Market Update by Solidecn.com

[Solid ECN]

BTCUSD


Bitcoin is currently consolidating within a range of 25,300 to 26,000. The key support level is at 25,300, which has shown significant reactions in the past few months. If the bullish momentum fails to sustain this level, a potential further decline may be expected.

[Solid ECN]

Oil


Oil is taking a hit at the beginning of a new week. Brent (OIL) and WTI (OIL.WTI) are trading around 1.5% lower at press time. Recent OPEC actions and announcements provided only a short-term boost for prices and oil quickly resumed pullback. Brent dropped and reached the lowest level since the beginning of June today. There is no strong, clear reason behind the move lower today. However, some news surfaced recently that may support bears today.


Iranian authorities made some upbeat comments on possible agreement between Iran and the West that may lead to a lifting of sanctions on Iranian oil. However, it should be noted that negotiations have been going on for years now and similarly positive comments did not lead to any breakthrough earlier. Apart from that, Goldman Sachs slashed its December 2023 Brent price forecast from $95 to $86 per barrel, citing increased recessionary fears as well as higher output in Iran, Venezuela and Russia as reasons.





Taking a look at OIL chart at H4 interval, we can see that the price launched this week's trading with a bearish price gap and moved lower to test the $74 support zone. At first it looked like bulls may manage to halt sell-off there but selling resumed and OIL slumped below. Brent is quoted in the $73 per barrel area now and trades less than 1% higher month-to-date after gaining as much as 8% MTD earlier. The next support zone to watch can be found in the $72.50 area and is marked with local lows from mid-March, early-May and early-June 2023.

[Solid ECN]

Palladium


Palladium prices have been falling for quite some time - the main reason being an expected oversupply of the metal next year. One of the world's largest producers of the metal, Russian giant Nornickel estimates that the palladium market will reach a surplus of up to 300,000 ounces in 2024 against an estimated 200,000 ounce deficit in 2023. The company accounts for 40% of global palladium production. Among other things, palladium is used to reduce exhaust fumes in automobiles.


According to Nornickel, 80% of the world's palladium supply is absorbed by the automotive industry, where demand for palladium is expected to grow by 1% y/y in 2023. On the other hand, however, electric cars where palladium is not used because they do not emit exhaust fumes are growing in popularity. In addition, manufacturers are increasingly replacing palladium with cheaper substitutes. Increased consumption of palladium in 2022 and 2023 has resulted in the sale of accumulated stocks by automotive companies, but these sales are expected to end in the second half of the year as companies potentially empty their inventories. Nornickel also expects 180,000 tons of surplus nickel in 2024.





PALLADIUM is slipping towards $1,300 per ounce and has fallen below the 71.6 Fibonacci retracement of the upward wave from January 2016. From this level, declines may deepen even to $1100 per ounce where previous price reactions are located.

[Solid ECN]

JAP225


After a two-day decline from a 33-year peak, Japan's Nikkei share average rebounded on Friday. The Nikkei index surged 1.61% to 32,149.76 by midday, recovering nearly 4% from Wednesday's 33-year high. Index is on track to complete a nine-week advance, marking its longest winning streak in over five years. Since June 2, it has climbed nearly 2%, extending its advance since April 7 to 17%.


From the fundamental perspective, Nikkei performance is boosted by Japanese GDP data, which showed a growth at an annualized rate of 2.7% in the first quarter of the year, surpassing the earlier estimates of 1.6% made last month.


The two consecutive days of decline were likely just profit-taking from investors after a solid period of index appreciation. Now, with the indexes rebounding, it is a positive sign that bulls are still in power and set the stage for a continuation in the next week. Today, significant contributors to the Nikkei's performance included Uniqlo brand owner Fast Retailing, which jumped 3.85%, and air-conditioning maker Daikin Industries, which rose 3.09%.





The Nikkei 225 (JAP225) index is currently showing a strong bullish momentum, with its price standing at 32,159 points. This comes after the index rebounded from a significant support level at 31,500 points, which indicates a bullish sentiment in the market. If the bullish momentum maintains its strength, we could see the index aiming to test the recent peak at 32,770 points. However, it's important to consider potential downside risks as well. If the bullish momentum weakens, we could see a correction towards the next lower level of 30,600 points.

