USD/TRY is on course to post a fifth successive day of gains during which time its has rallied from underneath the 11.00 mark to current levels just above 13.00. That marks a roughly 20% rally on the week and corresponds to an approximate 18.5% depreciation in the value of the lira versus the US dollar. The pace of USD/TRY’s rally has subsided somewhat this Friday, however, with the “only” trading higher on the day by about 0.6%, a tiny intra-day move in the context of recent USD/TRY volatility. The pair seemed to find resistance at its 21-day moving average which currently resides close to 13.50.
Renewed calls from Turkish President Recep Erdogan on Friday for Turks to have trust in his “new economic programme” has not had any notable intra-day impact on the price action. The President rallied against dollarisation/the use of other medium’s of exchange in the Turkish economy, saying “I want all my citizens to keep their savings in our own money, to run all their business with our own money, and I recommend this”. “Let’s not forget this” he continued in a speech to a Turkish business group, “as long as we don’t take our own money as a benchmark, we are doomed to sink. The Turkish Lira, our money, that is what we will go forward with. Not with this foreign currency, that foreign currency.”
The implementation of Erdogan’s “new economic programme” has put the lira on course to post its worst annual return in more than two decades. The lira has lost more than 40% of its value versus the US dollar. Erdogan thinks high-interest rates as a cause of inflation (the opposite of classic economic orthodoxy) and has exerted pressure on the CBRT, which is supposed to be independent of the government, to cut interest rates despite high inflation. Indeed, even though Turkish inflation is likely to close in on 30% in December and some analysts think it could surpass 40% next year, the CBRT has been aggressively cutting interest rates in recent months. Rates have been lower by 500bps since September to 14.0%.
The massive gulf between interest rates and inflation in Turkey means real interest rates reside in deeply negative territory, which has spurred an ongoing flight from the lira, worsened as investors in Turkey fear Erdogan is going to push the nation into hyperinflation.
USD/TRY surged as high as 18.0 earlier in the month, but then dropped back to near 10.0 after the Turkish government unveiled a raft of new anti-dollarisation policies including a pledge that the government would protect converted local deposits from losses via lira depreciation. Some analysts saw this as an alternative to rate hikes, hence supporting the currency at the time.
But analysts are clearly skeptical that the Turkish government’s new deposit protection scheme can provide lasting support to the beleaguered lira and reverse the recent dollarisation of the Turkish economy. Analysts at Societe Generale said that while the new assurance could provide some “backstop” for the currency, “market participants need to see tangible steps to address underlying problems in the economy”. In other words, aggressive rate hikes to bring the CBRT rate above the inflation rate and Erdogan permanently stepping back from his meddling in the central bank’s affairs.
That is not going to happen anytime soon, which is likely why the lira has been back under selling pressure this week. Some analysts think the government’s new pledge adds to downside lira risks given that rapid lira depreciation now exposes the government to massive liabilities where it has to reimburse investors for their lira-depreciation-related losses. With CBRT forex reserves sat at a two-decade low of just $8.63B, there is precious little the central bank can do to push back against a new wave of lira selling pressure.Full Article
The first week of next year will have a busy schedule regarding economic data. In the US and Canada, employment numbers and ISM figures are due. Also the Federal Reserve will release the minutes from its latest meeting. Analysts from TD Securities expect a net job creation of 30K in Canada during December and NFP at 500K.
“The late-December COVID surge likely came too late to prevent a pickup in US payrolls after the gain in November (210k) appeared to be held down by an overly aggressive seasonal factor. In Canada, we look for labour market gains to moderate with 30k jobs added in December, well below the 6m (126k) trend, which should leave the unemployment rate stable at 6.0%.”
“Following the FOMC’s decision to double the pace of QE tapering and the projection of a significantly more hawkish dot plot, focus will now turn to the elements that led to the evolution of views among policymakers (including on “maximum employment”) after the November meeting. President Biden’s nominations for three Fed governor seats could also garner attention.”
“Data already released for December suggest slowing in the ISMs, but to high levels still. We expect the services index to decline more markedly following November’s eye-popping jump to 69.1—an all-time high—and given the likely initial impact from Omicron. The mfg index probably fell below the 60 mark for the first time in four months. Anything over 60 is exceptionally strong.”
