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BoE Deputy Governor Jon Cunliffe talked about the lessons learned from recent "instability and losses in crypto markets", also called the "crypto winter".

He said, "a widespread collapse of crypto-asset valuations has cascaded through the crypto ecosystem and generated a number of high-profile firm failures," which also resulted in Bitcoin losing 70% of its value.

The four lessons learned include:

• Technology does not change the underlying risks in economics and finance;
• Regulators should continue and accelerate their work to put in place effective regulation of the use of crypto technologies in finance;
• This regulation should be constructed on the iron principle of 'same risk, same regulatory outcome' ;
• Crypto – technologies offer the prospect of substantive innovation and improvement in finance. But to be successful and sustainable innovation has to happen within a framework in which risks are managed: people don't fly for long in unsafe aeroplanes.

Full speech here.

Bitcoin was down 2.5% on Monday and, continuing its decline on Tuesday morning, was back at $20,000. Ethereum has lost 5.2% in the past 24 hours to $1090. Altcoins in the top 10 fell from 1.1% (XRP) to 5.2% (Solana).

Total cryptocurrency market capitalisation, according to CoinMarketCap, sank 2.6% overnight to $891bn. The Cryptocurrency Fear and Greed Index lost 6 points, dropping to 16, and has been cruising through “extreme fear” territory for over two months.

The rising dollar and a new wave of pressure on stock indices did not escape Bitcoin on Monday amid a renewed fall in stock indices. Market dynamics indicate that sellers have been taking a pause to sell some assets at a higher price but remain the dominant force in the markets.

Investors are demonstrating a similar sentiment. More than 60% of major US crypto investors surveyed by Bloomberg MLIV Pulse expect bitcoin to fall to $10,000. If the collapse of the industry’s major projects results in significant losses for investors and causes a domino effect, the industry could face increased regulation.

Fed Vice Chair Lael Brainard said that the situation with the wave of defaults of cryptocurrency companies requires more oversight of the crypto industry. Bank of England spokesman Jon Cunliffe said the crypto industry regulation should be like traditional finance.

A remarkable transformation as cryptocurrencies emerged and were seen by enthusiasts as self-regulating instruments, rejecting, and resisting any interference and centralisation. However, if investors lose a lot of money or suspect the creators of fraud, they will likely seek protection and regulation themselves.

According to investment strategist Lyn Alden, the worst part of the crypto market’s bearish trend ended in the first half of 2022, when bitcoin lost more than 56% of its value. The massive sell-off in BTC has stopped, but further declines cannot yet be ruled out.

MicroStrategy CEO Michael Saylor said Ethereum, and other altcoins are securities because of the cryptocurrency issuer. And only bitcoin is a commodity because its blockchain cannot be changed, like the physical composition of gold.

GBPUSD could not close successfully above the 1.1988 – 1.2000 bar (2016 – 2019 base) last week, with the price erasing its latest bullish attempt to chart a new two-year low at 1.1844 early on Tuesday.

The market is lacking conviction for a meaningful bounce back as the RSI keeps hovering comfortably below its 50 neutral mark, while the MACD is displaying stronger bearish dynamics, extending its negative trajectory below its red signal line.

Hence, the base scenario is for the one-year-old downtrend to see further continuation, likely testing the tentative support line somewhere between 1.1700  and 1.1640, with the latter representing the 161.8% Fibonacci extension of the latest upside correction. If the bears snap that floor, the next destination will be the pandemic 2020 bottom of 1.1408.

In the event of an upside reversal, the pair may re-challenge the 1.1988 – 1.2000 ceiling before meeting the 20-day simple moving average (SMA) at 1.2132. Another advance from here could last until the 1.2300 zone, where the 50-day SMA and the resistance trendline from February reside. Should the bulls reclaim the previous high of 1.2400 as well, the recovery may pick up steam towards May’s high of 1.2665.

Summarizing, downside forces are expected to dominate in the coming sessions, with traders likely looking for support within the 1.1700 – 1.1640 region.

EUR/USD

The euro lost ground against the dollar, and after the successful breach of the support at 1.0071, the currency pair slipped into a new 19-year low. If trading remains limited under the mentioned zone, then a continued depreciation could easily lead to a test of the psychological support at 1.0000 and could strengthen the negative expectations for the future path of the EUR/USD. The first target for the bulls is the zone at 1.0071, which is now acting as resistance, followed by the upper level at 1.0115.

USD/JPY

The bulls did not gain enough momentum for a successful breach of the resistance at 137.42, and during the early hours of today`s trading, the price consolidated around the current level of 137.06. If the bears prevail, then the violation of the support at 136.69, followed by a breach of the lower target at 136.08, could easily deepen the correction towards the important zone at 135.27. If the bulls re-enter, however, then a new successful test of the resistance at 137.42 could lead to a new rally for the dollar against the yen and head the price towards the upper level at 138.00.

GBP/USD

Тhe appreciation of the dollar against the world currencies helped the bears prevail. The Cable tested the support at 1.1912, and at the time of writing the analysis, the pair is holding positions just under the mentioned zone. A confirmation of the breach here could lead to new losses and could easily head the price towards the lows at around 1.1877. If the bulls re-enter the market instead, then a violation of the resistance at 1.2045, followed by a successful attack on the upper zone at 1.2120, could result in a rally and a test of the important target at 1.2170.

EUGERMANY40

After the unsuccessful attempt to breach the resistance zone at 13000, the German index erased some of its recent gains and successfully violated the support zone at 12875. If the bearish attack continues, then a breach of the lower target at 12617 could easily lead to new losses and could pave the way for a test of the zone at 12384. Better-than-expected German data for the ZEW Economic Sentiment (today; 08:00 GMT) could encourage the bulls to re-enter the market. If they succeed to retake the zone at 12875, which is currently acting as resistance, and later violate the upper level at 13000, then all of this could lead to a recovery of the EUGERMANY40 towards 13171.

