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According to the IMF, at the end of 2022, the share of USD in the reserves of national banks of different countries was 58%; to compare, in 1999, its share was over 70%. At the same time, more and more countries are calling for abandoning the dollar in trade.

Bloomberg writes that USD value is under pressure because of:

→ tough Fed policy;

→ banking crisis in the US;

→ strengthening of the yen and yuan.

At the same time, Arthur Hayes, co-founder of the BitMEX exchange, has opined that bitcoin can become a reserve currency — in his opinion, the exchange rate of the main cryptocurrency against the US dollar can reach 1 million.

The bold predictions of crypto enthusiasts are becoming more fantastic as the BTCUSD chart forms a bearish pattern — a false bullish breakout of a long-term downward channel. Orange marks indicate price action, which confirms the validity of the channel: if the price continues to move within it, the scenario of a decline to the USD 20k level will become more realistic.

More than a third of the companies whose shares are included in the S&P 500 index will report their earnings this week.

Bank of America analysts note that of the companies that have already released their first-quarter earnings, 27 have raised their earnings-per-share expectations — the best start to the season since 2012.

However, despite a promising start to the reporting season, the S&P 500 was down last week (and has also been bearish since Monday morning). According to Business Insider, this could be due to several factors:

→ reports look positive because forecasts were initially lower;

→ the impact of the banking crisis is not yet fully reflected in the results of companies;

→ the growing risk of default on federal debt is factored into the stock market valuation. The cost of CDS (insurance against default) updates multi-month highs.

Also, from the technical side, note the restraining influence of the resistance line (1) 4,170, which we have pointed out several times. If the reports this week turn out to be disappointing, this may lead to a bearish breakdown of the median line of the current channel (shown in blue), which will open up the prospect of another descent to its lower border (2).

EURUSD opened with weak momentum on Monday, tiptoeing sideways within last week’s tight range of 1.0940-1.0988.

Despite the muted tone in the market, the technical picture remains encouraging. The price has been trading within a short-term bullish channel over the past month and slightly above its exponential moving averages (EMAs), while it recently secured a strong foothold around the 50% Fibonacci retracement of the 2021-2022 downtrend and the ascending line from October.

Meanwhile, some caution might be necessary as the RSI and the MACD seem to be losing impetus. Yet, the former is still fluctuating comfortably above its 50 neutral mark, while the latter is also clearly above its zero line, endorsing the positive trajectory in the market.

If the bulls cross above the 1.0988 border, which they could not successfully claim in February, the recovery may speed up towards the channel’s upper boundary seen around 1.1130. A continuation above the 1.1183-1.1230 zone could then clear the way towards the 1.1365 resistance and the 61.8% Fibonacci of 1.1450.

Alternatively, the pair may come under renewed selling pressure if the 1.0940 support region collapses and the price slides below its 20-day EMA. If that proves to be the case, the 50-day EMA currently at 1.0825 may immediately attract attention ahead of the 1.0735-1.0700 area. Moving lower, the bears may next target the 200-day EMA and the 38.2% Fibonacci level of 1.0609.

In brief, the short-term risk for EURUSD remains skewed to the upside, sustaining hopes for a bounce up to the channel’s upper bar despite the latest horizontal move in the price.

Market Picture

The total capitalisation of the crypto market fell 8.6% last week to $1.16 trillion, according to CoinMarketCap, returning to consolidation levels in early April.

Bitcoin has fallen 8.2% in the last seven days to $27.4K but is consolidating near levels from the second half of March. The market has erased its previous growth momentum and is now testing the strength of the medium-term uptrend in the form of the 50-day moving average (now at $27K). A break below this would call into question the bull market’s strength, while a consolidation below $26.6K could be the prologue to a more profound decline.

Ethereum lost 11.7% to $1850, also approaching a test of its 50-day at $1800, while other leading altcoins in the top 10 fell between 5.7% (BNB) and 16.2% (Solana).

Technically, the pullback in cryptocurrencies has cleared the accumulated overbought conditions, which is good for potential buyers. However, short-term traders would be wise to keep an eye on the near term as the risk of a sharp decline has increased.
News background

The US Congress is aiming for a bipartisan cryptocurrency bill. According to The Block, a bill could be drafted by the end of May.