NZD/USD is trading in a stable fashion just underneath the 0.6850 with New Zealand having now already welcomed in the new year. The pair found resistance at an uptrend that has been capping the price action since early December on Thursday and this, combined with prior monthly highs in the 0.6860s, has kept the currency pair subdued to the south of the 0.6850 mark. Most likely, amid holiday-thinned trading conditions where European markets have already closed for New Year’s Eve and volumes are very low, NZD/USD will continue to trade within its recent intra-day 0.6810s-0.6850 range into the year’s end.
NZD/USD’s gains on the month stand at a modest 0.2%, with the kiwi underperforming the Aussie by a surprising degree in December. For reference, the Aussie is set to gain about 1.9% versus the US dollar. However, NZD/USD is set to close out the year with losses of about 4.8% versus the buck, which is not nearly as bad as the Aussie’s 5.7% (at current prices) loss. Both currencies lost ground versus the US dollar amid a hotter than expected recovery in the US economy and labour market sparking a much larger and longer than anticipated surge in US inflation, thus triggering a hawkish pivot at the Fed. The fact that the New Zealand economy has been running comparatively hotter than the Australian economy, thus prompting the RBNZ to have axed its QE programme long ago and hike interest rates twice, seems to have supported the NZD over AUD.
But as indicated by the divergence in the two currencies’ December performance, investors are clearly doubtful about whether NZD outperformance against the Aussie can continue into 2022. The RBNZ has been known to be the G10’s most hawkish central bank for some time and the risks seem more tilted towards the bank underdelivering rather than overdelivering. Meanwhile, the RBA has room to pivot substantially in a more hawkish direction. While the RBA hasn’t yet conceded that its first post-pandemic rate hikes could be coming any sooner than 2023, markets are priced for the bank to start hikes in 2022 in tandem with the Fed. Strategists might argue that there is thus also substantial room for the RBA to disappoint.Full Article
Shiba Inu (SHIB) price is a bit stuck between buyers and sellers as bulls are trying to push back above $0.00004000, while bears are trying to trap bulls and get them to be stopped out of their long positions. As SHIB is still a young cryptocurrency in its existence, not all or many technical elements are present, but as the $0.00004000 was the historical high in the first trading week of its existence, it will be essential to see if bulls can break above it to make new all-time highs in 2022. With that high at $0.00009000, bulls will need some external tailwinds to get that far.
SHIB price got stuck in a bit of a downtrend after hitting those all-time highs in October, after which price action collapsed and found support around $0.00003000. Since then, price action has been range trading a bit with the historical $0.00004000 proven to be a difficult hurdle to jump above. As bulls tried to push bears against that level to squeeze them out, the lack of momentum and tailwinds made price action dip to the downside this week, starting to form a bull trap. Do not expect any considerable risk to the downside as SHIB is well supported with $0.00003000 and a bit further below at $0.00002640, historical support still waiting to be tested.
As the Relative Strength Index (RSI) is still hovering above the 50-marker, this shows that investors are present and are buying into SHIB, even when the price action is on the back foot. Expect thus sooner rather than later to see a bullish breakout above $0.00004000 as the investor side is starting to enlarge against fewer sellers. A weekly close above $0.00004000 would deliver a bright buy signal to hesitant buyers and bulls looking for an opportunity to get in, which could see a rapid uptick towards $0.00007000, which falls in line with the monthly R1 resistance level.
SHIB/USD daily chart
If global markets start 2022 on the back foot, expect to see investors be somewhat hesitant before joining Shiba Inu price action. Expect bears to succeed in their bull trap and dip towards $0.00002640. As this level still has to prove its support, keep in mind that it could not stop the downward price action. The 200-day SMA around $$0.00002000 could be the fail-safe level needed to prevent Shiba Inu from devaluing further.Full Article
The USD/CAD drops to fresh three-week lows during the New York session, trading at 1.2677 at the time of writing. The last trading day of the year has a downbeat market mood; despite that Asian equities closed in the green, European stock indices like the CAC40 and the FTSE 100, the only ones open, are down, while US equity futures slide.
