VOT Research Report
Market Analytics and Considerations
Welcome to VOT Forex Friday, a weekly presentation where we examine various currency trends mostly from a macro perspective while sprinkling in a little technical analysis.
We talk about the dollar, bitcoin, and cryptocurrencies in this week’s program, along with the euro, pound, and yen.
- US currency continues to decline
- GBP and EUR have little room for growth among macro issues.
- As FTX files for chapter 11, Bitcoin will suffer even more.
- Considering the upcoming week
The US currency continues to decline—for now
After a sharp decline on Thursday, the US dollar continued to decline as foreign currencies surged higher. The Fed may decide to scale back its aggressive rate hike policy in light of the US inflation figures, but inflation must still decline significantly before the Fed even considers suspending hikes. However, for the time being, traders are penalizing the dollar and therefore will inquire afterwards. However, it’s crucial to avoid basing your decisions solely on one inflation report. There are numerous additional dangers that might stop the risk surge and strengthen the dollar. As the USD/JPY breaks the bullish trend line and tries support at 139.00, the path of least resistance at this time is downward:
Concerns regarding the UK and Eurozone economy could harm the GBP/USD and EUR/USD as well as GBP and EUR crosses in the future. They both currently profit from the decline in the value of the dollar.
The UK and the Eurozone’s economies are being choked by rising prices.
In the UK, the quarterly GDP decreased by less than expected 0.2%, although industrial production and building output both above forecasts, despite barely increasing. The monthly GDP, however, disappointed with a larger decline of 0.6% month over month.
In the Eurozone, the CPI surpassed the UK’s own double-digit inflation in October, rising to a new record high of 10.7%. Inflation in the Eurozone is now expected to average 8.5% this year and 6.1% in 2023, both much higher than forecasts issued in July, according to the European Commission.
High energy price burdens, a decline in household buying power, a weakened environmental factors, and stricter financing circumstances are expected to send the EU, the euro area, and the majority of member states into downturn amid the current climate of elevated uncertainty, according to the Commission.
The BoE is anticipated to maintain raising interest rates in the UK due to the weak GDP figures and skyrocketing inflation, which should make it harder for consumers. The decline in global demand is also bad news for exports from the UK and the Eurozone, both inside and outside of Europe.
The 2017 bottom, which might represent the next possible barrier for the EUR/USD, could be followed by the 200-day average, which is somewhat higher. Lose this and a repeat of the break region around 1.0090 would be susceptible for a retest, which support is now seen around 1.0200.
In that it has broken many short-term levels of resistance and traders are still buying near-term dips in the process, the GBP/USD displays a similar picture to the EUR/USD.
Bitcoin is suffering more now.
The Dow increased by 1200 points, the German DAX reached a 5-month high, and the GBP/USD soared by 300 pips on Thursday as a result of the far softer-than-expected US CPI data. After a particularly difficult few days in BTC’s history due to the ongoing issue at FTX and the potential market contagion its failure may cause, the CPI report even contributed to the stabilization of cryptocurrencies.
Ahead of what could be a stormy weekend for crypto assets, we are starting to notice some softness return to the markets including cryptocurrencies, even though some of those moves initially extended.
On Thursday, Bitcoin climbed back above $17,000 and made an attempt to break through the short-term resistance (about $17.5K) and June low, both of which it had previously breached the day before. It was unable to maintain control over this region. The first indication that BTC may have bottomed would be if it were to successfully retake this area and maintain above it today. We will eventually need to see a greater high for confirmation, even if it does that. Currently, the most recent high is slightly shy of $21.5,000.
Update: After hearing that FTX has applied for Chapter 11 bankruptcy, bitcoin and other cryptocurrencies recently fell precipitously. It appears like this weekend will be difficult.
Going forward
Chinese data, ZEW, and Eurozone GDP data Tuesday, November 15
Should GDP shows a decline, this will support concerns that the Eurozone is about to enter a recession. ZEW Economic Sentiment will also be released at the same time, and earlier in the day, Chinese retail sales and industrial production data will be available. Therefore, if we see weaker-than-expected figures, fears about global economy could flare up again.
Both US retail sales and UK CPI Wednesday, November 16
The October CPI estimate will get a lot of attention after rocketing to 10.1% in September, especially if it holds steady or increases further into double digits. Unless CPI falls significantly, as it did in the US situation, we are unable to understand how this will benefit the pound.
US retail sales and UK CPI (Wednesday, November 16
The October CPI estimate will get a lot of attention after rocketing to 10.1% in September, particularly if it holds steady or increases further into double digits. Unless CPI falls significantly, as it did in the US situation, we are unable to understand how this will benefit the pound.
Over the past few months, US retail sales have been either very mildly rising or remaining unchanged. It is obvious that rising inflation has a negative impact on consumer purchasing. If the numbers come in below expectations, this will add to worries about the state of the US consumer and economy and may have a negative effect on risk taking.
