Yesterday saw only 2 major economic events influencing the market, allowing traders to concentrate on price action. Most instruments, including exchanges and commodities, formed clear intraday price movements. The highest volatility was experienced on Bitcoin and Crude Oil. Regarding fundamental analysis, investors continued to monitor economic releases influencing the UK and EU.
Bitcoin
The price of Bitcoin dropped to a 10-day low after investors returned to the stock market as the liquidity crisis cooled in investors’ minds. In addition, investors may have been partially reacting to the lawsuit against Binance, the world’s largest cryptocurrency exchange. The price of Bitcoin declined sharply by 5.50% before returning closer to the previous support level.
According to the US Futures Trading Commission, the exchange did not comply with multiple regulations and offered US citizens cryptocurrency derivatives. US regulators do not permit certain derivatives, specifically on cryptocurrencies. Binance responded by advising "significant investments" were made to ensure that US users were not active on the platform, including blocking American citizens or residents and anyone with a US mobile number. According to US regulators, this was inadequate, and more should have been done.
The price of Bitcoin is currently moving within a horizontal price range which is normal after a sharp decline. Investors can use bullish and bearish breakout levels to stop further price movement possibly. However, traders should be cautious of breakouts that revert to the price range.
Crude Oil
The price of Crude Oil saw the largest bullish price movements across the market in terms of percent. The upward price movement also only experienced two minor retracements, which lasted no more than 90 minutes and measured just over 1%. For this reason, the upward trend was relatively straightforward for individuals looking to trade the trend and a nightmare for those looking for a reverting market.
What has driven the upward price movement? The influence was mainly from the supply side as the Russian Deputy Prime Minister advised the country would look to lower their production levels. Other OPEC+ members will likely implement similar procedures as the price significantly declines. In addition, the media on Sunday reported supply constraints coming from Iraq and Turkey, both major suppliers in the region.
Iraq was forced to stop the export of around 450,000 barrels through an export pipeline to the Turkish port of Ceyhan. This was due to a new disagreement between the two countries about the Kurdish minority. If the supply route opens, it can pressure the price back into a correction.
However, traders should also note that the level of demand is not pointing again towards high oil prices. Investor sentiment over the past 24 hours has improved, but the risk of the recession continues to remain high. One of the US’s most-watched investors and economists, Jeffrey Gundlach, has advised that the US will fall into a recession in months. According to Gundlach, a recession will start once the unemployment rate increases. In addition, the economic recovery in China, the world’s largest oil importer, is expected to be weaker than predicted.
GBP/USD
The Pound is growing over all competitors, including the Euro, the Yen, and the US Dollar. Yesterday the exchange rate increased in value by 0.42% and was up a further 0.27% during this morning’s Asian Session. The Pound over the past 24 hours was supported by the Bank of England Governor advising the UK banking sector was “resilient” and not a concern. According to the Governor, the main priority remains solely inflation.
The UK is struggling to fight inflation compared to its US and European counterparts. This morning reports confirm that UK grocery inflation hit a new high of 17.5%. The Bank of England Governor has advised he remains “optimistic” and believes inflation will decline “sharply within the summer months”. Mr. Bailey also confirms that the interest rate cycle may be nearing the end and will most likely remain below highs seen in the early 2000s.
The exchange price continued to obtain bullish signals from trend and momentum indicators. However, the price is also close to recent resistance levels at 1.23430 and longer-term resistance levels at 1.24470. Both levels have triggered a strong selloff over the past 6-months.
Summary:
- Mr. Bailey also confirms that the interest rate cycle may be nearing the end and will likely remain below highs in the early 2000s.
- BoE to concentrate on inflation as UK grocery inflation hit a new high of 17.5%.
- Crude Oil prices shot up after Iraq was forced to stop the export of around 450,000 barrels.
- Bitcoin declined as the US filed a lawsuit against the world’s largest cryptocurrency exchange.
