official Market Update by Solidecn.com

[Solid ECN ✔️]

USDTRY

The Turkish lira is failing to halt its ongoing powerful downward momentum (-0.82% against USD today), and the factor that added fuel to the sell-off today was a slightly higher-than-expected CPI inflation reading.

Inflation in Turkey fell to its lowest level since 2021, with consumer prices rising by 39.6% year-on-year in May, slightly lower than forecast (39.2%) and compared to 43.7% in the previous month.  On a monthly basis, inflation was close to zero for the first time in four years.

Despite the good tone of the headline reading itself, investor sentiment is still spoiled by the underlying reading, which no longer shows this downward dynamic. 

Core inflation surprised analysts with a much higher reading than expected, which, coupled with Erdogan's uncertain policy, puts tremendous pressure on the Turkish lira.

On the other hand, however, and in the matter of Erdogan's policies themselves, we may see some information suggesting a change in the authorities' attitude towards inflation. Mehmet Simsek, Turkey's new Treasury and Finance Minister (and former BofA Merill Lynch strategist), said on Sunday that "the main goal will be to fight inflation rationally". Investment banks also seem to have a different view of the lira. Goldman Sachs predicts a further weakening of the lira against the dollar. On the other hand, Societe Generale recommended a short position on the USDTRY pair in view of the stretched positioning and the high positive carry/aggressive market valuation of the lira's depreciation in futures.

[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 ✔️]

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 ✔️]

Bitcoin

According to Bloomberg, the U.S. Securities and Exchange Commission has sued the largest U.S. cryptocurrency exchange Coinbase in a New York court. Bitcoin is slipping below yesterday's lows. Shares of Coinbase (COIN.US) are losing nearly 11% before the open.  The market is gaining confidence that a coordinated action by US regulators is taking place. Sizable pre-opening sell-offs are also noted in the stocks of other cryptocurrency companies like Microstrategy (MSTR.US) and HIVE Blockchain (HIVE.US).

 

 

Berenberg analysts estimates that SEC moves may cost at least 37% of Coinbase net revenues. The key for the company may be to change business model and relocate from the US.

 

[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 ✔️]

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.

[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 ✔️]

USDCAD

The Bank of Canada (BoC) has raised its target for the overnight rate to 4.75%, in line with its ongoing policy of quantitative tightening. This decision comes amid global economic shifts, with major central banks signaling potential further rate hikes to maintain price stability.

Canada's economy showed stronger than expected performance in Q1 2023, with a GDP growth of 3.1%. Despite lower energy costs, goods price inflation increased, and CPI inflation rose to 4.4% in April. The BoC anticipates a decrease in CPI inflation to around 3% in the summer, but concerns persist about it remaining above the 2% target.

BoC note: "In response to these factors, the BoC increased the policy interest rate, reflecting the need for a more restrictive monetary policy to balance supply and demand and return inflation sustainably to the 2% target. The Bank remains committed to restoring price stability for Canadians."

[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 ✔️]

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 ✔️]

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 ✔️]

EURUSD

• US indices finished yesterday's trading higher. S&P 500 gained 0.62% to 4,294 points, Dow Jones moved 0.50% higher to 33,833 points and Nasdaq 100 added 1.27% to 14,484 points. The Russell 2000 dropped 0.41%, as investors were taking profits after a good session the day before.
• Asian stock markets are poised for their second consecutive week of gains, buoyed by the prospect of economic stimulus in China and the S&P 500's transition into a bull market.
• Japanese markets bounced back from a two-day downturn - Nikkei climbed 1.66% to 32,174 points and Australian stocks also rebounded after a three-day decline - S&P/ASX 200 dropped 0.11%.
• South Korean stocks have hit their highest point since June of the previous year - Kospi gained 1.25%. 
• Indices from China decreased by around 0.25%
• European futures point to a flat opening of the European cash session today, DAX futures are traded 0.06% lower at 16,014 points.
• The Chinese Consumer Price Index (CPI) Year on Year (YoY) remained as expected at 0.2%, while the Producer Price Index (PPI) YoY fell to -4.6%, lower than the forecasted -4.3%.
• The Bank of Japan's Governor Ueda stated that the bank is implementing policies to achieve a stable 2% inflation rate.
• A spike in US unemployment claims to the highest level since October 2021 indicates a softening labor market, which lowered the expectations that the Federal Reserve would keep interest rates elevated for a prolonged period.
• Despite the S&P 500's return to a bull market, an analyst from Bank of America has stated that the overall market sentiment remains pessimistic.
• Analysts at Bank of America believe that as long as inflation remains high globally and particularly in the US, the EURUSD is likely to remain weak. Currently, the carry trade is also applying downward pressure on the euro.
• Saudi Arabia reportedly threatened the US with economic repercussions last fall due to oil price reductions, according to the Washington Post.
• Precious metals trade mixed - gold trades flat, silver gains 0.15%, platinum gains 1.25% and palladium jumps 0.18%
• Binance.US has halted USD deposits and warned of a potential pause in fiat withdrawals in response to the "extremely aggressive and intimidating tactics" employed by the SEC and intended to safeguard customers and the platform.

