News

Our newsletters rarely cover the outlook for the Canadian dollar. This is due to the “more interesting” currencies and comodities traded by our subscribers. However, that does not stop us from keeping an eye on the US dollar/Canadian dollar pair. Now is the moment when all active traders should pay close attention to it.

USD/CAD

Above is not our usual daily chart, but a monthly chart of the US dollar/Canadian dollar pair. What do we see there? The price has approached a 6-year low from as far back as 2015. Moreover, it is now just above the all-important circular level of 1.20. If we go to the daily chart, we can see that the bears have been trying to sell it for a few days now, but so far without much success.
What are we showing it for? There could be very strong moves in this pair in the coming days, either one way or the other. This means that it becomes interesting for our traders. There is a potential to take a big movement.
What is important to understand? Breaking through the level of 1.20 in the next few days is probably not going to tell us anything. Why? The fact is that the markets are waiting for the US and Canadian unemployment data, which will be released next Friday. Synergies are emerging. It is very common for data to come out better than forecast in Canada and worse in the US. Or vice versa. And that actually doubles the movement.
By the way, why did the Canadian dollar rise so much compared to the levels shown in previous years? The stars have aligned. On the one hand the US dollar is depreciating because of the huge amount of unsecured money. And on the other hand oil prices have risen sharply. Black gold is Canada’s main export product. What’s more! It is not just a question of the physical sale of oil. The rise in its value is leading to investments in new wells and infrastructure. The investment comes in US dollars and is exchanged for Canadian dollars, leading to an even greater demand for it.

14.30 US Personal Income for April
14.30 US Personal Spending for April
16.00 US University of Michigan Consumer Confidence Index for May

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

An idea that we constantly bring to the attention of our subscribers. Markets are extremely insidious and like to do things that no one expects them to do. This is exactly how the gold market is behaving this year.

XAU

Since the beginning of 2021, inflation has started to accelerate around the world. Commodity prices began to rise rapidly. And gold, which is considered the best defence against inflation, began to fall. And it fell for four months. What did fundamental traders have to do? They had to constantly close their positions on stops. Then they would go long again, hoping that finally an uptrend started. And then they would exit again on stops.
All this went on until the gold began to not interest anyone. The attention of the markets switched to Bitcoin’s rise. Moreover, one of the growth drivers of the first cryptocurrency was the overflow of money from gold ETFs into BTC. As a result, both volatility and trading volumes on the yellow metal fell to an annual low.
It was at this point that we suggested that the market had finally bottomed out. There is simply no one to sell further. The technical and fundamental point of view showed that at any moment an uptrend will start. It began. The whole beauty of the situation for the bulls is that the gold has been rising for a month, and not many people pay attention to this growth. This means that we are still very far from the potential end of the move. The higher the prices go up, the more funds and speculators will go back into the longs, only pushing the price higher.
We noted that the only risk for the bulls is a potential interest rate hike in the US. However, the Fed governor has once again reassured the markets. Rates will not rise for a long time to come. Therefore the nearest psychological resistance is at 2000$. After its passing, the talks that gold is highly undervalued will start again. And predictions of new historical highs for the yellow metal this year.

14.30 US Q1 GDP
14.30 US Durable Goods Orders for April

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The Chinese authorities have issued a statement that they will crack down on cryptocurrency mining. Immediately after the news broke, bitcoin collapsed again. It seemed as if the sky had fallen to Earth. But what does China’s mining ban really mean for the market? Let’s get to the bottom of it.

BTC

Today, up to 2/3 of bitcoin mining capacity is located in China. The ban means that all large, officially operating companies will be forced to shut down production.
What happens next? Next, they will move the equipment to other countries and reopen. Or they will simply sell the equipment to other companies. There won’t be any problem with that, given the huge shortage of asics on the market.
Bitcoin mining will not be affected in any way. A new block in the network is mined about once every 10 minutes. And with or without the closure of mining in China, the same amount of bitcoins will be mined in a month. Where is this panic selling coming from then? Because many traders don’t understand this simple thing.
Now for the more difficult part, which few people think about at all. What does it mean to move equipment to other countries? It means using more expensive electricity. Huge capacity has been deployed in China precisely because of the world’s cheapest access to an electrical outlet.
What’s the threat to bitcoin from a more expensive outlet? It doesn’t threaten anything. What’s more! It’s exactly the opposite. More expensive electricity will mean a more expensive cost of mining new bitcoins. And this is precisely not a bearish signal, but an extremely bullish one. That is, from some level miners will simply not sell mined BTC, expecting the price to rise. And that level, after the transfer of mining and China, will become much higher.
And another extremely important point, which will pay off over the next few years. There was a lot of talk that China could take over the BTC market, at the expense of mining. That risk is now a thing of the past. Bitcoin mining will become much more decentralised. This will lead to even more trust in the first cryptocurrency.
So the market was wrong? The market is always right! The traders discounting BTC on emotion were wrong.