[Solid ECN]

US100


Unemployment claims in the US surprised with an increase. In the first reaction, US100 is rising after the reading.


Unemployment claims: 261k Expected: 235k Previously: 232k.
Continuing claims: 1757k Expected: 1802k Previously: 1795k.





The very large surprise in the increase in applications for benefits may mean that the unemployed in the economy are increasing rapidly, but the drop in continuing applications reflects still strong employment in the economy. After the reading, the market reassured itself that Fed rates are unlikely to be raised in June.





The market is pricing a Fed pause in June with a 72.5% probability after the claims reading. The odds of a 25 bp hike fell about 6%, to 27.5%, compared to yesterday's forecasts.

[Solid ECN]

US2000


The Russell 2000 Index of U.S. smaller-cap companies (US2000) has been on an upward surge for several days. In yesterday's session, it rose nearly 1.8% against a 1.7% decline in the Nasdaq, weakness in the S&P500 and the Dow index. Driven by oversold regional bank stocks in recent weeks, the benchmark has risen less than 7% since the beginning of the year, a weak performance against the major indexes. By comparison, it has gained nearly 8% in the past five days alone. Today's claims reading at 2:30 pm could mean additional volatility for the index.


For now, the market is reassuring itself that the US economy remains quite strong (although industry is sending signals of weakness) with a strong labor market, and in view of consumer strength, revenues of listed companies are not in danger of collapsing at least in the foreseeable period. The increases in the major indexes are thus 'spilling over' slowly to smaller companies that have been bypassed for months, which is also helped by the Fed's rate hike cycle coming to an end. The Russell sub-index, which includes energy companies and banks, has recently lagged behind the sub-index linked to growth stocks (the largest disparity in more than 20 years) - primarily due to the frenzy related to AI and the strength of the largest BigTech companies (a situation reversed in comparison to 2022). In recent days, value companies from the Russell especially bank shares, have closed the gap somewhat by driving the benchmark.





US2000 broke out above the 38.2 Fibonacci retracement of the March 2020 upward wave and a rise above 1900 points could open the way for the bulls to reach the psychological resistance of 2000 and 2100 points, where the 23.6 Fibonacci retracement is visible. The index has formed a strong base near 1750 points, the strength of which has been 'tested' by the price several times - each time the bulls have managed to bounce higher. In the bearish scenario 1750 - 1800 points zone may be tested again.

[Solid ECN]

Gold and Big Tech Stocks in Retreat


Precious metals quotes under pressure, gold loses more than 1%, profit taking on Big Tech stock


The second half of today's session brings increased volatility on the dollar, which also translates into clear movements on precious metals. Gold and silver fared quite well today and were trading on the upside until 3pm BST. However, sentiment changed after the publication of the Bank of Canada's surprise interest rate decision. The EURUSD pair turned back from its daily highs and precious metals moved lower.


It is worth noting that this is the second unexpected hike this week. The Bank of Australia also decided to raise interest rates at yesterday's RBA meeting. These decisions were prompted by the latest macroeconomic data, which points to the need to further cool inflation.


In the US stock markets, we have seen a reduction in the recent upward momentum, primarily in the technology stocks that make up the NASDAQ. The sizable declines are mainly recorded by the largest companies. Alphabet (GOOGL.US) loses 3.3%, Microsoft (MSFT.US) over 2.7% and Amazon (AMZN.US) close to 3.4%.





On the other hand, investors' attention is attracted by the huge disparity between the quotations of indices such as the S&P 500 (US500) and NASDAQ (US100) and the Russell 2000 (US2000) small-cap benchmark. As reported by Goldman Sachs bank's trading desk, the record jump in call option ETF's volume on the Russell index may indicate, a gaining 'soft landing' narrative, which may indicate a return of interest around previously underperforming smaller companies.





Looking technically at the chart of gold, the price has been moving in a downtrend since 4 May. At the beginning of June, the price reacted at the resistance height at $1981, but sellers failed to push the price to new lows and a correction was generated. The corrective movement was stopped today, however, at the height of the 100-period average at $1968, from where a dynamic retracement took place. If the current sentiment does not change, an attack on the recent minima at $1932 is not excluded.

