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- The US Dollar Again Increases in Value as a Fed Pivot Fades
The US Dollar Again Increases in Value as a Fed Pivot Fades
21 November 2022
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Michalis Efthymiou
Traders over the weekend were mainly focused on 2 stories developing within the financial trading markets. The first was definitely the prices of Crude and Brent Oil which significantly declined, Crude Oil prices declined to below $80 per barrel for the first time since the 30th September 2022. This is something we will look at in more detail below.
US Dollar and US Stocks
The second story was the Dollar again increasing in value. This morning the price of the US Dollar Index increased by 0.54% and the Dollar has increased against all main currencies. The currency originally declined after lower than expected inflation figures, which resulted in market’s pricing in a 50 basis point hike, not 75 bps. However, over the past week, the Fed has reassured markets that the regulator will remain restrictive and that inflation is still too high. The committee also confirmed they would not consider a “break” in hikes nor pivot any time soon.
EUR/USD 1-Hour Chart on November 21st
Tomorrow will be an important day for the US Dollar and also US Stocks. The Federal Reserve has over 4 speeches scheduled for members of the FOMC, which determine the next rate hike. This includes speeches from Mester, George and Bullard, any comments or signals provided can influence the price movement. The price of US Indices has so far maintained previous gains, regardless of the appreciating Dollar. Only some indices, such as the NASDAQ, have formed a small retracement.
Cryptocurrencies
This morning, cryptocurrency traders are still fixed on the price action of the market. The price of Bitcoin this morning is again declining and has dropped below $16,000 for the first time since November 2020. The market share in Bitcoin has slightly increased but the overall market capitalization has continued to decline. The price of Bitcoin has declined by 1.70% and Ethereum by 1.65% during this morning’s Asian Session.
Crude Oil
The price of Crude Oil has seen a considerable decline in price which may be negative for buyers but is positive for the overall economic condition, inflation, stocks and all citizens of course. Traders are evaluating the decline and considering whether OPEC will allow the price to decline to $70. OPEC have repeatedly made public their objective of keeping oil prices at $80 minimum.
The price this morning is currently moving within a retracement and has formed a double top. If the double top does not gain momentum to a “higher high”, it would be a further indication of a downward trend. The price is also currently moving below most moving averages, which also confirms the downward trend. Though traders should monitor, the price does not spike upwards to change the current valid indications.
Crude Oil 1-Hour Chart on November 21st
The price of Crude Oil is mainly being influenced by news coming out of China. China has seen an increase in the number of COVID-19 cases and also has seen their first death in 6-months. Some cities have already advised citizens to try to remain indoors, but investors fear the situation may develop to another city-wide lockdown. Lockdowns and restrictions are known to significantly lower demand, especially when in China, which is the largest importer.
The news from China is the main reason for the decline, but the price is also pressured by the rise in the US Dollar and general high monetary policy. However, investors should be cautious of the OPEC meeting in the first week of December, which may aim to upset the trend.
Investors will specifically be interested to see if OPEC again chooses to cut their production targets. This would lower supply and potentially support prices once again. Lastly, investors would be interested to hear the cartel’s demand expectations for the next quarter.
Summary:
- Crude oil prices declined to below $80 per barrel for the first time since the 30th September 2022.
- Chinese data pressures the price of crude oil as does an appreciating US Dollar.
- The US Dollar Index again increases in value as a Fed pivot fades, but stocks hold onto gains.
- Bitcoin drops below $16,000 for the first time since November 2020.
IMPORTANT NOTICE: Any news, opinions, research, analyses, prices or other information contained in this article are provided as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and therefore, it is not subject to any prohibition on dealing ahead of dissemination. Past performance is not an indication of possible future performance. Any action you take upon the information in this article is strictly at your own risk, and we will not be liable for any losses and damages in connection with the use of this article.
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