Thin liquidity conditions and a weaker US dollar across the board boost the prospects of the loonie, despite US crude oil prices falling around 1%, as investors close their books, aiming towards 2022. Nevertheless, the US central bank hawkish pivot led by Fed’s Chief Jerome Powell, appearing at the congress on November, emphasizing that inflation is no longer “transitory,” put a lid on the USD/CAD fall, as market participants assess which of the Fed and the Bank of Canada (BoC) would be the first to pull the trigger hiking rates.
The USD/CAD daily chart depicts the pair as upward biased in the long-term, but a technical break of an upslope trendline drawn from October 2021 swing lows, paves the way for further losses, as CAD bull’s aims for a test of the 50-day moving average (DMA) at 1.2652.
In the event of breaching the aforementioned, the following USD bulls line of defense would be the 100-DMA at 1.2626, immediately followed by the December 8 swing low at 1.2607.
On the other hand, the first resistance would be 1.2700. A break above that level would expose the December 30 swing low support-turned-resistance at 1.2734. and then the upslope trendline break around the 1.2740-60 area.Full Article
The USD/MXN is trading at 20.34, the lowest level since November 10, falling for the fourth consecutive day. The Mexican peso strengthened across the board on the last week of the year and pushed the cross further lower.
Technical factors also contribute to the decline, first with the break of an uptrend line and then with the slide under the 20.45/50 support area. Now USD/MXN is looking at the 200-day simple moving average that awaits at 20.27.
An improvement in market sentiment across global financial markets helped the MXN. The currency was the best performer in December and is about to end the year with small losses versus the US dollar.
The short-term outlook continues to favor the downside, although the daily RSI is approaching 30. So far, no signs of a correction area seen. The area around 20.25/30 should limit the downside and could trigger a rebound to 20.45. If it breaks below, the next support at 20.10 would be exposed.
To remove the negative bias, the dollar needs to rise above 20.90. Before that level, resistance levels are seen at 20.50 and 20.71.
At this point, the evidence is overwhelming that omicron is much less severe than delta. Pile on vaccinations, booster shots and prior infection and it’s clear the market figured this out quickly.
I’m closely watching for a potential omicron outbreak in China. Officials in Hong Kong today confirmed two cases of local transmission of omicron. Those are the first locally-transmitted covid cases in three months.Full Article
On the final trading day of the year, a day marred by low liquidity/volumes given market closures across Europe and other parts of the world, EUR/USD has continued to find support at its 21-day moving average. The pair rebounded from a test of the 1.1300 level for a second session running and has, despite the recent closure of the few European markets that had actually been open on New Year’s Eve, is rebounding towards 1.1350. The short-term bulls won’t be getting too excited just yet given that the pair continues to trade within recent ranges and below the 1.1360-80ish monthly highs that have acted as a ceiling over the past few weeks.
EUR/USD is likely to remain subdued within recent ranges for the rest of what will be a very quiet session and looks on course to close out the month ever so slightly in the green. On the year, the pair looks on course to post a 7.0% decline. A blistering US economic and labour market recovery driven by a combination of massive fiscal and monetary stimulus has pushed inflation in the US to four-decade highs and triggered a hawkish pivot from the Fed. While the Eurozone recovery has also been strong and inflationary pressures there are also elevated, the ECB’s hawkish pivot has been much less aggressive (they will taper the pace of QE purchases in 2022, but have not yet set an end date). This has been a key factor weighing on the pair this year.
Looking at EUR/USD from a technical perspective; some technicians might argue that the pair has formed an ascending triangle in December, with gains capped in the upper 1.1300s, whilst the pair posted ever higher lows throughout the month. That suggests a bullish breakout could be in the offing, though this may cut against the fundamentals. Many FX strategists expect dollar strength to persist in Q1 2022 as the Fed winds down its QE buying to zero and perhaps even kicks off its hiking cycle. The market’s reaction to what will in all likelihood be a very strong US labour market and ISM PMI survey data next week will be a good guage of the market’s appetite to continue to chase the dollar higher.Full Article
Front-month WTI futures slipped to fresh lows for the week near $75.00 per barrel in recent trade amid what appears to be some modest profit-taking in holiday-thinned trading conditions on the final session of the year. Prices have since rebounded to around the $75.50 mark, but choppiness may continue into the US session amid expectations for a continued lack of liquidity.
