Analytics

Expert Review: U.S. Bank Capitalization & Cryptomarkets are in Decline

Mid-term Analytics by Olymp Trade Experts


The U.S. is trying to cooperate with other countries in the hope of changing the situation in the energy market. Is it a joke – gasoline is at a seven-year high? What about Biden’s rating? Meanwhile, the U.S. dollar slightly corrected. What’s going on in the markets? We discuss these issues in today’s digest.

 

Weekly Trends

  • EUR/GBP −1.69%. Trading down with $100 and X500 multiplier, you could have easily made $845.
  • ETH/USD -12.38%. Trading down with $100 and X10 multiplier, you could have easily made $123.80.
  • Apple +3.79%. Trading up with $100 and X20 multiplier, you could have easily made $75.80.

 

Currency Markets

Last week, the U.S. dollar corrected slightly. The movements on the currency market were multi-directional. USD/CHF rose by 0.7%, and USD/CAD added only 0.3%. However, against the British pound, the dollar corrected as GBP/USD grew by 0.73%. The current situation is caused by technical factors rather than fundamental indicators.

The fundamental picture is generally unchanged. For the month of October, the U.S. consumer price index rose by 4.2% year on year. Retail sales rose significantly by +1.7% as did the number of building permits. Fearing a run-up in inflation, markets prefer to move to a more reliable currency, which is USD.

Perhaps the main underperformer of the week was the euro. EUR/USD fell by 1%, and the European currency also fell against those of other countries. For example, EUR/JPY -0.75%, EUR/GBP -1.71%, and EUR/CAD -0.72%. In our opinion, the reason is both the GDP growth in the Eurozone, which did not exceed expectations of +3.7% year-on-year, and a slowdown in inflation. The Core CPI rose by 2% in October, while the growth rate was expected at 2.1%.

Although Moody’s economists expect real 2022 GDP growth in Germany to surpass that of the previous year, real GDP growth in the EU as a whole should slow down.

Olymp Trade - Moody’s global outlook - Expert Review 2021.11.22
Pic. 1. Moody’s global outlook for G-20 countries

EUR/USD on the 1DTF formed a classic Doji, which provides the bulls with some hope for a bounce. We think that the bounce target might again be at 1.14000, which is the 38.2% Fibo correction. Don’t get too excited though because it is only a small run for the bulls before a further drawdown.

Olymp Trade - EUR/USD chart - Expert Review 2021.11.22
Pic. 2. EUR/USD. 1D TF.

 

Stock Markets

The U.S. stock market also moved in different directions last week. The Dow Jones was down nearly 0.7%, while the Nasdaq100 was up more than 1%, and the S&P 500 barely made it to 1% growth. Note that the stock market is becoming more and more “flat” as there is less and less positive news. The reporting season is almost over, and the threat of inflation and rate hikes is getting stronger.

Meanwhile, major investment banks are revising their forecasts for indices to go higher. Goldman Sachs also revised its view on the S&P.

Olymp Trade - Goldman Sachs forecast for S&P 500 - Expert Review 2021.11.22
Pic. 3. Goldman Sachs forecast for S&P 500

Interestingly, it was the banking sector stocks that suffered the most last week. Goldman Sachs shares shed more than 4% over the week, JP Morgan Chase‘s capitalization fell by almost 2%, and Citigroup Inc. fell by 3.9%.

 

Commodity Markets

Brent oil continues to decline in price. The price movement is in a descending price channel. After breaking the level of support at $80.50 per barrel, the price continued to drop.

The RSI indicator shows us that the price has a good way to go before reaching the oversold area. Therefore, the local downtrend is likely to continue. The next local support is at $77.45 per barrel. If the trend does not change near this level, then we can forget about the renewal of the ATH (all time high) in the mid-term.

Olymp Trade - Brent chart - Expert Review 2021.11.22
Pic. 4. Brent Oil. 1D TF.

The main news of last week, which is keeping oil from further growth, is the proposal of the U.S. President to release a part of the Strategic Petroleum Reserve (SPR). Moreover, we’re not only talking about the reserves in the USA. The main reason for this suggestion is the significant increase in the cost of gasoline in the country. In November, gasoline prices in the U.S. rose by 60% on average to $3.4 a gallon, setting a 7-year high.

