It’s shaping up to be a risk-off day as the storm clouds are weighing on market sentiment again after a bit of a breather in the first two days this week. European equities are down heavily across the board and we’re now seeing key indices start to hit their lowest levels since March in trading today.

The DAX is down 2.3%, CAC 40 down 1.9%, and FTSE MIB down 2.3% and are all looking poised for a potential drop towards their respective March lows:

The losses aren’t contained to European indices as US futures are also enduring a torrid time so far on the day. The S&P 500 gained by ~90 points in trading yesterday but futures are pointing to a ~70 points decline, or down 1.9%, at the moment.

Higher and more persistent inflation, central bank tightening and a deteriorating economic outlook continue to present a major challenge to the market landscape for the time being. The worst part? It doesn’t look like those dispositions will change any time soon.

This article was written by Justin Low at www.forexlive.com.

Bitcoin
rallied from $20.5K to $21.6K during the day on Tuesday but later reversed to
decline and went back on Wednesday morning. Ether corrected deeply, losing 4.4%
over the last 24 hours. The top ten altcoins showed mixed dynamics, ranging
from a 6.5% decline (Solana) to a 3.6% gain (Dogecoin).

 

Total crypto
market capitalisation, according to CoinMarketCap, declined 1.9% to $900bn.
Bitcoin’s dominance index dropped 0.2 points to 43.5%. The Cryptocurrency Fear
and Greed Index is up 2 points to 11 by Wednesday and remains in a state of
“extreme fear”.

 

After a
strong move down last week and a retreat from the extremes on Sunday, BTCUSD
failed to gain ground with buyers and remained pegged at the round level of
$20K.

 

Bitcoin’s
recent drop below $20K triggered a new wave of deleveraging and liquidations
that affected miners and long-term investors, Glassnode claims.

 

Ethereum
co-founder Vitalik Buterin criticised the popular Stock-to-Flow model for
predicting bitcoin exchange rates, saying it is wrong and only gives people
unwarranted confidence in the predetermination of exchange rate movements.

Investors
are buying bitcoin despite the market’s decline. According to CoinShares,
crypto funds saw capital outflows of $39m last week, while there were inflows
of $28m into BTC.

 

Investors
have, in our view, false confidence in their strengths. It is commonly believed
in the media that retail investors were the first to buy out the 2020 bottom
and who managed to beat the funds in 2021 using the r/wallstreetbets forum.

 

But then the
Fed and many other central banks, along with governments, were on the buyers’
side, conducting unprecedented policy easing and handing out monetary stimulus.
Now they are doing the opposite: rolling back support programmes and raising
rates at the highest rate in decades.

 

Retail
shoppers risk being caught swimming against the financial current, which is
hardly a successful strategy. History suggests that enthusiasts risk running out
of steam soon, being left with depreciating assets, and losing confidence for
years that equity or cryptocurrency markets are a worthwhile place for their
money

 

This article was written by FxPro’s Senior Market Analyst Alex
Kuptsikevich.

This article was written by FxPro FXPro at www.forexlive.com.

• The new tool should be different as circumstances are not the same
• It will be different from PEPP, APP or OMT programmes

The OMT was designed to cater more towards a crisis of solvency a decade ago and that isn’t exactly the main challenge that the ECB is facing right now. It is arguably the tool that has the closest set of characteristics desired by the central bank to counter fragmentation but it offers up a lot of political challenges as well. Don’t expect Italy to sign up for any of that.

Ideally, the new tool should come with the right kind of economic components offered up from the OMT but without the political stipulations. It is going to be hard to do that while having to navigate backlash from its own members, especially Germany. So, we’ll have to see how creative policymakers can be in the weeks/months ahead.

This article was written by Justin Low at www.forexlive.com.

The speed bump from jawboning by Japanese officials and market concern about a BOJ policy pivot slowed down the USD/JPY surge in the past week but now that we’ve cleared the latter, it is looking like buyers are taking charge again. The pair is now running up to 135.96, its highest since October 1998.

The technical dominoes continue to fall by every 500 pips for USD/JPY since breaking the 120.00 mark and there is little resistance from hereon until we get towards 140.00 potentially. That will be the next big psychological level as to whether we might see firmer intervention by Japanese officials.

Otherwise, the continued policy divergence and lack of buying conviction in bonds amid continued central bank tightening and surging inflation will just continue to present headwinds for the Japanese yen.

Another pair which I have been rather fond of since last week has been CHF/JPY and it is up for a fourth consecutive day, trading to 140.40 – up 500 pips since the SNB policy pivot.

This article was written by Justin Low at www.forexlive.com.

The German network regulator reiterates its call to save as much gas as possible as the country faces a shortage emergency amid a cut in supplies from Russia. The country is turning to coal-fired power plants again to ensure electricity continuity and is a serious blow to ambitions reduce coal usage by the turn of the decade.

It’s not just Germany that is being affected by this at the moment. Italy, Austria, and the Netherlands are all facing a similar predicament.

This article was written by Justin Low at www.forexlive.com.

