Market Update by Solidecn.com

[Solid ECN]

Russel 2000 rallies 2.5% as banks outperform


Wall Street indices managed to recover from early losses and are posting small gains at press time. Russell 2000 is an exception as the index is not posting a small gain but a massive one. The index is trading 2.5% higher at press time with all 11 sector groups trading higher. Biggest gains, however, can be spotted on Financials subindex. The move high in financials is driven by banks, with regional banking shares rallying today. The move is somewhat puzzling as there was no news that could justify outperformance of the sector. It looks like a relief rally following struggles of regional banks in recent months.


However, it should be said that banks have been underperformers on Wall Street yesterday and this underperformance was a result of WSJ report suggesting that US regulators are considering raising capital requirements for banks by 20%. This story has been neither confirmed, nor denied by US authorities but it looks like shares in regional banks are trying to erase part of recent weakness today.





Russell 2000 futures (US2000) rally today and has managed to climb above 1,845 pts resistance zone earlier during the session. The index is trading at a 3-month high. The next resistance zone to watch can be found in the 1,885 pts area.

[Solid ECN]

USDCNH


The USDCNH pair and the CHNComp contract reacted with rises in the face of the announcement of the Chinese authorities' order to cut deposit interest rates to stimulate the economy. Yields on Chinese debt securities lost following the above announcement.





State-owned banks, including Bank of China Ltd, Industrial & Commercial Bank of China Ltd and Bank of Communications Co, were ordered to cut interest rates on a range of products, including by 5 basis points on demand deposits and by at least 10 basis points on three-year and five-year time deposits, anonymous sources said.

[Solid ECN]

Massive Crypto Sell-Off!


Binancecoin loses almost 10% and Bitcoin falls by more than 5% amid the problems of the Binance exchange in the US


Cryptocurrencies are clearly in a downturn. Bitcoin is losing over 5%, and Binance Coin is down nearly 10% following the news that the SEC was planning to sue the largest cryptocurrency exchange, Binance, due to uncovered irregularities. Binance is accused of violating securities market regulations, conducting unregistered securities sales (the SEC considers cryptocurrencies as securities), and operating an unregistered securities exchange in the United States. Additionally, the SEC reportedly indicated that the exchange was managing its clients' funds, including secretly transferring funds to an entity controlled by the company's founder.


It is important to note that this is not the first time U.S. authorities have sued Binance. The CFTC had previously taken similar action. The United States likely wants to prevent investments in cryptocurrencies through the Binance exchange as quickly as possible.


In response to these reports, we are witnessing significant drops in cryptocurrencies and, above all, a breakout from the recent sideways trend. As we can see, positive sentiments in the U.S. stock market or commodity market no longer have a positive impact on cryptocurrencies.





Binancecoin is at its lowest since early March, as is Bitcoin. On the other hand, we are seeing further increases on the US100.

[Solid ECN]

EURUSD


Final services PMI readings for May from European countries were released this morning. Revised data from France and Germany, as well as whole euro area, showed lower PMI readings than flash releases. Releases from Spain and Italy also missed expectations and came in lower compared to a month ago. Nevertheless, services sector in all major European economies is still in expansion with PMI readings above 50 pts threshold.





EUR moved slightly lower on those releases with EURUSD looking back towards daily lows in the 1.0682 area. Equity indices did not saw any major reaction to PMIs today.

[Solid ECN]

USDCHF


Swiss CPI inflation data for May was released this morning at 7:30 am BST. Data came in-line with market expectations and showed a deceleration in headline measure from 2.6% to 2.2% YoY. This is the lowest reading since February 2022. Core gauge slowed from 2.2% to 1.9% YoY, slighly more than expected. As such an outcome was expected, there was no major reaction on CHF market.





USDCHF saw barely any reaction to Swiss CPI print. Pair continues to test a short-term 0.9110 resistance zone.

[Solid ECN]

US30


US indices launched this week's trading on the back foot and moved lower on Tuesday and Wednesday. However, tides turned yesterday as it became more and more likely that Fed will keep rates unchanged at June meeting (13-14 June, 2023). Comments from Fed Harker and Jefferson signaling that FOMC is in position to skip a rate hike at the June meeting led to a slump in rate hike bets on money markets. Currently, markets price in just a 25% chance of 25 basis point rate hike at June meeting while those odds were as high as 70% following release of JOLTS data on Wednesday. NFP report for May, which is scheduled to be released at 1:30 pm BST today, will be watched closely but it seems that Fed members have already made up their minds when it comes to the June decision and therefore jobs data may not have too much of an impact.





