Stock futures are shaking off some of the pessimism we saw last week, pointing to a higher open for both the European and US futures. There is no doubt that equity markets worldwide have been massively oversold, bargain hunters have been preparing their lists for a while, and now they are out shopping. One may still want to take an immensely cautious approach with the current markets as the bounce that we see in the stock futures and the European markets could turn out to be nothing more than a dead cat bounce. This is because nothing is addressed in terms of the fundamentals that pushed the markets lower, and Fed officials in the US are only adding more noise. For instance, James Bullard said yesterday that the US economy isn’t shrinking and will expand more aggressively than the market expects. The reality is that the US economy is only one GDP reading away from falling into recession. Soaring inflation, which has brought this situation for the US and the world, hasn’t reached its peak. In addition, there are still no signs that can flag when inflation in the US will reach its peak, and this is even more worrying for investors and traders.
Regarding the economic calendar, we have the US Existing Home Sales data coming later today. It is widely anticipated that the reading will be lacklustre as the Fed continues to increase the interest rate more aggressively, putting consumers further into a tighter spot. In addition, we also have the Fed member, Mester, speaking later today, and traders will be looking for a more coherent message. However, this is not what we get as various Fed members hold different views of the economy and create more unnecessary turmoil in the market with their views of the market. At 12:30 GMT, traders will also see the Canadian Core Retail Sales m/m, which is expected to show consumers aren’t spending like before as their disposable income has been adversely influenced due to soaring inflation. A weak economic reading will likely push the Canadian currency lower against the dollar.
Traders have started to believe that the 20K support level was what Hodlers have been waiting for as the price is respecting this price level. The reality is that the BTC bears are only gathering their momentum after pushing the price lower by more than 70% from its all-time high, and there could be another 10% more on the cards before we see the price reaching a real bottom. In simple terms, we are still not there, and the BTC price is likely to move a bit more, and a real bottom is likely to be near the 15 to 13K price level as the crypto winter has still too many winter nights left.
The precious metal is also in the recovery mode today as the dollar index continues to retrace from its highs. For gold traders, two things matter the most. Firstly, the risk-off mode among investors and traders when it comes to the price. If there is too much uncertainty in the market and traders are nervous about the stock market, we do some investors placing bids for the yellow metal, which brings more shine to the metal. Second is the monetary policy stance among Fed members. Tomorrow we do have Fed Chairman Jerome Powell testifying, and his commentary is highly likely to be a source of volatility for the gold price.
Oil prices continue to wobble while investors are focused on the demand and supply equation. The US releasing oil from its strategic reserves last week has helped the prices, and the fact that there are higher chances of a recession taking place in different parts of the world is also keeping the demand in check. The front-month prices for both Brent and Crude are quite significant, and we saw them dropping last week; if we do see the price action following the same pattern this week, we could see the long-term curve pulling away from its highs as well.
The US is trying its best to mitigate the adverse effects of Russian oil being under embargo and its influence on the oil supply. Still, the strategic reserves in the US are nearly at 40 years low now, and there is not much the US can do, especially if oil demand picks up, and that is if we see an improvement in the economic sentiment in China.