Intra-day volatility that has seen WTI dip just under $1.0 on the session shouldn’t distract from the fact that oil prices are set to post their best annual return since 2009. WTI is set to post gains of more than 55% having surged from lows last January of underneath $50.00 per barrel. Crude oil has surged this year as the global economy has recovered from the 2020 pandemic-induced recession and become more resilient with time to successive waves of the virus, largely thanks to rising vaccination rates.
After surging as high as the $85.00s in October (annual gains of nearly 80% at the time), oil prices saw a sharp correction lower in November and into December on fears of economic disruption and crude oil demand destruction after the emergence of the new, highly transmissible Omicron variant of Covid-19. However, as evidence has built over the last few weeks that the new variant is far milder than any prior strains of the virus and government’s have held off on imposing lockdowns, risk-appetite and crude oil prices have recovered sharply. WTI is thus set to post a monthly gain of about $8.50 or nearly 13% and is more than $12.50 or 20% up from earlier monthly lows in the $62.00s.
But Omicron risks remain, with countries across the world (including the US, UK and Australia)reporting record daily infections and this is capping oil’s gains. The fact that New Year’s celebrations have been canceled across many parts of the world is indicative of some of the near-term risks faced by the global economy and could perhaps be behind some of Friday’s year-end profit-taking. Separately, some investors fear supply-side dynamics could weigh on oil prices in 2022 as OPEC+ and US output climbs.
These fears were on show in a poll released by Reuters on Friday. The median forecast of survey participants was for WTI to average slightly more than $71.00 over the course of 2022, a downwards revision of expectations for next year’s oil prices from the November poll. In the prior poll, the median investor forecast had been for WTI to average just over $73.00 next year. Sources speaking to Reuters earlier in the week said that the cartel looks on track to agree to hike output by 400K barrels per day again in February. According to analysts at Julius Baer, “with oil demand growth slowing, supply growth persisting, and the energy crunch easing, we see the oil market balance expanding rather than shrinking in 2022 and thus expect prices to trend lower from today’s levels.”Full Article
The ongoing rebound from the corona-lows was an impressive one in Europe as markets close for the year. There were slight declines today but the overall returns were impressive.
That will be tough to top in 2022 but the gains in France speak to the market’s ability to look past 200,000 daily covid cases and the CAC monthly chart looks good.Full Article
As Ethereum heads towards ‘the merge’ or the transition from proof-of-work to proof-of-stake, experts believe Cardano, Solana and Polkadot could outperform ETH2.
Experts believe that Ethereum’s transition to Proof-of-Stake (PoS) could allow the altcoin to onboard millions of new users. However, through 2021, layer-1 solutions have witnessed a spike in on-chain activity and transactions. Avalanche and Polygon have posted 435% and 125% growth in daily active addresses from September 2021 to the end of the year.
The spike in daily active addresses implies increasing investor interest in layer-1 scaling solutions. Experts have predicted that the merge would increase active users and the transaction volume on the Ethereum network.
The underlying improvements implemented by the merge are expected to lower the transaction cost on the network. However, it is unclear whether the migration from one consensus mechanism to another would help the Ethereum network compete with rising layer-1 scaling solutions.
Cardano, popular as an Ethereum-killer, recently launched its ERC-20 converter. The community will now have the ability to bring ERC-20 tokens from Ethereum to the Cardano network.
The Ethereum-killer blockchain has revamped its network to release contracts at a higher capacity.
@FeraSY1, a crypto analyst and educator, believes that the drop in Ethereum prices is a red flag. The analyst notes that the current cycle’s drop-in altcoin prices is a red flag for cryptocurrencies.
Such disastrous performance for #Altcoins, even for the best ones like $ETH is a big red flag for me not to blindly hodl cuz u NEVER know when things flip upside down, and the moment bear market confirmation kicks in, it will be toooo late to take any protective action
— Crypto Feras (@FeraSY1) December 30, 2021