Market Update by Solidecn.com

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Bitcoin Analysis

Cryptocurrencies extend losses amid fears of FTX asset liquidation!

Bitcoin is down 2.70% and is struggling to maintain the key support zone at the level of 25,200 dollars. The sentiment in the market is not improving, and the upcoming decision on September 13th regarding the liquidation of FTX assets with a total value of 3.4 billion dollars is causing another wave of panic. The next level of support is 24,800 dollars. This was the low on June 15, 2023, following the market panic due to the delisting of many altcoins and SEC lawsuits.



The liquidation of funds from FTX is to take place gradually, with between $100-200 million entering the market week by week. However, the details of the transaction are not yet known. It is possible that the assets will be sold on the OTC market - outside exchanges. In this case, all market concerns are panic, which only confirms the stage of the cycle we are currently in.

Another date to watch this week is the statement by the SEC chairman, Gary Gensler, before the Senate Banking Committee, which will take place on September 12th.

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China Inflation to Rebound on Economic Recovery

China’s consumer price inflation, which measures the average change in prices over time that consumers pay for a basket of goods, is expected to increase in the coming months. This is due to the economy’s moderate recovery, which is being driven by various policy measures.

In August, consumer prices rose by 0.1% compared to the previous year. This was a reversal from July, when prices fell by 0.3%. This was the first decrease since February 2021.

The Chinese government has set an inflation target of around 3% for this year. The rise in prices was mainly due to a 0.5% increase in non-food prices, while food prices fell by 1.7%.

Core inflation, which excludes food and energy prices, remained steady at 0.8% in August. This was the highest level since January.

Meanwhile, the annual decrease in producer prices (the prices that producers get for their products) slowed to 3.0% in August from 4.4% in July.

Economists Zichun Huang and Julian Evans-Pritchard predict that producer prices will stop falling by the end of the year and consumer prices will continue to rise over the coming months. They expect an average inflation rate of around 1.0% in 2024 and 2025.

They also believe that core inflation will increase in the coming months as excess stock from the pandemic export boom is sold off and policy support leads to a partial recovery in domestic demand.

Despite a slump in the property market, Beijing expects to achieve a growth target of around 5% this year. The Chinese government has introduced several measures to combat the economic downturn following the reopening related bounce back at the start of the year.

The People’s Bank of China has also relaxed its borrowing rules and reduced mortgage rates for first-time home buyers.

In August, bank lending increased sharply to CNY 1.36 trillion from CNY 345.9 billion in July, exceeding the expected level of CNY 1.2 trillion. Total social financing (a broad measure of credit and liquidity in the economy) increased to CNY 3.12 trillion in August from CNY 528.2 billion in July.

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Apple Sanctions Shake Wall Street

Wall Street is down today. This is due to a strong reading of US claims, a sell-off in China, and sanctions against Apple. The strong claims reading shows that the labor market is doing well. This fits with the higher-than-expected ISM services report from yesterday.

The dollar is up because people are avoiding risk. Yields are also up, and the chances of the Fed raising interest rates have increased. In China, both imports and exports fell in August compared to last year. This shows that the economy is still weak. The rising dollar is also adding to people’s worries. It is being supported by strong labor market data, which is causing people to sell stocks. Unemployment claims fell again, and productivity and labor costs were revised up more than expected. Markets think there is a 7% chance that the Fed will raise interest rates in September.

Investors are worried about China’s decision to ban state employees from using iPhones. They say this is because of spying concerns. Apple is losing the most out of all the big tech companies today. Its stock is down 3.2% as people wait for the release of the iPhone 15. Investors are worried that China’s decision about iPhones could be part of a bigger plan. They think it could lead to more tension between China and the US, which are still very dependent on each other economically.

The background to today’s decline in the US stock market is the loss of momentum in China. This has happened many times this year, despite efforts to stimulate the economy and help the banking and real estate sectors. Chinese index futures are down nearly 3%. Imports fell 7.2% compared to last year, and exports fell more than 9%.



The US100 index is trying to recover from earlier losses, but sentiment is still down in the short term. The key resistance level on the M15 chart is 15317 points.

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Japanese Government Considers Intervention as Yen Volatility Continues


The yen in Japan has been quite unpredictable lately, which is causing worry for the country’s leaders. Masato Kanda, the Vice Minister of Finance for International Affairs, and other officials have hinted that they might step in to keep the yen stable and control speculative trading. They believe that activities not aligned with basic economic indicators are causing this unpredictability.





Last year in October, the government took similar steps, showing that they are serious and ready to act firmly. However, when the USDJPY fell below 145 in August, the government softened its warnings. This left traders unsure about what the government might do next. Recently, the yen fell to its lowest point in ten months, getting close to levels that have led to government intervention in the past. Market experts have noted that if USDJPY falls to 150, the government might be forced to intervene in the market again.

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Bank of Canada Expected to Keep rates unchanged tomorrow.