According to ultrasound.money, the Ethereum market supply has dropped by more than 100,000 ETH since The Merge update. The deflation on the network after the move to PoS was 0.15% on a year-over-year basis.

Metropolitan Commercial Bank, one of the top 10 most efficient banks in the US in 2022, has notified the SEC of its withdrawal from cryptocurrency-related business due to the recent collapse of Silvergate Bank, Silicon Valley Bank and Signature Bank and regulatory pressure.

The Canadian Teachers’ Pension Fund of Ontario (OTPP) withdrew from cryptocurrency investments after investing $95 million in the bankrupt FTX crypto exchange.

Wallet developers have added the ability to buy Bitcoin via the Telegram messenger’s web interface. Previously, the feature was only available through a text bot in the messenger.

On the hourly chart of AUD/USD at FXOpen, the pair started a fresh decline from the 0.6770 resistance. The Aussie Dollar dropped below the 0.6740 support to move into a bearish zone.

There was a clear move below a major bullish trend line at 0.6705 and the 50-hour simple moving average. The pair is now consolidating near the 0.6670 zone. Immediate resistance is near the 0.6705 level.

The next major resistance is near the 0.6740 pivot level. If there is an upside break above the 0.6740 zone, the pair could rise steadily toward the 0.6770 level. Any more gains might send AUD/USD toward 0.6820.

Immediate support is near the 0.6670 level. The next key support is near the 0.6650 level. A downside break below the 0.6650 support might open the doors for a test of the 0.6600 support.

Last week's market movements remained confined to a narrow range. However, global inflation is still the main concern after last week UK CPI, and FED hawkish speculation have caused a slight rebound in US yields and the USD over the last two weeks. If stocks experience a descent from resistance levels, it is likely that we may see further growth in these markets.

This week's market behavior will be significantly influenced by forthcoming GDP data, earnings reports, and BOJ decisions. Based on the latest Elliott wave price action, we can anticipate that these factors will favor the USD. Additionally, the DXY shows a strong intraday bullish impulse, signaling more upside potential after the current consolidation phase.

If a sharp break higher occurs, it may trigger a sell-off on the EUR, GBP, and already weak commodity currencies like AUD and NZD. Overall, the market outlook remains uncertain, and investors should keep a close eye on these key indicators for further insights into potential market trends.

Germany Ifo Business Climate rose slightly from 93.2 to 93.6 in April, below expectation of 94.0. Current Assessment index dropped from 95.4 to 95.0, below expectation of 96.1. Expectations index rose from 91.0 to 92.2, above expectation of 91.6.

By sector, manufacturing rose from 6.5 to 6.7. Services dropped from 8.8 to 6.8. Trade dropped from -10.1 to -10.7. Construction rose from -17.5 to -16.7.

Ifo said: "German business's worries are abating, but the economy is still lacking dynamism.

Full Germany Ifo release here.

GBP/USD is eyeing a key upside break above the 1.2470 resistance zone. EUR/GBP is now consolidating losses above the 0.8825 support.

Important Takeaways for GBP/USD and EUR/GBP

• The British Pound is slowly moving higher from the 1.2365 support against the US Dollar.
• There is a key bearish trend line forming with resistance near 1.2440 on the hourly chart of GBP/USD at FXOpen.
• EUR/GBP started a downside correction from the 0.8860 resistance zone.
• There is a major bullish trend line forming with support near 0.8825 on the hourly chart at FXOpen.

GBP/USD Technical Analysis

On the hourly chart of GBP/USD at FXOpen, the pair found support near the 1.2365 zone. The British Pound formed a base and started a decent increase above the 1.2400 resistance against the US Dollar.

The pair even spiked above 1.2440 and the 50-hour simple moving average. However, upsides remained capped near the 1.2470 zone. The pair is now consolidating near the 50-hour simple moving average and the 23.6% Fib retracement level of the upward move from the 1.2367 swing low to the 1.2451 high.

On the downside, there is a major support forming near the 61.8% Fib retracement level of the upward move from the 1.2367 swing low to the 1.2451 high at 1.2400.

