Bitcoin has been vastly oversold due to the fact of regulation concerns from the US government wanting to make a more controlled market just like stocks. For over 2 months, the crypto has fallen nearly 42% from the highs in November, but it looks like it has found a bottom in the $39Ks.
Although Bitcoin received very little interest in COT data last week, I think it's about to gain a lot of attention soon. With the crazy inflation status for the USD, crypto might become something investors would like to put their money in to. Gold, recently, has been underperforming and moves slow even though it has a bullish bias against the USD, and bitcoin looks like the better play in the coming months. The image below is CPI on the USD.
Until the Fed makes a move, the dollar will continue to look weak. And people are tired of waiting on gold, so why not get in on something that can be more lucrative? It is a risky bet for sure, but now is a time where buying something to hedge inflation will be a key play going forward.
Concerns regarding the USD are pretty clear, but there is also an issue being presented in the bitcoin market that needs to be addressed. A technical concern I want to point out is the potential death cross pattern happening with bitcoin where the 50 DMA and 200 DMA intersect and the 50 crosses below the 200. This indicates a bearish move on a technical level, but if we see a swing up from the lows, the two moving averages might cross again signaling a bullish move.
Concluding, I think this this a potentially big opportunity for bitcoin investors especially as we will catch COT behavior later today and where the money is flowing. Interest rates are the biggest concern, but I do think this month and next will be big for bitcoin as the Fed does not intend to raise rates in February at all.
CPI numbers came in yesterday indicating a 7% climb in inflation from last month. This is some bad news for the Fed, USD, and stock market which could lead to a short term bearish trend until the Fed raises rates. This report should be bullish for the USD in the longer term since investors can be more certain that rate hikes are coming, but the dollar is still dropping. Here's why the USD could be bearish.
There are a couple reasons to why the dollar could still be bearish right now. That is probably because the three 25 bp hikes the Fed wants to do might not be enough to offset the rapid rise in inflation. According to TradingEconomics, the inflation rate is expected to trend upward to 1.90% by 2023, so even the 0.9% interest hike the Fed plans to do might not be enough to a big enough policy to keep inflation under control.
We also don't know for sure whether or not the Fed will pursue this plan to go from near-zero percent interest to nearly 1% by the end of the year. The original plan was a 0.3% hike, now it's 0.9%. We may have to see a larger hike for investors to feel comfortable with the USD's strength. So, in the meantime, the USD could be bearish.
According to COT data, institutional interest is on the short side of the trade which means it's more likely we see a downtrend than a rally. The way CPI is trending seems like the 7% rise is not the top for the inflation index.
The yen has been the most volatile across the board all day, and there a few reasons why. It seems that investors are more hesitant on the Japanese economy now that stricter monetary policy seems to be more prevalent in other countries more so than in Japan. The economy is expected to continue recovering, but it will do so at a slower pace. Super loose monetary policy for the past decade is likely to continue this year causing the yen will be consistently out of favor. Having said that, here are some yen pairs to watch on this wild trading day.
Bullish potential still seems probable for these three pairs right now although COT is buying up lots of futures contracts on the yen. However, the persistent easing drives investors away from the yen and brings them towards stronger currencies that plan to tighten monetary policy this year.
Dollar yen had a strong day as the pair flew up to the highs of 116.300s before taking a minor retrace on the 4H. Although the previous candle showed rejection from the lows, we still might see a further move downward to support which lies around 115.500s. UJ is now at the levels not seen since January of 2017.
Driven by higher oil prices and bond yields, the loonie gained more demand over the yen in late December. Price crossed above resistance at 91.186, but it hasn't closed above. Also, two trend lines look noticeable on the 1D timeframe, and price has broken above one of them.
Across the pond, pound pairs are in a similar boat as the dollar with the expectation of higher rates going forward. This factor is helping to drive price up closer to highs around 158.239. A trend line formed on the 4H where the pair has respected that level twice. Support lies around 156.000 and 154.746 just below.
To read more about GBP pairs, click here.
Learn more about these picks and why they could be the biggest plays of the New Year. Here's our top 3 markets in forex right now.
The US is in a constant search for more productivity and supply in the oil market, and they are struggling to find it. As the largest producer and consumer of this commodity, the government and curators are looking for supply elsewhere. In an article by IBD, they mention that Biden and Tehran are in discussions with the potential to increase the amount of barrel supply by 1.4 million.
Another news source show us that pre-pandemic productivity has still not been reached in the US. However, we are expected to increase production by 670,000 bpd in 2022. The problem facing the US is that demand is outweighing supply, and that is causing a rather large move in the oil sector. However, under the Biden administration, oil production was cut setting the stage for higher prices. And if the administration decides against a proposed production increase, analysts fear a $100 price per barrel.