Taking a look at Dow Jones futures (US30) at D1 interval, we can see that the index made another test of the 32,900 pts support zone and has once again failed to break below. The aforementioned support zone is marked with previous price reactions, 200-session moving average (purple line), upward trendline and the 50% retracement of the downward move launched at the beginning of 2022. Positive demand-side reaction to this hurdle suggests that the index may be set for a bigger recovery move. The first resistance zone to watch should current gains extend can be found in the 33,700 pts area, marked with 61.8% retracement.

[Solid ECN]

Oil


Oil prices have made an almost complete U-turn, recovering the majority of losses made earlier today. While there was no specific news driving the rebound, Reuters survey based on secondary sources suggested that OPEC countries were over complying with pledged output cuts. While countries like Saudi Arabia, Kuwait and United Arab Emirates were mostly in-line with pledged cuts, there were a number of countries that have cut more than pledged. Iraq and Nigeria are of note here as they are significant oil producers and their compliance with pledged cuts stood at 151% and 448% respectively. Combined output of 13 OPEC countries was 460k bpd lower in May than in April. Moreover, output data for April was revised lower by 150k bpd.


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Taking a look at OIL.WTI chart at H1 interval, we can see that price plunged to $67.00 area earlier today, where early-May lows are located. However, buyers took over control afterwards and a strong upward move was launched. While OIL.WTI is still trading around 1% lower on the day, it has been dropping as much as 4% earlier. Continuation of the upward move will, however, depend on whether buyers manage to push the price above the $69.45-69.65 area, where the upper limit of a local market geometry can be found.

[Solid ECN]

Crude Oil

Brent crude is losing 4% today, which can be linked to several factors. The US media is talking about uncertainty regarding the debt ceiling agreement, as several Republicans have made it clear that they will not support the bill. In addition, there are increasing question marks over China and further demand growth.

Nonetheless, the key factor that is likely to support price declines at this point is the disagreement within the enlarged OPEC+ cartel. Recently, Saudi Arabia's oil minister warned contract sellers about the possibility of OPEC+ action, which could suggest another potential production cut. On the other hand, Russia's energy minister says Russia is happy with the current course of events and prices. However, there have been signs that Russia may also be producing and exporting more than the internal arrangements in the cartel. This threatens a potential 'break-up' of the entire agreement, which could lead to a return of supply of as much as 2 million barrels per day, although of course one has to bear in mind the limited capacity for such a rapid increase in production. Nevertheless, recently, Iraq or the UAE were said to have hinted that they would like to produce more.



Strong declines in Brent crude were triggered by uncertainty about the sustainability of the OPEC+ agreement and uncertainty about demand from China or globally if the US were to eventually go bankrupt. The nearest support is around USD 68 per barrel, where the 23.6 retracement is located.

[Solid ECN]

USDJPY

USDJPY quotes started the new week with a correction. Looking technically at the D1 interval, before the weekend the price reached the upper limit of the wide upward channel, where sellers appeared. For now it is far too early to think about a change in sentiment, nevertheless the last upward wave was made in one go, so there is a risk of a deeper downward correction. Should the discount actually gain momentum, the 137.30 - 137.90 zone should be regarded as key support. Resistance remains around the 141.00 level, which is the area of the upper limit of the aforementioned upward channel.



Looking at the lower time frame - H1, we can see the very strong uptrend. The key short-term support is the level of 139.60, which is derived from the lower limit of the 1:1 structure and the EMA100 average. According to the overbalance methodology, only a break of this support could lead to a deeper discount.

[Solid ECN]

Bitcoin

• US debt deal was reached during a weekend
• Beijing “Web3 Innovation and Development White Paper” introduction

Bitcoin experienced a price increase over the week, reaching above $28,000, attributed to various factors. One significant development was the announcement of a debt ceiling deal by the White House, which boosted market sentiment and led to a 4.9% increase in Bitcoin and a 4.9% increase in Ether. Additionally, a Chinese governmental agency released a white paper outlining suggestions for China's Web3 policy, signaling progress in a country that has been reevaluating its approach to cryptocurrencies.





The release of the white paper in Beijing coincided with new digital asset regulations in Hong Kong, sparking further interest in China's stance toward the crypto industry. The document, titled "Web3 Innovation and Development White Paper," recognizes Web3 technology as an essential aspect of future Internet industry development. Beijing's municipal government aims to establish the city as a prominent global innovation hub for the digital economy, allocating a minimum of 100 million yuan annually until 2025 for this purpose. As a reminder, retail investors in Hong Kong are allowed to trade cryptocurrencies starting from the 1st of June.