Opportunities for Bitcoin and Oil this week
As a result, there were no significant moves for most of the instruments at the beginning of the week. The focus at the moment remains on the Fed’s greater hawkishness following comments from senior members of the FOMC last week. These have not led to a clear increase in the dollar index, but the yield on 30-year government bonds rose to around 3.8%, suggesting that interest rates may actually go higher than expected around this time last month.
President Biden made a surprise visit to Kiev on Monday and pledged more military support to Ukraine. While this has the potential to increase geopolitical tensions between Russia and countries that support Ukraine, markets seem to be ignoring the war for now and concentrating more on economic conditions.
This is a fairly unimportant week of data for most instruments, but the main event is the FOMC minutes on Wednesday evening. These may provide some clues as to the likelihood of a peak in the funds rate above 5.25%. The situation of low unemployment and high inflation together is ambiguous: many actors in the markets seem reluctant to commit to “risk on”.
The absence of clear new drivers this week unless there is a noticeable surprise in the FOMC minutes or from personal consumption expenditures on Friday means that technical action is likely to dominate for many instruments. However, bitcoin has been an exception: the ambiguity of most markets has driven a shift in focus to crypto.
Bitcoin has gained almost $9,000 in 2023 so far
Bitcoin has been one of the biggest beneficiaries so far of competing narratives in markets, in part because its losses late last year appear to have been exaggerated. Although institutional engagement here is lower than around the same time last year, the reaction to plans by the SEC to tighten regulation of cryptocurrencies has been positive so far.
The upward movement on the daily chart is strong technically with a triangle that has formed since approx. 15 February. A breach of this to the upside could signal further gains, while $21,500 appears to be a key support from which a bounce could be observed if tested.
Oil lacks direction amid lower volatility
The narrative of impending recession has moved somewhat out of sight in recent weeks amid strong jobs data, so an impending recession in most major economies looks unlikely. But as mentioned above, many players in markets are reluctant to make major moves in the context. OPEC+ appears determined to keep prices high, although US production appears to have peaked last December and has fallen slightly since.
Although the overall situation for oil appears to be optimistic, the same cannot be said about the chart. The price of Brent is below all moving averages of 50, 100 and 200, the slow stochastic is close to neutral and the ATR has reached a new low. ATR in the context of the chart may signal a buy in this situation – eventually volatility cannot go lower and must pick up – but the lack of reaction to reasonably positive news in recent weeks would indicate weaker sentiment.
$80 does not appear to be a major support, but December’s low just above $75 could be a demand area on the chart. On the upside, the 100 SMA around $86.50 is a likely resistance. This week, traders will monitor stock data and the Baker Hughes rig count from the US as usual and assess news on President Biden in Ukraine, China’s economy and the US strategic petroleum reserve.
The opinions expressed in this article are personal to the author. They do not reflect Exness or FX Empire.
This article was originally posted on FX Empire