Having this information will help us look at pairs that rely heavily on oil production and demand.
Lower production as of now is putting a weaker and uncertain valuation around the dollar. However, investors expect at least one rate hike in 2022 which they could then price into the dollar's price. Additionally, if the US can manage to boost the amount of barrels manufactured without depending on foreign sources, the USD will get stronger. The dollar index has had a great year so far after reaching as high as 8%
Tensions between Russia and Ukraine have not been pleasant for a while either, and this can have a negative impact on NATO and geopolitical agreements.
Outlook on the loonie looks stronger than the USD right now after the latest take on oil's global supply and production. Canada relies on oil demand more than the United States so a less productive US could help out Canada's currency. So, Canada needs the opposite thing to happen that the USD bulls are hoping for: less production in the US and finding supply elsewhere like Tehran and/or Canada.
All three forex picks have something in common: oil production. Whether or not the US decides to up their supply will undoubtedly affect all three markets. But this also doesn't necessarily mean that one will be better than the other in the New Year. In fact, all three seem like strong picks going into 2022. Biden will likely not try to boost production, and if he does, it will probably not be by a substantial amount.
So, I think it's important to consider a market where oil demand grows, Canada's loonie gets stronger from a higher oil price per barrel, and investors begin to price in the USD after the federal fund rate hikes in 2022. All three have the potential to be very bullish especially if treasury yields continue to increase and omicron fears push through into 2022.
To read our other top picks, check out our market analysis tab on the A1 website here.
On December 15th the Federal Reserve Board of Governors made a press release detailing their plans to reduce their open market operation purchases in 2022. The central bank also predicts several rate hikes in 2021, and continuing on into 2023. When you combine this with the current overvalued state of the market, there's good reason to believe that we will see a minor correction, or a mostly flat market.
Fed Open Market Operation purchases of bank bonds and other assets of buoyed up the stock market. SPY and Fed assets look like virtually the same line. Running a correlation on SPY and Fed purchases from 1/2/2021 yields an astounding correlation between the two of 0.8537, or 85.37%. We hardly EVER see this much influence by the fed
Rates have an inverse relationship with the market. When rates go up, stocks go down. What we want to know is how much rates will increase and how many hikes there will be. The Fed has indicated that there will be three hikes in 2022.
3. Emerging Markets and Heavy Industry related currencies in South East Asia and Pacific Economies
AUD, NZD will benefit form the gains in emerging markets in South East Asia. This year alone, Vietnam a 34% increase in their largest stock index. Because these are the largest regional speculative currencies in the area, FOREX traders looking to benefit from the gains in emerging economies would do well to consider AUD and NZD pairs.
For questions and comments, you can reach the author at firstname.lastname@example.org or through the A1Trading discord at @smstreb97
A major end-of-the-year announcement from the FOMC yesterday waved a big bullish flag for the USD. Several factors were discussed in the conference including interest rates, inflation and tapering. Here is why 2022 could be a fantastic year for the currency:
The Fed decided to double the amount of asset purchases to a rate of $30 billion per month. By the month of January, they will only be buying $60 billion compared to what used to be $120 bn, and by March, the Fed should have reduced their purchases to nothing. This quick reduction of purchases will then be followed by rate hikes.
Fed Calls For 3 Hikes In 2022
After the Fed tapers in the early half of 2022, they will follow it up with three interest rate hikes which will likely equate to 0.75 basis points in total for the year. Although this is bullish news for the USD, it is still not set in stone with the concerns of omicron virus still lingering. Virus fears will likely persist in 2022, so the expectations of three hikes may be quelled if the problems with this strain gets worse. But, at least two seem promising for next year. These raises will help fight the CPI inflation factor that has risen 6.8% in the last month.
The US dollar index came a little off the highs around $96.9, but looks like it wants to come back up to that level once again. Price may have made a wedge formation on the 1D chart as higher lows and lower highs are taking shape. Support lies below at 95.545 and 94.600.
Hey everyone! Welcome to this week's forex forecast for the week ending December 17th, 2021. I'm TraderBart with A1 Trading, and this week I'll be looking at AUDUSD, EURUSD, EURAUD & XAUUSD. This will be the final WFF of 2021 as I'm going abroad to spend time with family. Hope everyone has a Merry Christmas and a Happy New Year, and I will be back from mid-January to continue this series of articles.
Price recently broke out of the ascending channel, making a touch of the 0.70 key horizontal level which dates back all the way to September 2018, and is now on its way to potentially making a touch of the ascending channel. Look out for whether we see price re-enter the channel, suggesting further bullish moves towards the channel's top OR if we see price reject the channel's bottom, suggesting further bearish moves towards 0.70 and potentially new recent lows.
