USD Weakens For Fourth Straight Day While Bitcoin Breaks $40,000

Okay, very good morning to everyone. Hope you're doing well. It's Wednesday, 19th of May, uh, still nursing a bit of a cough at the moment, so I'm going to try and whip through this briefing as efficiently as I can. A couple things to get you up to speed on. Firstly, starting off with the close on Wall Street, fairly uniform closes down around 0.7 to 0.8% across the major 3 indices. 9 of the main 11 S&P 500 sectors finished lower. The mega-cap tech stocks saw a bit of a turn. We saw some late selling pressure on Wall Street, and that essentially has translated through to generally negative trade in Asia, and US index futures seem lower this morning. We'll have a quick chat about those charts in a moment. One of the underperforming sectors was that of oil. We did see some fluctuation in oil prices yesterday From a technical perspective, when we're looking on the daily chart, obviously we're at a really big significant multi-year area of resistance. So a bit of a pullback on the initial run-up and test at those levels, but that's still to be watched quite closely. But as you can see here on a slightly more zoomed-in fashion, fairly range-bound in that respect with that upside resistance in play. But you can see some quite extreme downside pressure that came late in the afternoon yesterday and was still a little bit heavy this morning, down $0.69 for the time being. One of the main things that people are looking at is some kind of flip-flop comments to a certain degree from Russia. Russian envoy dials back talk of a major breakthrough on Iran deal. So there was some kind of semi-cryptic tweets that were made that kind of felt like there was an imminent restoration of the 2015 nuclear accord and deal with Iran, and a breakthrough was forthcoming. There's some talk about an imminent announcement, i.e., happening today in Vienna, and that was what was causing some of the volatility. But just to be clear, some of those comments have been walked back but did at the time trigger a bit of a slump in, in prices, and that did weigh consequently on some of the related energy names. Um, just having a look here, um, sorry, at the chart on, on oil. This is what I was talking about. So on the daily chart, that was that area of, of resistance we were looking at for Monday this week, and then that was that volatility here on the right-hand side, as you can see on extension on those wicks. But looking at equity markets, as I said, lower close on Wall Street, a bit of late selling pressure. I'm just going to look at the NASDAQ 100 here, and that area still in play that we've been looking at. And, and despite kind of rough resistance, it's still been an area or zone, if you like, with that double bottom from early May that's restricted any price gains despite the kind of seesaw price movement. And where we're at at the moment essentially is just a, a fib drawn from this March, early March low, uh, up to the, to the recent highs that we've printed in the NASDAQ, uh, going back to around late April. And we're about essentially a 50% retracement of that move as we trade at the moment. So a bit of near-term response to that for the time being in the NASDAQ. Um, however, going lower down, next points here of support, I think, at 13,070, the 13,000 level, and then the eventual low that was seen towards the, the back end of, of last week, which was down at 12,915. If we continue to trade somewhat heavy, again, the major kind of themes here that are weighing on equities is mainly predominantly down to inflation. Uh, there was the Bank of America kind of fund manager survey out yesterday, and unsurprisingly, inflation is the main concern that people have at the moment. S&P-wise, not too interesting right now, I'd say. Again, we've responded quite nicely yesterday to the level we're looking at, at the R1 and the previous high, and we've just kind of drifted south since that point in time. On a daily chart, just wait for it to load up here. Again, we're just a bit of a reversal of the, the initial bounce and firm bounce that we saw during the really second half of last week. So these, these US equity indices, I think they feel susceptible again to a little bit of further downside. The market's kind of wrestling at the moment this idea about kind of on the rotational side, the balancing of the Fed and what they're going to be judging upon their decision-making on the, on their view on inflation. So I don't really see very bearish developments. However, potentiality for, for some further weight to come in would kind of be my, my base case view. In the FX market, the dollar continued to remain weak. It dropped for a fourth straight session yesterday. So from a currency perspective, we continue to see that support then other dollar-based pairs. So EURUSD continues to move higher at the moment. You can see the Asia-Pacific session, uh, coming to late hours into European open. We've just managed to break higher once again. Looking on a slightly longer time frame, this is on a daily chart. As you can see here, going back to the Feb 25th high is what we're testing at