promising results over the past two weeks. The price increased from $714.7 to $764.5, that’s almost 7%.

By the way, regarding Tesla shares, we are likely to see continued price growth in the future. On the 1D TF, the short-term trend accelerated, the price reached the upper boundary of the price channel ($765 mark). The growth target is likely to be the nearest local maximum or the $780 mark.

Olymp Trade - Tesla chart - Expert Review 2021.09.13
Tesla chart

 

Commodity Markets

Many commodities updated multi-year highs last week. Nickel rose to a new 7-year high and aluminum to a fresh 13-year high. We expect the reason being that China is cutting energy-intensive industries as part of its emission reduction program.

Of course, this will directly affect the final cost of goods. In August, China’s PPI rose to 9.5%. For the end consumer, this inflation is exacerbated by the record-high tariffs for freight transportation.

Natural gas prices at Henry Hub hit $5 per million Btu for the first time since 2014. The increased prices are primarily the result of inventory lagging behind their averages.

Olymp Trade - Natural gas chart - Expert Review 2021.09.13
Natural gas chart

It is unknown how long the current rally will last, but the EIA released a report that prices should average $3.50 by next year due to increased production and reduced LNG exports.

Brent crude rose to $70 per barrel. Due to Hurricane Ida, production in the Gulf of Mexico has been suspended and restored. Production losses are estimated at around 20 million barrels.

Opinions were divided over the medium-term outlook for oil. OPEC + held a regular meeting, following which production volumes will increase by 400 thousand barrels per day until the end of October. Kortel believes that commercial oil reserves will not recover until May 2022.

According to analysts at Morgan Stanley, American mining companies will not increase production, and OPEC + will adjust production plans. The bank also believes that the current wave of coronavirus incidences will decline in September, so the demand for gasoline in the United States and China will increase.

 

Cryptocurrency Markets

Bitcoin (BTC) reached a local high of about $53,000, after which the price collapsed by 13%. At the moment, the cost of the leading cryptocurrency dropped to $43,000-44,000. The total volume of liquidations in the futures market reached $3 billion.

Olymp Trade - Bitcoin chart - Expert Review 2021.09.13
Bitcoin chart

Such a movement caused a collapse among altcoins. Almost all coins from the top 10 by market capitalization lost 10 to 20% in value.

The only exception is the Solana cryptocurrency (SOL). It renewed its all-time high at $216 and took 6th place in the overall rating with a capitalization of $57 billion. SOL climbed higher than Dogecoin, Polkadot, and even Ripple.

The dominance of BTC continues to decline and is already at 41.5%. The fear and greed indicator dropped from 79 to 45 points and turned into a state of fear.

The main news of the past week is the legalization of bitcoin as a means of payment in El Salvador. On September 7, the government of the country acquired 550 BTC. McDonald’s, Pizza Hut, and Starbucks have already started accepting bitcoin as payment in the country.

Nevertheless, against the backdrop of the recent collapse of bitcoin, the yield on El Salvador’s government bonds shifted. The short-term maturity yields exceeded those of the securities with higher maturity yields. Such an inversion could mean the beginning of a severe recession in the economy.

 

Conclusion

Recent highs in the commodity market make it clear that the impact of COVID-19 on the balance of supply and demand may be non-linear. In some markets, events line up in a “perfect storm” fashion and violently push the price.

There is every reason to believe that the price surges in the commodity market are due to the pandemic, and problems with the stimulus will be more significant and prolonged further than previously assumed.

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