Cryptos and risk assets struggle ahead of the Fed meeting this week
Oil => The commodity holds above 85.00
ETH/USD => The cryptocurrency falls to 1300
EUR/CAD => The pair falls below 1.1500
Oil steadies as China lifts some COVID lockdowns
Oil prices fell last week as economic indicators pointed to a sharp economic slowdown, which could dampen oil demand. As the markets brace for recession, the outlook for oil demand eases, leading to falling prices. Oil fell 2% last week, marking the third straight week of declines. In addition to rising recession concerns, the stronger USD also makes oil more expensive for buyers of other currencies. So far in Q3, WTI crude oil trades 20% lower. Today oil is holding steady above 85.00 supported by China lifting some COVID lockdowns in large cities such as Chengdu, which is expected to boost economic activity in the city, helping fuel demand rise. This week is expected to be a big week for central banks, with the Fed expected to announce another jumbo-sized rate hike, a move which would slow growth further.
Where next for Oil?
Oil again failed to retake the 20 sma and rebounded lower, closing the week at key support at 85.00. The bearish RSI could keep sellers hopeful of further downside, although sellers must break below 85.00 to extend the bearish trend, opening the door to 81.00, the September low. Meanwhile, buyers could find hope in the fact that support at 85.00 was held. However, buyers need to re-take the 20 sma at 89.00 and weekly high at 89.95 in order to expose the 50 sma at 92.00 and the August 30 high at 97.00
BTC, ETH selloff continues
After losing over 7% last week, the selloff in BTC/USD continued across the weekend, shedding a further 6.5% to belo1 19k. BTC/USD is heading towards the September low of 18500, with few signs of the selloff easing. Meanwhile, Ether remains firmly out of favor and trades at its lowest level since July 1300.
The sell-off in the crypto space comes as Ether’s flawlessly executed Merge seems to be a distant memory, as the USD rises towards 110.00 and ahead of the US Federal Reserve interest rate decision. The fact that Ether has sold off so persistently following the Merge raises the question of the timing of the technological overhaul. While the real impact of the shift to the proof-of-stake protocol may not be genuinely apparent for months, the knee-jerk reaction has been far from encouraging, but that could also be the poor timing of the move. The macroeconomic backdrop is far from ideal.
Since the disappointing inflation data, which raised the prospect of the Fed raising interest rates more aggressively, cryptos and risk assets, in general, have plunged. The Fed is widely expected to hike rates by 75 basis points on Wednesday and could indicate even more hawkish measures going forwards. This week’s Fed meeting will likely set the tone for trading for the rest of Q3.
Technically sellers will be looking for a move below 17600, the June low, to extend the bearish trend.
EUR/CAD looks to ECB speakers & CAD PPI
EUR/CAD rose 1.5% across last week as measures by the EU to ease the energy crisis soothed the markers, and news that Ukraine was advancing in the war also buoyed the common currency. Meanwhile, the Canadian dollar traced oil prices lower. Weak Canadian housing market data added to the depressed mood towards the loonie. Today the pair is edging lower at the start of the new week as attention shifts to several ECB officials’ speeches, which could shed more light on the likelihood of another 75 basis point hike. Meanwhile, CAD traders will look toward Canada’s wholesale inflation data, which is expected to fall further in August after falling in July. Wholesale inflation is often considered a lead indicator for consumer prices, so a weaker than forecast cast read could suggest consumer prices will soften further.
| CAD PPI MoM Aug. | Expected: –2.7% (0.6%) | Previous: -2.1% |
Support can be found at 1.3080 (50 sma) and 1.30 (psychological level).
Resistance for the pair can be seen at 1.3320 (September high) and 1.34 (June low).