04.00 New Zealand National Bank interest rate decision
05.00 New Zealand National Bank Press Conference
10.00 ZEW Swiss Economic Expectations Index for May

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Of course, we are talking about bitcoin. And the whole cryptocurrency market. In the last newsletter we advised medium and long-term investors to look at the first cryptocurrency. It has fallen to attractive levels. And today we can already ask ourselves the following question. Has a low been reached from which the uptrend will continue.

BTC

There was no new “bad news” to push cryptocurrency holders into selling on Wednesday. However, there was a major collapse. BTC was down to $29,000 at one point. Many altcoins were down 2X in the moment compared to levels seen 24 hours ago.
The only reason for what happened is because of panic sell-offs related to margin-calls. It’s no secret that not only at forex brokers, but also at cryptocurrency exchanges, many use high leverage. So during Wednesday’s collapse, the exchanges closed positions of such traders at any price, only intensifying the downward movement.
All this is similar to what happened on March 13, 2020, when BTC collapsed two times in one day. It should be noted that this Wednesday’s drop was not as severe. But psychologically, the situation is similar. The heavens seem to have collapsed to the ground.
But there is one difference in those collapsed skies. The price of bitcoin now, even after the fall, is still 10 times higher than it was 14 months ago. Let’s remember what analysts were saying at the time. They argued that this was the complete end of the cryptocurrency market. Bitcoin would no longer be of interest to investors. What followed was a rise from $3,500 to $65,000.
It is now important to understand. Whether the $29000 level was a low or not. By the way, note that this is the price at which the first cryptocurrency closed trading on 31 December 2020. So, for all the panic, the price of BTC still refused to move lower.
One thing is certain. “Smart money” knocked a large amount of cryptocurrency out of the “weak hands” yesterday. And big investors built up their BTC holdings.

03.30 National Bank of China Interest Rate Decision
03.30 Australian unemployment rate for April
14.30 US initial jobless claims for the week

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

After failing to gain a foothold above $60000, the first cryptocurrency began to decline. The primary driver was data on a sharp rise in inflation in the US. A new announcement by Elon Musk led to a precipitous drop.

BTC

So what did Tesla’s founder say? That the company will not accept bitcoins as payment for cars. Why not? Bitcoin mining consumes too much electricity. Which means bitcoin mining affects the environment. When the developers solve this problem, bitcoin will be added as payment again.
From the outside, this may seem like the height of cynicism. Didn’t Ilon Musk know 2 months ago how much electricity miners were wasting? Of course he knew perfectly well. Then what’s the question?
We think the whole thing is simply that no one wanted to buy Tesla cars paid in bitcoin. Or rather, some buyers did, but they just couldn’t pass the CUS. Can a resident of Nigeria pay with the first cryptocurrency for a Tesla? Yes, he can. But the company won’t be able to accept such a payment because it could be accused by US regulators of helping with money laundering. And U.S. citizens who have official jobs and official incomes on which taxes have been paid can buy a car without BTC.
This is the tip of the iceberg. And in reality it appears to be a huge market manipulation. If this had happened in the stock market, Elon Musk would have already been in court and out on very high bail. However, crypto is not yet regulated at the proper level, so the Tesla CEO’s statement goes completely unpunished.
What’s in it for traders?
Traders got increased volatility. And this is already a good thing. No volatility, no earnings. And investors, who have long been waiting for the drawdown, should reflect on whether it is the right time to take a position. I am talking about long-term investments with a horizon of more than 1 year.

