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Bitcoin traded lower yesterday as gold rallied. It was our view (four days ago) that “it’s likely that Bitcoin stays medium-term bearish below last week’s high. A rally above 46000 looks unlikely. If Russia invades Ukraine further the price of gold is likely to stay bid and could attract allocations from Bitcoin. This inverted relationship has existed in the past and a major war in the heart of Europe could trigger more buying in gold”. Reports of artillery fire near Donetsk airport yesterday rallied gold and pushed bitcoin lower. Today’s macroeconomic news releases include Canadian retail sales and home sales data from the US. By reading further you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.

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Bitcoin chart 2h 02 18 1

BTCUSD traded lower yesterday as gold rallied. We said (here) that “it’s likely that Bitcoin stays medium-term bearish below last week’s high. A rally above 46000 looks unlikely. If Russia invades Ukraine further the price of gold is likely to stay bid and could attract allocations from Bitcoin. This inverted relationship has existed in the past and a major war in the heart of Europe could trigger more buying in gold. The 41141 support is now broken and the market is likely to stay bearish. BTCUSD is now trading below the 41141 support but above a bear channel low. The nearest key support and resistance levels are 38946, 41141, 43468 and 44810.

USNGAS chart 2h 02 18

USNGAS is correcting lower in a 2h bear channel. If the market cannot break out from this channel it soon closes below the 4.336 support. This would be likely to move the market to the 4.163 support and maybe even deeper (to 3.944) if the level doesn’t hold. This is yet another war sensitive market as it’s feared that, should there be sanctions,  Russia could use the energy as a weapon against the EU. About 30% of Europe’s natural gas is supplied by Russian companies and should there be any reduction in the quantity supplied the demand being rather fixed the price of natural gas would soon be sky-high. This makes short positions in natural gas a high-risk play and it’d be advisable to use only very small exposure on the short side. The gap up risk due to the situation in Ukraine is considerable. A break above the channel would be likely to move the market at least to 4.50, perhaps even to levels near yesterday’s high.

DAX chart 2h 02 18

DAX is trending lower in the 1h timeframe after trading down to 15128 yesterday. So far the index has failed to penetrate the high of a bearish trend channel. The next key support level is yesterday’s low (15128). If the crisis in Ukraine continues to produce negative newsflow it’s quite likely that the low gets penetrated. Then the next key support level at 15008 could come into play. Alternatively, a higher low above 15128 would increase the likelihood of the market breaking out of the bearish channel. A sustained breakout from the bear channel would be likely to take the index to the 15446 – 15496 range.

Gold 8h chart 02 18 1

Gold rallied higher after news reports of artillery shelling around the Donetsk airport yesterday. We said yesterday that “Now gold is once again testing a weekly resistance level at 1877.09 and if there’s no real progress on the ground the price of gold is likely to rally beyond this high sooner or later”. This time it was sooner rather than later and the green team took out all the sell stops that the red team had placed (it’s no secret that people tend to place their stops right behind key support and resistance levels). Stops being triggered together with buying prompted by war news fuelled the rally. Now gold has retraced a bit and the nearest key support is at the 1877.09 – 1879.45 range while yesterday’s high at 1902.45 is naturally the nearest key resistance level to focus on. If the level is penetrated the next key resistance level at 1916.55 is the next likely goal for the bulls.

Macro Drivers for the USD As the most followed, invested and traded markets for risky assets are priced in the USD it is helpful to understand what macroeconomic factors impact the other side of the equation, the USD. Whether we are trading EURUSD, XAUUSD or US equity CFDs the factors impacting the dollar, the nominator in the equation, have a significant role in the formation of all medium to long-term price action. The following table summarises the most important fundamentals.

The Federal ReserveFed could be hiking rates significantly this year and even raise the rates by 50 basis points per FOMC meeting (instead of the normal 0.25%). The Fed believes that rates could rise significantly before hurting employment.
StimulusThe US lawmakers have authorised approximately five trillion dollars of economic stimulus since the beginning of the pandemic. Now, US Congress has passed a $1.2 trillion infrastructure spending plan.
YieldsIn Q3 and Q4 2021, the benchmark 10-year US Treasury yield ranged between 1.1720% and 1.6830%. The hottest inflation readings since 1982 have pushed the 10 yr. yield higher as bonds have been selling off.
EmploymentThe January non-farm payrolls increased by 467K while the analysts had expected only 110K new jobs. Average hourly earnings were confirmed at a much better level than predicted (0.7%, 0.5% expected).
InflationThe annual headline inflation reading for January  came in at 7.5% (7% prior). This was the highest CPI print in 40 years. The core CPI (all items less food and energy) was confirmed at 6.0% (5.5% previous).

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 The Next Main Risk Events

  • CAD  – Retail Sales m/m
  • USD – FOMC Member Brainard Speaks
  • USD – FOMC Member Waller Speaks
  • EUR – French Flash Services PMI
  • EUR – German Flash Manufacturing PMI
  • EUR – German Flash Services PMI
  • GBP – Flash Manufacturing PMI
  • GBP – Flash Services PMI

For more information and details see the TIOmarkets economic calendar here

 Market News & Facts 

  • UK Retail Sales m/m 1.9% (1.1% expected)
  • US Philly Fed Manufacturing Index 16.0 (19.9 expected)
  • UK CPI 5.5%, (5.4% expected)
  • Canada CPI 0.9% (0.6% expected)
  • US Retail Sales 3.8% (2.1% expected)
  • US  Industrial Production m/m 1.4% (0.4% expected)
  • Only 10K Russian troops withdrawn from the Ukraine border
  • ZEW Economic Sentiment (48.6, 54.4 expected)
  • German ZEW Economic Sentiment (54.3, 55.1 expected)
  • US PPI (1.0%, 0.5% expected)
  • Empire State Manufacturing Index (3.1, 11.9 expected)
  • No indication yet that Putin has decided to invade Ukraine further
  • UK Prelim GDP q/q (1.0%, 1.1% expected)
  • US Prelim UoM Consumer Sentiment (61.7, 67.2 expected)
  • US Wholesale Inventories 2.2% vs 1.7% prior
  • US Average Hourly Earnings m/m (0.7%, 0.5% expected)
  • US Non-Farm Employment Change (467K, 110K expected)

Trade Safe!

Janne Muta
Chief Market Analyst
TIOmarkets.com

Open a VIP Black account now at TIOmarkets.com. We want you to be able to exploit trading opportunities in financial markets with 0 commission and tight spreads. Take advantage of the best trading account in the industry: Tiomarkets VIP Black. For more details on this truly exceptional offering see here. For more analysis and commentary, visit our YouTube channel where you can find market commentary videos to support your learning and growth as a trader. 

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