EURUSD chart -  according to BoA a sustained rally in EURUSD would necessitate a change in the Federal Reserve's stance, Interval H1.

[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 ✔️]

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 ✔️]

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 ✔️]

 

Quadruple Bottom on Oil?

 

Crude oil continues its declines in another week of June. In addition, new Goldman Sachs forecasts for crude have emerged. GS is now pointing to a level of $86 per barrel for Brent at the end of 2023, against a previous forecast of $95 per barrel. Why the forecast cut?

• Higher production from Russia and Iran offsets the impact of an additional cut from Saudi Arabia
• The market should be balanced after the AS cut, but there will not be a deficit
• GS expects higher production growth this year and next year from countries outside of key OPEC members
• Uncertainty about China

Technically, however, there is a potential signal of a quadruple bottom. The price would still have to fall a few tens of cents, but this is a very important test for oil. Usually the fourth test of support leads to a breakout, so the emergence of very negative news on, for example, demand from China or the continuation of hikes by the Fed could lead to a breakout from the consolidation. On the other hand, if oil survives this test, it seems that the trend should eventually reverse and lead to a breakout to price ranges, probably to levels of $80-90 per barrel.

 

 

The recent lows associated with the triple/quadruple bottom formation are near $71.5 per barrel. If a rebound from this area were successful, then, with a breakout of the neckline near $78 per barrel, the range of the formation would point to around $85 per barrel, where the retracement of 23.6 currently holds.

[Solid ECN ✔️]

US100

 

Wall Street futures are expected to open higher at the beginning of the new week, with investors eagerly awaiting important Consumer Price Index (CPI) data and the Federal Open Market Committee (FOMC) decision on interest rates later in the week. The US500 index futures rise a 0.3% increase, reaching 4320 points, while the US100 (NASDAQ 100) trades 0.5% higher at 14630 points, which is close to this year's all-time high of 14680 points.

 

The financial markets are currently dominated by a positive sentiment, as investors anticipate the Federal Reserve to announce a pause in their cycle of interest rate hikes after a string of 10 consecutive increases. This sentiment has led to an appreciation of higher-risk equities, while the performance of major currencies has caused the dollar index to decline. The US100 (NASDAQ 100) has experienced modest gains, indicating a potential continuation of the bull market trend.

 

 

The US100 index, currently priced at 14630 points, is displaying a strong upward trend, suggesting a robust bullish momentum. This is supported by the bullish signal from the Moving Average Convergence Divergence (MACD) indicator, with higher highs indicating a strong upward movement. The next potential resistance zone for the US100 index may be around 15000 points. However, if the price fails to reach this level a retracement to around 14300 points or even further down to 14000 points is possible.

[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 ✔️]

GBPUSD - Chart of the Day

 

Economic outlook

The robust labor data suggest that the UK economy is doing better than predicted despite high inflation and rising central bank interest rates. The job report indicates that workers are demanding and receiving pay awards, which, coupled with businesses' higher pricing intentions, risk of a wage-price spiral. As such, the Bank of England may decide to continue raising interest rates to fight inflation.

 

 

Post-publication of the labor data, GBPUSD has seen a modest rise. The pair is currently hovering near the highs, although the jump only roughly halves the losses from the previous day. Given that markets have already priced in about 100 bps worth of future rate hikes, this report doesn't significantly change that. Therefore, the gains for the pound may be more limited if solely reacting to the labor data. Additionally, GBPUSD performance will be highly reactive to the upcoming US CPI inflation report and the tone set by the Federal Reserve. The possibility of a future rate hike in July by the Federal Reserve may support dollar and could put a downward pressure on GBPUSD currency pair.

[Solid ECN ✔️]

 

Ripple

 

Cryptocurrency RIPPLE gains 5% as fintech lawyers await to get access to internal SEC correspondence in court later today. Ripple has been fighting the SEC for nearly 2 years according to which the cryptocurrency is a security, and the company behind it has committed illegal sales. The cryptocurrency has proved surprisingly resilient to the crypto crisis of recent days.

• The dossier due to arrive in court today is expected to include messages exchanged by SEC members after former director Hinman's speech. The one contrary to Gensler's position indicated that cryptocurrencies could be commodities. Potentially inconsistent comments could undermine the SEC's authority and increase Ripple's chances of winning in court.
• The Federal Trade Commission (CFTC) has long been in dispute with the U.S. Securities and Exchange Commission (SEC) over whether cryptocurrencies should be considered commodities or securities. Over the years, there has still been no consistent position on the issue. This regulatory mess could be exploited by lawyers;

 

A look at the chart

In recent weeks, which have been very weak for crypto, the price of Ripple has managed to rise unexpectedly. The chart below shows the divergence between Binancecoin (yellow chart) testing the December minima, and Ripple - this one has been gaining since late May. In contrast to Bitcoin and most cryptocurrencies. The market is taking a positive view of the chances of winning in court, with the judge allowing evidence of the Commission's internal correspondences into the case despite the SEC's protest.

 

 

RIPPLE is climbing in the vicinity of 0.56 USD, and potentially breaking the psychological resistance of previous peaks at 0.57 USD may open the way to 0.68USD where the price may encounter the first significant resistance (past price action).