The next major support is near the 1.2365 level. If there is a downside break below the 1.2365 support, there is a risk of a sharp decline. In the stated case, GBP/USD may perhaps revisit the 1.2300 support. Any more losses could lead the pair toward the 1.2250 support.

On the upside, resistance is near a key bearish trend line at 1.2440. The pair might attempt a fresh increase if the RSI stays above 50. The next major resistance is near the 1.2470 level. A clear move above the 1.2470 level could spark a rally toward the 1.2540 level.

EUR/GBP Technical Analysis

On the hourly chart of EUR/GBP at FXOpen, the pair started a decent increase above the 0.8825 resistance. The Euro climbed higher toward the 0.8860 resistance against the British Pound.

It traded as high as 0.8861 and recently started a downside correction. There was a move below the 23.6% Fib retracement level of the upward move from the 0.8791 swing low to the 0.8861 high.

It is now consolidating losses, with immediate support near the 50% Fib retracement level of the upward move from the 0.8791 swing low to the 0.8861 high at 0.8826. There is also a major bullish trend line forming with support near 0.8825.

The next major support is near 0.8810. A downside break below the 0.8810 support might call for more downsides. In the stated case, the pair could decline toward the 0.8795 support level. Any more losses could open the doors for a move to 0.8720.

Conversely, the bulls could remain active above the 0.8825 support. Immediate resistance is near the 0.8845 level. The next major resistance for the bulls is near the 0.8860 level.

A close above the 0.8860 level might accelerate gains. In the stated case, the bulls may perhaps aim for a test of 0.8900. Any more gains might send the pair toward the 0.8920 level.

Gold has been underperforming in the past few days, breaking back below the 20-day simple moving average (SMA) around 1,985. When looking at the bigger picture, the price is strongly bullish in the long-term timeframe as it is holding well above the ascending trend line, which has been drawn from the low in November 2022.

Based on technical oscillators, momentum is titled to the downside as the RSI is approaching the neutral threshold of 50, while the MACD is standing beneath its trigger line in the positive region.

If price action remains above 1,935 (immediate support) and the 50-day SMA, there is scope to test the previous 13-month high of 2,047. Clearing this key level would see additional gains towards the restrictive region of 2,074.90-2,100.

If the 1,935 support fails, then the focus would shift to the downside towards the lower boundary of the Ichimoku cloud at 1,906, which overlaps with the uptrend line. If this line is breached, it would increase downside pressure and bring about a reversal of the trend. From here, the commodity would be on the path towards the 200-day SMA near 1,805.

Overall, gold has been positive since peaking at 2,047. Near-term weakness is expected to remain as long as price action takes place beneath 2,000.

• Cyclical sectors have underperformed, and Real Estate is the worst.
• No clear signs to indicate the resurgence of a major bearish trend.
• China A50 is at risk of further downside pressure to retest key support at 12,300.

China’s stock market has started to show signs of fatigue after a magnificent three-month rally of 22% from the October 2022 low to January 2023 high as seen on its benchmark CSI 300 Index. Since 18 April 2023, it has declined by close to -4% and underperformed a basket of developed nations’ stock markets.

The recent bullish up move from the October 2022 low of 3,495 in the CSI 300 has been fueled by optimism from the removal of prior Covid-zero lockdown measures, the introduction of stimulus measures to boost domestic consumption and reduce the credit crunch faced by embattled property developers as well as the toned down of draconian regulatory measures imposed on Chinese technology platform firms.

Cyclical sectors are the worst performers with Real Estate at the bottom

Source: TradingView as of 24 Apr 2023

As seen from the charts above, cyclical sectors such as Materials, Financials, Industrials, Consumer Discretionary, and Real Estate have underperformed against the benchmark CSI 300; the worst is the Real Estate which recorded a three-month rolling performance of -13.40% versus -5.90% recorded in the CSI 300.

Meanwhile, two defensive sectors; Telecommunication Services and Utilities together with Energy and Information Technology have managed to outperform with positive gains of 22.70%, 3.60%, 11.80%, and 9.90% respectively over the same period.

It’s all about liquidity and investors’ positioning

The latest slew of robust economic data; China’s Q1 GDP, industrial output, and consumer spending for March coupled with a rebound in new home prices over the same period that recorded its fastest pace of recovery in 21 months on a month-on-month basis; a 0.5% increase in March from a 0.3% rise in February has allowed China’s policymakers some breathing space to a adopt a “wait and see” approach.