• Prior 26

UK industrial order books slip in June but the good news is that price expectations also eased to a 9-month low. It is a bit contrasting with rising consumer inflation but CBI notes that this could be „the first signs that weaker activity is beginning to slow the pace of price increases in the sector“.

This article was written by Justin Low at www.forexlive.com.

Equities are reflecting a more risk-on mood so far on the day and that is translating to a softer dollar in European morning trade. The greenback and the yen are the two weakest performers, as European stocks are seeing solid gains on the session alongside US futures. Here’s a snapshot of the equities space before we get to some dollar charts:

• Eurostoxx +1.3%
• Germany DAX +1.1%
• France CAC 40 +1.7%
• UK FTSE +0.8%
• S&P 500 futures +1.9%*
• Nasdaq futures +2.0%*
• Dow futures +1.7%*

*relative to Friday levels

The euro is among the better performers so far with EUR/USD climbing from 1.0520 to 1.0580 on the session, helped by continued hawkish remarks by ECB policymakers.

The high last week near 1.0600 will offer up some minor resistance with the daily close one to watch as to whether buyers can keep a hold above the 50.0 Fib retracement level at 1.0566. For now, the near-term bias is more bullish upon the push above the 200-hour moving average (blue line) earlier in the day.

Meanwhile, GBP/USD has also managed to climb above 1.2300 and is up 0.5% on the day currently:

The 1.2400 level will still offer sterner resistance with traders continuing to try and sort out the divergence story in the pair.

Elsewhere, USD/CAD is pinned near the lows and is down 0.5% to 1.2910 amid a double-top pattern being formed just above 1.3050:

The better risk appetite and higher oil prices (WTI crude up 2% to $111.85) are both also contributing to a stronger loonie on the day.

Looking at other commodity currencies, the gains are more measured with AUD/USD up 0.4% to 0.6975 and still keeping below 0.7000 and its 200-hour moving average at 0.6996. NZD/USD is up 0.3% to 0.6355 with the Friday high at 0.6395 keeping a lid on any upside push for the time being.

This article was written by Justin Low at www.forexlive.com.

Well, market odds have already priced in at least 75 bps for both July and September combined. It is now down to the ECB to deliver on that as such. ECB policymaker Kažimír is also out saying that negative rates „should be a thing of history“ by September.

This article was written by Justin Low at www.forexlive.com.

Headlines:

• Reminder: It is a US holiday today
• Swiss franc continues to pace its advance after SNB policy pivot
• ECB’s Kazaks says would support 25 bps hike in July, 50 bps hike in September
• ECB’s Kazaks: We do not target specific spread levels
• ECB’s Centeno: There is a great determination to deal with fragmentation risk
• BOJ’s Kuroda: Important for exchange rate to move stably reflecting economic fundamentals
• Germany May PPI +1.6% vs +1.5% m/m expected
• SNB total sight deposits w.e. 17 June CHF 751.8 bn vs CHF 753.1 bn prior

Markets:

• AUD and NZD lead, USD lags on the day
• European equities higher; S&P 500 futures up 0.8%
• Gold down 0.1% to $1,837.62
• WTI crude up 0.7% to $110.30
• Bitcoin up 1.6% to $20,875

With it being a long weekend in the US, markets are seeing less appetite to stray away from Friday’s bit-part relief.

Equities are trading a little higher after a dreadful escapade last week, with European indices holding decent gains with US futures also ticking higher. The dollar is seeing a bit of a retreat across the board as such amid the calmer risk tones.

EUR/USD was steady during the session around 1.0510-30 after advancing in Asia from its opening gap lower around 1.0475. Meanwhile, GBP/USD also recovered some ground in a push from 1.2230 to test its 200-hour moving average at 1.2281.

USD/JPY was little changed but retreated from 135.10 to 134.80-90 levels as the yen keeps pace with the dollar at the back of the group.

Elsewhere, AUD/USD and NZD/USD are both up 0.9% on the day to 0.6990 and 0.6360 respectively while the franc continues to push for gains after the SNB policy pivot last week. USD/CHF is down 0.5% to 0.9650 with the low earlier touching 0.9620.

It’s going to be a quiet one in the session ahead with Wall Street out for the day but there will be a couple of ECB and Fed speakers to keep things moving along as the new week gets underway.

This article was written by Justin Low at www.forexlive.com.

Steady as she goes for the Swiss franc as it continues to creep higher after the SNB policy pivot last week.

The downside push in USD/CHF ran into trendline support before stalling at the end of last week and that is the key area being tested once again currently. That said, the double-top pattern just above 1.0000 is an ominous technical signal when you couple it with the change in the narrative at the SNB.

A push below the trendline support will bring into focus the late May and early June lows around 0.9545-56 next.

Elsewhere, EUR/CHF is also down 0.4% to 1.0135 as the pair continues to look towards parity. Meanwhile, CHF/JPY is making a run for it above 140.00 – touching fresh highs since 1980 upon the break higher from the end of last week.

This article was written by Justin Low at www.forexlive.com.