the moment. And so initial key technical test here at these levels on the upside, any breach above that, I'd be looking at the 1.23 handle If I just mark that up, you've got those highs that we're seeing back on the 8th of Jan, and then also mid-DEC, and then that would see us also inside of the year-to-date high in the euro, up at 1.2368. So quite an incredible turnaround really for the euro since the doldrums of price we were trading literally not that long ago, the end of March, when we were close to 1.17 handle. You know, we're now having conversations about trading back up at 1.24 handle. So, you know, irrespective of equity fears about how to handle this inflation situation, the rest of the market seems fairly assured at this point that the Fed are going to remain accommodative. And that's what's leading to that dollar weakness despite any increased inflation concerns. And, and largely that is reflected in the yield movement as well, because T-notes down here in the bottom right have been very quiet as well, which would fit in step with that. And so hence the reason why, although there could be some further material downside in US equities, I still think we, we eventually encounter some, some decent support lower down if that were the case. Gold, um, consolidation really after the breakout that we had at the beginning of the week. I don't think that's again too much of a surprise because we're up at that key 75 level on the test. Definitely worth watching that today. I mean, yesterday You can see the range was respected, but very early in the European open here at 7 AM right now as I'm filming this, but right up testing any break of that. You've got the R1 and the previous day's high sat at 76. But on the daily chart, obviously this opens up the prospects of really next stop would be psychological more than anything, up at the 1900 handle. And certainly the way it's been shaping up, that wouldn't be too surprising, I think, to materialize on, on the day session. Okay, quick look at some of the other headlines. Something I'm sure that you've, you've already seen is Bitcoin. Bitcoin chartists see the route worsening with $40,000 in focus. Well, you can forget $40,000 because we're already through it. I mean, that's how quickly this asset moves. The world changes in the blink of an eye, and, and here we are. I know this is a little bit— I'll try and drag the annotations into shot. But if you just go through the year-to-date journey, it's been an incredibly interesting one actually for Bitcoin price action. We initially hit first thing, first week pretty much of the year, all-time highs. The breakthrough really confirmation of the run through $20,000, we went to $40,000 very rapid fire, and people just bailing on that on a quite aggressive pullback once we hit that target. We broke through that on confirmation of almost the validity of, of Bitcoin in a more mainstream sense after Tesla said it would buy Bitcoin and accept it as payment. We kind of went then all the way up until we had some issues around the Bitcoin kind of mining blackout that happened when we hit the peak at around $65,000. And then Elon Musk has been on a bit of a death wish since that point. And he and his increased frequency of tweeting from Tesla stop stopping Bitcoin payments denying rumors of selling any Bitcoin. And then we've had that latest 13F filing from the kind of infamous short-positioned investor Michael Burry, who's— who has disclosed a fairly sizable half a billion position he's been accumulating over Q1 in, in a Tesla short. And, and so we're through $40K, at least for the moment. We're trading just under there at the moment. We've printed in the futures $38,610. And so from a technical perspective, certainly today's close is going to be interesting. Do we, do we not finish above or below $40K? If we start to go below $40K, I think it starts to get quite, quite, uh, heavy in trade, or the potential for that. You've got those previous highs on the 29th of Jan and 4th of Feb, that's down at $36,740. You've then got $35K $30K, which was also that low on the 29th of June, and then that eventual kind of area of double bottom from late Jan this year, $27,000. Seems like, um, fantastically large moves I'm talking about here, from going from $40K to $27K, but we are talking about a product that can move in that type of range. And I did tweet earlier a backward-looking study of data of— on pullbacks in terms of what the average is over the lifetime of Bitcoin. And one of the, the findings of that analysis is basically Bitcoin tends to retrace to a certain margin of around, basically from highs, of 30 to 40%, and generally finds a floor and recovers. And if it doesn't, it generally falls more like to the 75+ type region, which obviously would put us way back lower than back towards the $20K mark, um, in that respect from the all-time highs we were trading just literally just over a month ago. Um, so yeah, quite interesting overnight, a little bit of extra weight coming in. A lot of people talking about, um, the People's Bank of China conveyed a statement reiterating that digital tokens cannot be used as a form of payment