USDCAD enjoyed strong gains between June 2021 and October 2022, gaining over 15% over the period. However, the advance was halted in the final quarter of 2022 and the pair has traded largely sideways since. Recent USD strengthening allowed the pair to bounce off 10-month lows in the 1.3100 area and climb towards the upper limit of the trading range at 1.3650. An attempt to break above this zone was made today but so far, bulls failed to deliver a breakout. Decision from Bank of Canada tomorrow could be crucial for whether the pair breaks above this zone or pulls back from it. Should we see a strong hint that incoming data doesn't support rate hikes at future meetings, CAD may find itself under pressure with USDCAD potentially breaking above 1.3650 area.

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EURUSD

Christopher J. Waller, a voting member of the Fed's Governing Council, delivered some comments on monetary policy and economy this afternoon. Comments can be seen as dovish with Waller hinting that the September meeting may see rates being kept unchanged.

Key takeaways from Waller today

• Data released last week allows Fed to proceed carefully
• Data doesn't say we need to do anything imminent
• Data is looking 'pretty good' for no recession
• Whether more rate hikes are needed depends on data
• Want to be careful on saying inflation job done
• Don't think one more hike would trigger recession
• Not obvious one more rate hike would damage job market
• Need to keep rates up until inflation eases
• Treasury yields are about where they should be
• Fed takes fiscal policy as a given
• Trillion dollar deficits sustained don't look good for the US fiscal position
• We are keeping a close eye on the commercial real estate sector
• I'm not seeing anything in commercial estate that will threaten the economy

Markets saw dovish reactions to Waller's comments, especially to bolded lines. EURUSD bounced off the daily lows and attempted to climb back above 1.0750 mark while European and US index futures revisited daily highs.


EURUSD bounced off the daily lows following dovish comments from Fed Waller.

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EURUSD

PMI indexes in Europe mostly performed weaker than preliminary readings. In countries that reported data for the first time today, the readings were also worse than expected. Those are services PMI readings from European countries:

• Spain: 49.3 (expected 51.5; previous: 52.8)
• Italy: 49.8 (expected: 50.3; previous: 51.5)
• France (fin.): 46 (expected: 46.7; previous: 47.1)
• Germany (fin.): 47.3 (expected: 47.3; previous: 52.3)
• EMU (fin): 47.9 (expected: 48.3; previous: 50.9)
• Eurozone composite drops to 46.7 with 47 points expected.

We have the lowest reading since 2020. HCOB writes in a commentary that the eurozone did not fall into recession in the first half of the year, but the second half of the year comes into big question. The services sector, which had been a stabilizing force for the economy for many months, now appears to be a strong drag, and the industrial sector is likely to decline further. HCOB forecasts -0.1% change in GDP for Q3 in EMU.



EURUSD continues its declines and is currently testing the 1.0750 levels.

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Bitcoin: Will the Price Drop Below $25,000

Bitcoin’s price is falling and is currently around $25,400. A few days ago, the price went up after Grayscale won a court case against the SEC. However, the excitement didn’t last long. Major cryptocurrencies are having trouble keeping their value because there aren’t enough new investors. The SEC didn’t accept other applications for funds, including one from BlackRock. The next deadline for reviewing applications is in mid-October.





Technically looking at the D1 interval, Bitcoin prices recently reacted at the support level of $26,000 (slightly breaching it earlier). This level stemmed from the lower limit of a broad 1:1 pattern. According to the Overbalance methodology, defending this level could result in a move to new highs. However, the upward movement was halted at the level of the 100-day EMA, after which the price dynamically moved downward. We are currently observing another attempt to negate the 1:1 geometry. Attention should be paid to the horizontal support zone at the level of $25,300, which is currently being tested. If this level is breached, the price drop may intensify. The next noteworthy support level is only at $23,600, which results from a 50% measurement of the last upward wave.

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Chart of the Day - USDCAD

The value of the US dollar compared to the Canadian dollar (USDCAD) might change a lot today in the early afternoon. This is because two important reports will be released at 1:30 pm BST. One report is about jobs in the US for August and the other is about Canada's economy for April-June 2023. People will pay more attention to the US jobs report.

The US jobs report for August is one of the last two important reports before a meeting on September 20, 2023. The other report is about US prices for August and will be released on September 13, 2023. The jobs report today is expected to show that 170,000 more people have jobs, and that the unemployment rate and how much people earn did not change (3.5% and 4.4% more than last year). If the report shows fewer new jobs, it would mean that the job market in the US is not doing well.

For Canada, people expect that the economy grew less from April-June 2023 (1.2%) than from January-March 2023 (3.1%).



If we look at a chart of USDCAD, we can see that it is close to an important value of 1.3500. If it goes below this value, it could mean that the value of the US dollar will keep going down compared to the Canadian dollar. We will know more around 1:30 pm BST when the reports are released.