Joe Biden personally suggested to the Chinese president that they should release some oil from China’s strategic reserves. They are estimated at 200 million barrels. A similar request was also sent to the authorities of Japan, India and Korea.

Chinese officials said they are working on a plan to sell oil from their reserves. Japan supported the initiative but said it could not use its reserves to lower prices by law.

Many market participants believe that this week the United States will announce further sales of oil from the SPR as of 2022. Sales from the U.S. SPR began on October 1, 2021. The plan is to release 20 million barrels of oil by December 15, 2021. Nevertheless, according to the EIA, additional sales in the range of 15 to 48 million barrels could reduce the price of oil by only $2 per barrel and the price of domestic gasoline by only 5 to 10 cents per gallon.

Gold was on a steady rise last week, reaching the level of $1870 per troy ounce. The price is consolidating near this level, which coincides with the local downtrend line.

At the moment, there is a good chance that the asset will break this level and continue to rise to the target of $1900. If bulls manage to secure themselves above this level, there will be a change of trend. However, don’t rule out a local breakout with a return to the current movement structure (false breakout).

Olymp Trade - Gold chart - Expert Review 2021.11.22
Pic. 5. Gold. 1D TF.

The reason for the rally, despite the strengthening of the U.S. dollar, is that U.S. interest rates are lagging behind potential inflationary threats. Gold has historically been a protective asset primarily against inflation. CPI rose by 6.2% in October, which is a high last seen back in November 1990.

The market began to seriously assess the likelihood that the rate of inflation could remain high for a prolonged period of time. Investors have once again turned their attention to the precious metal.

Major banks are revising their forecasts for gold. Goldman Sachs, in its baseline scenario, believes gold will rise to $2,000 an ounce in early 2022.

Credit Suisse analysts expect a test of the June high of $1,917. The next resistance level is at $1959 – $1977. Ultimately, the price of gold should rise to a record high of $2,075 per ounce according to the bank’s opinion.

 

Cryptocurrency Markets

Bitcoin failed to maintain its last price high and began a correction last week. The price dropped from $69,000 to local support around $59,500 and then continued to drop.

Price is falling towards the next strong level of support at $54,000. If this area is broken, the short-term trend will change to bearish. In case of a $50,000 price level breach, a medium-term trend may switch its direction to the downside.

Olymp Trade - Bitcoin chart - Expert Review 2021.11.22
Pic. 6. Bitcoin. 1D TF.

The capitalization of the entire cryptocurrency market has fallen to $2.6 trillion. The daily trading turnover also declined to $124 billion.

Olymp Trade - Bitcoin metrics - Expert Review 2021.11.22
Pic. 7. Bitcoin metrics

The Fear and Greed Index moved into neutral and stood at 54 points. Retail traders are still hopeful for the further growth of BTC. BTC’s domination index is still around 42.5% like a week ago. At the same time, altcoins lost more in price than Bitcoin during the fall.

The U.S. president signed a $1.2 trillion infrastructure renewal bill into law without amendments for cryptocurrency companies.

Tim Cook said that he owns cryptocurrencies, but Apple is not going to invest in cryptocurrencies. Twitter’s CFO also said that the company is not considering investing in cryptocurrencies because “it doesn’t make sense right now”.

Ripple and Binance last week proposed their plans to regulate the cryptocurrency market:

  • Ripple published an “operational and pragmatic” way to create a regulatory framework for cryptocurrencies. It involves government-business cooperation, adapting current legislation for the financial sector, and creating a grace period for cryptocurrency companies.
  • Binance published a document titled “10 Fundamental Rights of Crypto Users”. The authors of the document believe that regulation is inevitable, but it must be “smart,” ensuring data privacy and security, as well as compliance with the rules for the sale of derivatives.

However, let’s not forget that both Binance and Ripple are not decentralized businesses, so such rhetoric is necessary for them to avoid further pressure from regulators.

 

Conclusions

The US dollar was corrected, but the correction looks more technical. The fundamental picture continues to speak in favor of USD growth.

The stock market is lacking positive news. Some securities rallied, but as a whole, we should be skeptical about such growth.

Gold is rising amid inflation risks, and oil is falling in price after the U.S. president announced a plan to sell strategic reserves for a number of countries including China.

Bitcoin failed to hold near its all-time high and went into a correction. Whether it is a pullback before further upward momentum or a local change of trend, we will most likely find out as early as this week.

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