Price is forming a triangle pattern following the break of the descending channel. Watch out for a break of this pattern, if we see a break above, look out for the retest and rejection before potentially going long. If we see price break lower, look out for the retest and rejection before going short. A break above 1.14 opens up price to 1.16; a short-term key level.
After breaking out of the ascending triangle pretty early, price has made its full move but is now retesting the pattern's resistance at around 1.57 which is the same as the ascending triangle from May earlier this year. Watch out for a rejection of this level, where following successive price action confirmations would be a potentially good time to go long on this pair.
Gold continues to consolidate for another week, still failing to break below 1765 suggesting its potentially waiting for a major catalyst to create a new trend in the market. Price will likely be slow during the Christmas and New Years period.
For any questions or comments, you can reach me at @TraderBart on Telegram or @TraderBart#2638 through the A1Trading discord.
Let's look at the news event's we've got lining up this week...
The Reserve Bank of Australia is widely expected to keep interest rates on hold at 0.10% once again. Although there have been some notable improvements in the Australian economy's performance, policymakers are likely concerned about the Omicron variant that might prompt another downturn in growth. In their previous rate statement, the RBA has already hinted that their first rate hike most likely won't happen until 2024 due to weak price pressures and other uncertainties.
The Bank of Canada is likely to keep rates on hold once again at 0.25%. The latest employment data has been stronger than expected in the past month, which might be enough for the BoC to shift to a slightly more optimistic stance. However, policymakers are also likely concerned about crude oil price swings and how the Omicron variant might affect growth and trade.
The Consumer Price Index (CPI) report measures the change in the average price basket of goods and services by consumers, which can be anything from food, transportation and medical care. Changes in the CPI are used to assess price changes associated with living in the country. It is one of the most used statistics to identify periods of inflation or deflation.
The USD is releasing its monthly inflation figures this week, and we're expected to see slightly slower price pressures as headline CPI is likely to dip from 0.9% to 0.7% while the core figure is probably going to fall from 0.6% to 0.5%. Weaker than expected results could undermine policy tightening expectations, especially with the Omicron variant forcing policymakers to wait and see before making any big decisions.
Hey everyone! Welcome to this week's forex forecast for the week ending December 10th, 2021. I'm TraderBart with A1 Trading, and this week I'll be looking at USDCAD, EURAUD, GBPJPY & XAUUSD.
Price is now consolidating at the resistance of the previous ascending triangle pattern at 1.283. Over the next week, lookout for a potential break of this level, this opens up price to levels such as 1.293 and 1.31. If price fails to break this level, it's likely it will continue acting as resistance and instead, we could see a bearish run back down towards 1.258.
Price is now just below a short-term key horizontal level 1.618 following the break of the ascending triangle and horizontal level 1.59. Over the next week, look out for a potential break above 1.618 which suggests a bullish run to follow, opening price up to 1.635 and potentially new higher highs.
Looking at G/J in the long-run, price is definitely failing to make a new trend and break yearly highs at around 156.0-158.0. Price is currently making its fourth recent touch of 149.0 and over the next couple of weeks, a break below this level suggests potential long-term bearishness towards 129.0. If price reverses and instead stays above, it's also potential we could still see new highs being made. This is a long-term view so would need to look over the chart for months.
Gold is continuing to stay above the long-term level 1765 and no major moves were made over the past week. Price did reject 1800 which suggests we could be seeing potential bearish moves coming up. A break below 1765 opens up price to levels such as 1725 and 1675. If price continues to stay above 1765 over the next week, it's likely we could be seeing price coming up to retest previous levels such as 1800 and 1835.
This morning, the US reported their monthly Non-Farm Employment Change and Unemployment Rate which came in at a miss of only 210K jobs added along with a decrease in unemployment rate by 0.3% or a 4.2% unemployment rate.
Although the currency saw some downside initially, it might still be relatively good news as the USD could see some upside. This is because jobs are still being added, although not by as much as expected, and the unemployment rate for the US is the lowest it has been since May of 2020. This report always seems to add lots of volatility at first, but it seems like investors could take this news pretty well. If today we don't see much upside, I still think that the dollar has the potential to keep rising with the tapering discussion becoming for present along with the steady drop in unemployment.
GU just broke under a long term channel on the 1D chart indicating a further move to the downside. If price can close under this channel, we could find ourselves looking at a momentous short setup. Even if price comes back up inside the channel, it looks like there is weaker buying volume with each 1D candle, and could be a chance to hop in the short.
UC dipped back into the wedge, but quickly recovered and shows some hard rejection from the day's lows. A test at resistance around 1.28920 still looks probable on the 1D chart.
USDCHF came down to the 200 DMA today after a miss in NFP expectations in the US although unemployment rate dropped by .3%. The pair has help itself on that moving average for the past couple days and has shown some rejection from that level suggesting it may bounce back up to resistance around .92175.