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Analysis

Lehman moment for the crypto world

Gold chart 11 09

Gold – After failing to close below the range low (1666.84) yesterday the market took off like a rocket and hit my upside target of 1690.  The rally was much stronger than I anticipated as the FTX liquidity crunch triggered fears of a crypto meltdown. More on this below. The fear of a Lehman moment in the crypto world helped gold to close above the daily bear channel high. This together with the triple bottom indicates that gold is bottoming and is more likely to break above the 1729.76 resistance than to break the 1614.72 support.

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The reason for the rally wasn’t in the treasury yield or USD moves but was more likely induced by a panic in the crypto space. FTX, one of the biggest crypto exchanges has seen a massive “bank run” as investors have withdrawn billions of dollars worth of crypto assets from FTX in November alone. WSJ reports that cryptocurrency companies and traders pulled money from FTX over concerns about the exchange’s financial stability.

This created a liquidity crunch and now crypto market operators fear contagion. All this has led to a takeover of FTX by Binance. According to Reuters traders and investors pulled about six billion dollars before Binance had to take over the FTX. Presumably to stop a contagion that would have created Lehman type of risk in the crypto space. As a result, the FTT token (FTX’s token) lost 72% of its value yesterday and some more today. This has most likely created massive inflows into gold products (CFDs, ETFs, futures and options).

Remember: This week’s most important risk event is the US CPI release tomorrow! The market swings are likely to be sizeable once again. Be ready to trade and top up your account if necessary!

USOIL chart 11 09

USOIL traded down to the bull channel low after hitting my T1 (see here). Now price is fluctuating right at the channel low but yesterday’s strong down move worries me a bit. There’s a risk that such a strong increase in downside volatility might have scared those considering buying the channel low. This could lead to more price fluctuation before the market is ready to rally. In order for the market to remain bullish it has to attract buyers above the 86.90 – 87.60 range. This is where we have the channel low and a horizontal support level from the beginning of the month. If this support range breaks the market is likely to trade down to 86.30 or so.

DAX chart 11 09

DAX is trading near a long-term channel high but is still trending higher in the 1h timeframe. For the bears to take over the bulls would need to stop creating higher lows and allow the bears to push the index below them. The nearest minor supports are at 13510 and 13561. Intraday traders might want to focus on this hourly trend. Dax uptrend remains in force above the 13561 level. If the market breaks the 13561 support decisively we have a breakout from the hourly bull channel.

 The Next Main Risk Events

  • USD FOMC Member Waller Speaks
  • CHF Gov Board Member Maechler Speaks
  • USD CPI
  • USD Unemployment Claims
  • CAD BOC Gov Macklem Speaks
  • USD FOMC Member Mester Speaks
  • USD FOMC Member George Speaks

For more information and details see the TIOmarkets economic calendar here

Trade Safe!

Janne Muta
Chief Market Analyst
TIOmarkets.com

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