[Solid ECN]

Cardano

• The seventh-largest cryptocurrency on the market, Cardano (ADA), is falling to levels not seen since late March.
• According to the SEC, Cardano is a security, and the Robinhood exchange is considering delisting some of the cryptocurrencies designated as securities by regulators - to avoid potential regulatory problems
• Some investors accuse the project of a lack of clear growth despite a nearly $13 billion market capitalization
• Onchcain data shows higher activity and accumulation by larger investors

Project developer Charles Hoskinson indicated that the project is developing at the right pace and much of the developers' work is not visible to the 'naked eye' from the outside. More recently, Cardano has been working on the Marlowe project, which could potentially facilitate the entire construction and bring smart contract adoption to the financial sector. The IOHK organization behind Cardano has indicated that Marlowe has already been audited both internally and externally to meet security requirements.

The regulator claims that Cardano is only ostensibly decentralized while nearly 17% of the supply is in the hands of a few entities that regularly conducted sales to finance the development and marketing of the project - through unregistered sales of securities. Cardano was thus supposed to meet the conditions of the so-called Howey test: "investment of assets, in a joint venture, with the expectation of profit derived from the efforts of others."

According to IntoTheBlock, Cardano saw an increase in large transactions over the past 24 hours where the total number of Cardano token (ADA) trades increased by 5.8 million to 63.57 million Cardano (ADA) . The number of large transactions, above $100,000, increased to 14,780 or (4,790 more than the previous day). Buying activity in terms of Cardano inflows into large portfolios also increased by 123.6% yesterday compared to June 5 (part of the transactions were due to portfolio splits - a total of 6.61 million net inflows).



CARDANO price again fell below the SMA200 (red line) suggesting a possible test of $0.30 where we see previous price reactions and the 71.6 Fibonacci retracement of the December 2022 upward wave. The chart also somewhat resembles an head and shoulders formation, with the neckline running through at the aforementioned $0.30 level.

[Solid ECN]

US500 - Trade of the day

Facts:

• US500 has broken out of the downward trend channel
• Currently, there is consolidation around the resistance zone
• The end of the hike cycle is near

Recommendation:

• Position: long on US500
• Target Price: 4384, 4437
• Stop Loss: 4230

Justification:


The US500 index has broken out of the downward trend that has been ongoing since the end of 2021. The index's breakout occurred at a price of 4200 points. After overcoming resistance, the index price gained up to the level of 4250 points, after which it retested support at the level of 4200 points. The following days brought a decisive rebound, and the previous week the US500 index ended on a solid plus. The price clearly broke above the support line, indicating a strong move. It is currently in consolidation around 4300 points, increasing the chances of a possible further breakout.





Next week, investors are awaiting key inflation data and the FED's decision on interest rates. Currently, the market estimates no hikes and hopes for a signal of the end of the cycle. The lack of a hike at this meeting may lead to euphoria on the indices in the hope of ending the cycle and a "soft landing". Although such a scenario is rather unlikely, it may lead to increases in the valuations of risky assets in the short term. This may be a sufficient reason for the US500 to continue the strong upward trend and break above 4300 points in the short term. However, if the price does not break above 4300 points, we recommend setting a stop loss close enough to minimize losses.

[Solid ECN]

USDTRY


Turkish lira is taking a massive hit this morning. Turkey's currency is dropping over 5% against the US dollar and euro. TRY slump was puzzling at first as its size was abnormal even for such a volatile asset as lira and there was no news that accompanied it. However, news justifying the move began to surface later on.


Bloomberg reported that Turkish state banks have given up on defending lira. Traders are reporting that Turkish banks halted dollar sales that were aimed at supporting TRY. As a result, an important source of TRY demand vanished and the currency began to freefall.





However, those news may not be as bad as they look at first glance. Turkish President Erdogan appointed a Wall Street veteran as a new treasury and finance minister - Mehmet Simsek, who is a former Merrill Lynch strategist. Given that FX interventions are costly and they do not bear fruit if there is no confidence in the currency (like it was the case with TRY), the decision to abandon them could be a wise move. Of course, this is only true if Turkish authorities take some other actions instead that could help stem capital outflow. Abandoning interventions and not engaging in any new actions could doom TRY to plunge further.