Hence, China’s central bank, PBoC is likely in a no hurry mode to further loosen its liquidity taps to stimulate economic growth at this juncture. The latest monetary policy action of PBoC has shown evidence of such a “controlled accommodating” stance where it has left the key one-year medium-term lending facility interest rate (MLF), that is PBoC’s lending rate to big commercial banks unchanged at 2.75% for the fifth consecutive month.

In addition, it injected the least amount of medium-term cash into the banking system; a 20-billion-yuan net injection via the MLF facility in April, the smallest amount since November 2022. Also, it left its other benchmark interest rates; the one and five-year loan prime rates unchanged at 3.65% and 4.3% respectively for eight consecutive months.

To put a halt to the credit crunch problem that resurfaced in 2021 for property developers and prevent contagion and systemic risk outbursts in the domestic financial system, Chinese policymakers have allowed indebted property developers easier access to the onshore corporate bond market for fundraising with a slew of regulatory easing measures introduced in 2022. One of them was the full guarantees for property developers’ issued bonds backed by the state-owned China Bond Insurance Company.

However, this key guaranteed initiative has started to lose its fanfare, property developers have managed to raise only 5.9 billion yuan of guaranteed onshore corporate bonds; down by -29% from 8.3 billion yuan recorded in December 2022.

Interestingly, some of China’s top-performing hedge funds such as Shanghai Bulls Asset Management and Shanghai Silver Leaf Investment have exited from their lucrative bets on high-yield property bonds that reaped more than 100% returns in 2022 as per reported by Bloomberg News.

Hence, a lack of further liquidity-pumping measures from PBoC and dwindling optimism in the Chinese property developers have reinforced the recent round of profit-taking activities seen in the various China benchmark stock indices such as the CSI 300 and FTSE China A50.

Is it the start of another major bear market for China equities?

Right now, it is still too early to put an “all-out” warning that we are witnessing the start of another major bearish trend phase to breach below the October 2022 low of the mainland benchmark stock indices as recent economic data as per mentioned earlier are indicating a recovery stage and inter-market analysis via a potential further weakening of the US dollar in the medium-term tends to support the China stock market.

The next key economic data to watch to have a clearer picture of the crystal ball is the release of the official NBS Manufacturing and Non-Manufacturing PMIs for April on Sunday, 30 April 2023. Forecasts are expecting a continuation of manufacturing growth to 52 from 51.9 printed in March; likewise, for the non-manufacturing activities where it is expected to increase to 58.3 in April from 58.2 in March, and if it turns out as expected, it will be the fourth consecutive month of expansion.

Also, consumer spending data during the upcoming Golden Week holiday for the Labour Day celebrations that kickstarts on 29 April to 3 May to have the latest gauge on consumers’ optimism and spending power.

The main inherent risk is geopolitical where the relationship between US and China is still frosty. The US-China High Tech war is still “alive” since 2018, the Biden administration is set to unveil new investment curbs on China in the next upcoming G-7 meeting in May for endorsement. These new measures cover the fields of semiconductors, artificial intelligence, and quantum computing that limit investments from US firms, including venture capital and joint ventures.

China A50 Technical Analysis – at the risk of short-term bearish pressure to retest a key support

Source: TradingView as of 24 Apr 2023

Since its 27 January 2023 swing high of 14,437, the China A50 Index (a proxy for the FTSE China A50 futures) has declined by -11% and evolved into a short-term bearish trend with an intermediate resistance at 13,470.

Downside momentum remains intact as indicated by the daily RSI oscillator where it has just staged a bearish breakdown below a former corresponding ascending support at the 44% level and has the potential to inch lower before it reaches the oversold region of less than 30%.

If the 13,479 intermediate resistance is not surpassed to the upside, the Index may see the continuation of the short-term downtrend with support coming in at around 12,300, a medium-term pivotal level that also coincides with the former major descending resistance from the 27 May 2021 high.

A point to note is that the Index is still evolving in a potential long-term bullish impending “Inverse Head & Shoulders” configuration since the 15 March 2022 low.