08.00 UK Consumer Price Index for April
20.00 US Federal Open Market Committee meeting minutes

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

A careful reader of our newsletter will remember that we asked a similar question about a month ago. Indeed, traders’ interest in the yellow metal has declined due to the downtrend and lower volatility. And it was then, a month ago, that we advised to pay attention to gold again. What has happened in the meantime?

GOLD

Exactly what we predicted happened. Both technically and fundamentally.
Let’s start with the technical picture. The pattern on the chart is still the same, it has not changed. The moment the gold broke the upper line of the descending channel, we estimated that a new uptrend starts and the fall ended. Then a double bottom appeared on the chart and the price immediately pushed up from it. Again we noted that this was a powerful bullish signal. The price went up without stopping, breaking through the 50-day moving average at first. And now it has already approached the 200-day moving average.
And what about the fundamental point of view? The situation looks extremely absurd. All industrial commodities have risen strongly in the face of accelerating inflation. And gold, which for centuries has been considered the main anti-inflationary asset, has fallen. Naturally, this absurdity could not continue. The yellow metal has started to rise again. However, this growth does not look too strong. Therefore, the end of the new medium-term trend could be far away.
What could prevent this from happening? What is hanging over the market like a sword of Damocles. It’s not even an interest rate hike in the US, just talks on the subject. In this case gold is simply an asset which is falling, on a par with stock market equities, emerging currencies and commodity futures.
One thing remains true. At the moment there is little focus on gold. It will rise sharply once it passes the $2,000 level. Which means the yellow metal still has a lot of potential to move on the risk/reward ratio.

04.00 Retail sales in China for April
16.05 Clarida FOMC speech

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The US consumer price level (inflation) rose by 4.2% year-on-year in April. Analysts were expecting a rate of 3.6%. Such an increase has not been seen in America for more than 20 years. Naturally, the dollar began to rise immediately, and all risky assets sold off.

S&P 500

Does Fed chief Jerome Powell think everything is under control?
What 2% annual inflation can we talk about when the Bloomberg Commodity Index of 23 commodities has risen by half in the last 7 months? The argument that rising commodity costs will have no effect on rising goods costs is a 5th grade schoolboy’s argument.
That said, the Fed has 2 main objectives. They are to ensure minimum unemployment and to keep inflation no higher than 2%. Both objectives have completely failed. The unemployment rate remains above 6% and inflation is already more than double the target.
What should the Fed do to stop the depreciation of the US dollar? Of course, raise interest rates and stop printing money out of control. Instead we hear assurances from the head of the Fed that everything is under control.
However, everything that Jerome Powell will say is known in advance. And it really is a mockery of common sense. Then why does the head of the Fed keep doing it? And why does the American elite, gritting their teeth, support him?
The answer is that the Fed is trapped. It has no good moves left. Anything it doesn’t do will be a bad decision.
Suppose the Fed raises the rate to 4% tomorrow. The outcome would be the following:
– A stock market crash and the ruin of many companies kept afloat by cheap money alone.
– Rising unemployment. Yes, a rise above the 6% mark.
– And worst of all. The US debt is $40 trillion. At 4%, it would need to spend $1.2 trillion annually just to service the debt.
How did America get to this point?

14.30 US retail sales in April
16.00 US University of Michigan Consumer Confidence Index for May

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

In Scotland’s first post-Brexit parliamentary election, the pro-Brexit parties won a majority. They now intend to call a referendum on independence – and to sue London over its legality.

GBPUSD

The counting of votes cast in the May 6 election only ended in Scotland on Saturday evening – and it emerged that the two separatist parties, the ruling Scottish National Party (SNP) and the Greens, performed worse than the polls had promised them, but still together won a majority of 72 mandates 64 and 8 out of 129.
It was not without reason that we stressed that the election results were not known until Saturday, when the forex market was closed. Next, many traders started making apocalyptic predictions about what would happen to the pound sterling on Monday.
It was predicted that the British currency will fall to 1.35 on Monday and to 1.30 during the week. What actually happened? It was the exact opposite. Right from the market opening sterling began to rise steadily, not only against the US dollar, but also against other major world currencies.
On this move, individual traders were averaging out by selling the pound. Logic said that there was a mistake, soon the British currency would turn around and collapse. However, this did not happen, and the growth has only accelerated. As a result, many traders, who traded with big leverage, incurred huge losses.
So why didn’t the pound fall? That is a separate big question. In short, the British government decided to flood the issue with money. Huge investments have been promised to the Scottish regions, bypassing the government.
But that’s not what we’re talking about today. In today’s world, playing on the news is becoming an increasingly dangerous pastime. The irrationalism of markets means that the more confident we are about the news and the direction of the market, the more often the market disappoints us. The problem is that huge confidence leads to MM breaches and traders take much more leverage than they can afford.
And the cherry on the cake. Pay attention to the chart. We have not changed the trend lines on it for many months. And right now the price is approaching the lower boundary of the channel again, with lots of stops.