as a trigger point for some of the selling pressure that came into BTC, uh, in the overnight session. Um, final piece of news as well to be aware of is we did have the— or a couple of other pieces, 3 more actually, to quickly get up to speed on. And we did have the API oil inventories last night. They came in at a 620,000 headline, slightly less than anticipated, 1.7 million, crushing 53,000 draw gasoline draw, 2.837 million. Not too much in a way of any real reaction to that, to be quite honest. Elsewhere on the infrastructure bill side in America, it's got a little bit quiet on that stimulus side. Just really an update of where we're at at the moment because US Republican lawmakers met yesterday, um, and they were kind of trying to find some sort of common ground. Because if you, if you remember, the counter proposal from the Republicans stood at $568 billion back in April, and obviously Biden's been trying to gun for $2.3 trillion. And so they're poles apart at the moment. A bipartisan group of senators have discussed a package of around $1 trillion. The point being is the meeting yesterday, there was no new forthcoming plan or figure being tabled. So we're still at a bit of a status quo at the moment on that side of things. And then on the, the vaccine virus side, um, it's positive news. And this coming out of a study that's found that Oxford-AstraZeneca COVID-19 vaccine works well as a third booster shot despite concerns the immune system might fight off the adenovirus used as a delivery mechanism. And this obviously is really important as we go through in time because of the general mutation evolution of COVID as what we're seeing with the Indian variant. You know, do these booster shots— are they effective in counteracting that? And actually, according to one unnamed disclosed source here. I think it was here they talked about it. Another person with the— familiar with the trial results described the antibody reactions to the booster shot as unbelievable and strong enough to blow through almost any variant. Now that sounds— obviously you've got to wait for the data to back that type of bold commentary. But if it could blow through any variant as a booster shot, this would be hugely positive going forward. Not so much for markets right now, but from a COVID humanitarian crisis point of view, absolutely, because this, this COVID or coronavirus will remain apparent or present for a long period of time, and controlling variant outbreaks will be particularly key, as what we're seeing with the Indian variant at the moment. Okay, quick look at the calendar for today. We've already had the UK CPI come out, and you know, you guys have probably glimpsed the chart of the pound. Absolutely no reaction here in sterling, and sterling's just really holding pattern around 142 at the moment after that big run-up that we've discussed throughout the week. So still just short of the year-to-date high, seeing just about 50 pips or so above the current price. Otherwise, in terms of the UK CPI numbers, just for clarity's sake, 1.5% versus expected 1.4% year on year. That's against a previous of 0.7%, so quite a meaningful pickup for UK inflation, but absolutely as you would expect. Don't forget, these are April readings, so we're now comparing prices from the lows of the pandemic from last year, in addition to a 9% rise in household energy bills in April. And so an uptick of that magnitude is not untoward, I would say. So no, no great cause for concern at this point. Um, otherwise, back to the calendar. What else have we got today? Um, you've got the eurozone CPI, but these are final readings, so not expecting too much from that. The US session is particularly quiet, no major economic data. For CAD though, you do get inflation numbers for April. Now you've got the, uh, DOE infantry numbers to follow on from the APIs last night. Then you get the FOMC minutes. Again, not expecting a great deal from the minutes, to be quite honest. We already had the press conference with the meeting and so forth. So yeah, the comments out of the Fed— I mean, we had the Vice Chair speak last night and told lawmakers that a strong economic recovery is underway but is not yet complete. So they just continue to follow that party line for the moment. I don't think we're going to get too much in the way of any new information about what constitutes transitory and things like that beyond what we really already know at this point. Speaker-wise, um, Fed's or ECB's Panetta speaking throughout the morning, but more on payments systems. Um, you've then got Fed's Bullard and Bostic, the latter at 4:35. Bostic is a voter on the FOMC, so one just to be mindful of after the European cash close. Fixed income auctions coming out the UK, Bund auction Germany, $27 billion, a 20-year bond auction out the US. And some more US retailers to follow the really stellar performance we saw from Walmart, Home Depot, Macy's yesterday, Lowe's, Target seen pre-market today. And happy birthday, Buddha! And on that note, I'll let you guys get on with your, your day, and I will see you in the Amplify Live chat room. All right, thanks very much, guys. Take care.