Bitcoin Falls to Critical Support as Wall Street Stutters on G-7 Global Minimum Tax
Asia Pacific Markets may be at risk following Wall Street session
Global minimum tax consensus at G-7 summit pushes Treasury prices lower Bitcoin falls to major support level with potential death cross lingering
TUESDAY’S ASIA-PACIFIC OUTLOOK
Asia-Pacific markets could be vulnerable after a lackluster performance on Wall Street where the major indexes traded slightly lower. Small-cap stocks outperformed, and technology stocks to a lesser extent, with the Dow Jones Industrial Average (DJIA) dropping 0.36%. The VIX “fear gauge” traded unchanged while the US Dollar eased.
Treasury yields climbed modestly, extending gains from Friday, as the Group of Seven (G-7) industrialized nations agreed to a global minimum tax on corporations. The rate of 15% is aimed at stopping the “race to the bottom” on corporate tax rates.
Broader talks between over 100 nations will commence next month. A strong argument can be made over a global minimum tax spurring inflation by squeezing corporate margins, which could explain the Treasury weakness.
The risk-sensitive Australian Dollar and New Zealand Dollar both rose overnight against the Greenback despite weaker-than- expected data out of China on Monday when the economic powerhouse saw exports and imports miss analysts’ expectations. The May trade receipts showed a surplus of $45.54 billion versus an expected $50.5 billion. The Yuan has seen little reaction, with USD/CNH hovering just above the 6.38 handle.
Today’s economic calendar has Japan’s finalized first-quarter gross domestic product (GDP) set to show a -4.8% drop on an annualized basis, according to the DailyFX Economic Calendar. Australia will later report new home sales for May along with the NAB business confidence print. The US CPI print is also on the radar for later this week, with the event potentially having a large sway over global sentiment as traders mull taper talks for the Federal Reserve
BITCOIN TECHNICAL OUTLOOK:
Market sentiment may face a headwind from the ailing crypto market, however. Bitcoin is adding to recent weakness, with BTC/USD dropping nearly 5% over the last 24 hours. The digital coin has been plagued by a series of negative headwinds lately, with a tweet from Elon Musk late last week sending another wave of negative sentiment through BTC bulls.
Bitcoin is up against a major support level well defined by the 61.8% Fibonacci retracement level from the late May swing low/high. Technically, Bitcoin is in a weak position, below its 20-, 50-, and 200-day Simple Moving Averages. Moreover, the 50- day SMA may soon cross below its 200-day SMA, which would complete a bearish death cross, and potentially drag prices lower. The 30,000 psychological level would be a near-term bearish target.
News that the US Justice Department (DOJ) seized 63.7 Bitcoins from the DarkSide hacking group responsible for the Colonial Pipeline attack may also be dragging on cryptocurrency sentiment given the apparent capabilities available to US law enforcement agencies to track crypto wallets. According to the DOJ statement:
“law enforcement was able to track multiple transfers of bitcoin and identify that approximately 63.7 bitcoins, representing the proceeds of the victim’s ransom payment, had been transferred to a specific address, for which the FBI has the “private key,” or the rough equivalent of a password needed to access assets accessible from the specific Bitcoin address.”
BTC/USD DAILY CHART
Crude Oil Price Forecast: Traders Set Sights Above $70 With Uptrend Intact
Crude oil trades just shy of $70, a level it has not surpassed since late 2018
Strong economic data and continued economic reopenings may help drive demand and price gains Stock Market Forecast for the Week Ahead: The Summer Doldrums Approach
Crude oil trades tantalizingly close to the $70 mark for the first time since October 2018 as strong economic data helps drive continued price gains for the commodity. With little to suggest a reversal lower is imminent, bulls will look to keep the uptrend intact for the foreseeable future and a confident break above the $70 mark would serve as an encouraging first step on the road to further gains. That said, seasonal headwinds could make a convincing break hard to come by.
To that end, market participants have already begun to experience lower trading volumes as summer approaches and a lack of conviction could leave early attempts above $70 vulnerable to brief pullbacks. Thankfully for bulls, crude oil enjoys a collection of support nearby. Initial buoyancy may be found from the commodity’s swing high in early March, around $68, with subsequent support around the $65 area.
In the current market environment the $65 zone may serve as the “line in the sand” level that could see losses accelerate if pierced. The area roughly coincides with the 50-day simple moving average, a longstanding Fibonacci level and a crucial trendline from the April 2020 lows.
A break beneath the area and, perhaps more importantly the April uptrend, could seriously undermine the commodity’s longer- term technical outlook. For the time being, however, crude looks well positioned to continue higher given the fundamental and technical landscapes.
CRUDE OIL PRICE CHART: DAILY TIME FRAME (OCTOBER 2018 – JUNE 2021)
CRUDE OIL PRICE CHART: 4 – HOUR TIME FRAME (FEBRUARY 2021 – JUNE 2021)
US Dollar Sentiment Weakens, EUR Longs Pick Up, CAD Consolidates – COT Report
US Dollar Shorts at a 3-Month
High Euro Longs Picking Up
CAD Consolidates as Longs Look Stretched
In the final week of May, speculators had once again increased their bearish exposure in the US Dollar with net shorts rising to a 3-month high, totalling $17.8bln. While sentiment in the greenback has deteriorated, major USD pairs continue to trade in narrow ranges during this low vol period. Last week’s NFP figures reinforced the case that the Federal Reserve has a little more breathing room before they have to discuss tapering asset purchases. That said, the major focus for USD traders will be the US CPI report.
The Euro saw another modest rise in net longs ($815mln). Although, as I have noted previously, topside resistance at 1.2245 remains a stumbling block for the currency with failure to break above putting pressure back on the 1.21 handle. Elsewhere, with the ECB expected to maintain PEPP purchases at a significant pace for Q3, this could keep EUR/USD capped.
GBP net longs experienced a decent-sized pullback of $580mln (-4.4% OI) as outright shorts rose to a 4-month high. In the near term, uncertainty remains over the UK decision as to whether a full reopening of the economy will take place on June 21st. However, while this would likely see a shift in sentiment, the short term ramifications for the UK economy is limited. On the technical side, the psychological
1.42 handle continues to cap rallies, although, despite this, the trend remains higher with GBP above 1.40.
Across the commodity currencies, selling the Kiwi had largely been concentrated in the fast money community. Elsewhere, net longs in the Canadian Dollar grew ever so slightly and thus remains the largest long in the G10 complex. While there are reasons to be bullish CAD, given the size of the gains in recent months, the currency appears to be settling in for a period of consolidation above the 1.20 handle.
Safe haven currencies were in demand with JPY net longs cut by 350mln, while CHF flipped net long again. However, while the Japanese Yen continues to track Treasury yields, I remain bearish on the Swiss Franc, particularly as SNB officials highlight their desire for a weaker currency.
US Dollar Positioning
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