08.00 German consumer price index for April
08.00 UK Q1 GDP
14.30 US Consumer Price Index for April

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

All talk of a quick recovery of the US jobs market and thus an imminent rate hike was shattered by the harsh reality on Friday. The new job creation and unemployment figures came out as a failure.

S&P 500

Almost 1 million new jobs were expected to be created. In fact, it turned out to be about 270 thousand. Analysts had forecast an unemployment rate of 5.8%, in fact it turned out to be 6.1%. It was very far from what analysts had expected. For the analysts, of course, this is bad. But for the stock markets around the world it is good. A very weak labour market report would loosen the Fed’s rhetoric. We won’t be hearing about a monetary policy tightening anytime soon. There will also be less talk of an inflationary spiral.
In a bid to prop up the economy, the Donald Trump and Joe Biden administrations have been pouring money into the economy. And they continue to do so. Particular attention is directed at unemployment benefits, which in many cases are more (including state-specific supplements) than the person previously received at their job.
The result is complete absurdity. Why would a person go out to work, guaranteeing a lower standard of living and drastically reducing the amount of free time they have?
This absurdity has direct proof. According to the same Friday data, pay has risen much more than analysts expected. That is, with 10 million unemployed in the US, employers are forced to raise wages because they cannot attract the right number of workers.
Added to this is another problem. The shortage of raw materials. It is the one that has caused the prices of oil, copper, lumber and virtually all recyclable products to skyrocket.
And now what the analysts will not start talking about until a month from now. The current situation (high benefits preventing people from going to work + a shortage of raw materials) will lead to a slowdown in the US economy. Corporate reports for the second quarter could be much worse than expected. As a result, inflation could fall to 2% by the end of the year. And there will be talk of a new Fed stimulus programme.

03.03 Australian retail sales for March
10.30 EU Sentix investor confidence indicator for May

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

We are not claiming that a new commodity supercycle is coming. That’s what analysts who have been impressed by the growth of recent weeks in commodity markets are saying. And it is important for us, as traders, to know how to take advantage of the emerging opportunities in the forex market.

aud/usd

Strong demand from China, increased government spending on economic recovery programmes after the pandemic. And the trend towards “greening” the global economy has lifted prices for many important raw materials.
Iron ore, a key ingredient needed to make steel, palladium, used by carmakers to limit emissions, and timber hit record highs last week. Key agricultural commodities, including grains, oilseeds, sugar and dairy products, also jumped, with corn prices topping $7 a bushel for the first time in eight years.
At the same time, copper, the world’s most important industrial metal, is trading above $10,000 for the first time since 2011 and soybeans have reached an eight-year high. The S&P GSCI spot index, which tracks price movements of 24 commodities, is up 24% this year.
Of course, you could look at commodity CFDs. But forex traders have a good alternative. These are commodity currencies. Traditionally we are talking about the Canadian, Australian and New Zealand dollars.
If we look at the daily charts, we can see that the Canadian and New Zealand dollars have gained enough since the beginning of the year. The Australian dollar, on the other hand, is now trading at the same levels as at the start of the year. Meanwhile, the main export commodity, iron ore, has risen strongly and demand from China continues to increase.
This could lead to a strong uptrend at any time, with an upward move out of the range of recent months. The interesting thing is that it is not only the USD and the EUR which are likely to rise. But also in the crosses against the New Zealand dollar and the Canadian dollar. Especially interesting is the situation in the aud/cad pair. On the daily chart, the 200-day moving average is rising and the price is below it, at the important round level of 0.95.

14.30 US non-farm payrolls for April
14.30 US unemployment rate for April
14.30 Canadian unemployment rate for April
14.30 Canadian Employment Change for April

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.