US30

After the breach of the support zone at 31151, the American index continued its decline, and during the early hours of today, the price is headed for a test of the lower target at 30872. Success for the bears here could enhance the sell-off and could easily nudge the US30 towards the important zone at 30431. If the bulls take control instead, then their first resistance can be found at 31151. A violation of the upper level at 31425 could lead to a rally towards the high at 31707.

The British pound remained on edge as investors waited for clarity on who will become the next prime minister after Boris Johnson’s resignation. It has already become a crowded race, with many influential leaders declaring interest. Rishi Sunak, the former treasury chief, has taken an early lead. Other notable leaders are Liz Truss, the former Foreign Secretary, and Nadhim Zahawi, the current Chancellor of the Exchequer. Conservative members will vote on their preferred candidates on Tuesday. After that, the two will tour the country seeking to win a majority of the 150k members of the Conservative Party.

The euro continued dropping against the US dollar as a carry trade between the two currencies emerged. The Federal Reserve has already hiked interest rates by 150 basis points this year. With the labor market strong and inflation rising, analyst believe that the bank will continue hiking interest rates. On the other hand, the ECB has maintained negative interest rates and hinted that it will hike by just 0.25% this month. This means that there is more demand for the US dollar than the euro. The euro will react to the latest euro area economic forecast by the European Commission. In Germany, ZEW will publish the latest economic sentiment data.

US stocks retreated slightly as investors waited for the latest American consumer inflation data scheduled for Wednesday. Analysts expect the data to reveal that the country’s headline CPI rose by 8.8% while core inflation retreated slightly. These numbers will come a few days after the US published strong jobs numbers. As a result, investors have priced in more tightening by the Fed. Most importantly, equities declined ahead of the upcoming quarterly results by top American firms. Some of the companies to watch will be Morgan Stanley, JP Morgan, Blackrock, and UnitedHealth.

GBPUSD

The GBPUSD pair dropped to a low of 1.1890 as the sterling sell-off continued. On the four-hour chart, the pair is below the 25-day moving average. It has also moved below the important resistance point at 1.1935, which was the lowest point on June 14. The Relative Strength Index (RSI) has moved below the neutral point. Therefore, the pair will likely have a relief rally since it has formed a double-bottom pattern.

EURUSD

The EURUSD pair continued retreating during the American and Asian sessions. On the daily chart, it has moved below the Ichimoku cloud and the 25-day and 50-day moving averages. At the same time, the Average Directional Index (ADX) has moved to the highest point in months. The ADX is used to measure the strength of a trend. The Relative Strength Index has moved to the oversold level. Therefore, the pair will likely break parity on Tuesday.

NAS100

The Nasdaq 100 index pulled back as investors waited for the upcoming earnings. It is trading at $11,968, which is slightly below last week’s high of $12,192. The index has formed a cup and handle pattern while the Relative Strength Index (RSI) has moved below the overbought level. Therefore, because of the C&H pattern, there is a likelihood that it will continue rising as bulls target the key resistance at $12,200.

The USDJPY is consolidating under new highest level since Sep 1998 (137.75) in early Tuesday’s trading, following Monday’s bullish signal on 2.6% advance (the biggest one-day advance since June 17) and close above previous top at 137.00.

The dollar remains supported on expectations that Fed will remain aggressive in its monetary policy, short/medium inflation outlook remains pessimistic, with migration from risky assets to the safety on growing uncertainty over economic and geopolitical situation, additionally underpins the greenback.

Overbought conditions of firmly bullish daily studies, suggest that bulls may take a breather for consolidation before resuming towards Fibo projections at 138.21 and 138.57, violation of which would open way for attack at psychological 140 barrier.

Broken 137.00 level reverted to support whish so far holds, with dips expected to find ground above rising 10DMA (136.16) to bulls intact.

Res: 137.75; 138.21; 138.57; 139.14.
Sup: 137.00; 136.52; 136.16; 135.60.

Asian shares were a sea of red on Tuesday as recession fears and China’s renewed Covid-19 outbreak smothered appetite for risk. Overnight, Wall Street’s main indices took a beating as investors sprinted to safety ahead of the US inflation data and earnings season. In Europe, stocks are expected to open lower due to Europe’s energy shortage and growing caution ahead of key economic data and bank earnings.

In the currency markets, the mighty dollar flexed its safe-haven muscles with the dollar index (DXY) hitting its highest levels since 2002. Meanwhile, the EURUSD parity dream came closer to reality this morning as prices touched 1.0004 for the first time since December 2002. Looking at commodities, gold remains depressed and unloved while oil prices were hit by demand concerns.

The negative vibe and sense of uncertainty across financial markets could fuel further dollar upside while dragging equities lower. Given how markets remain highly sensitive and reactive to anything regarding inflation, tomorrow’s pending US CPI report could spark fireworks. On the data front, Australian consumer sentiment tumbled for the eighth consecutive month in July. Business confidence also disappointed, dragged by global uncertainty, looming hikes, and soaring inflation. Germany’s ZEW economic confidence survey will be published later this morning. A disappointing report could compound the euro’s woes, weakening the single currency further.

It's all about the US inflation report

Wednesday sees the release of the US inflation report with investors watching anxiously to see if prices are rising again or perhaps that we are finally peaking. According to a poll by Bloomberg, inflation is expected to rise 8.8% year-on-year in June compared with 8.6% in May. If expectations meet reality, this would mark the fastest increase in consumer prices since the 8.9% figure back in December 1981! Such a development will most likely reinforce market bets of more aggressive Fed rate hikes, ultimately injecting dollar bulls with fresh momentum.

Other than the US inflation data, it may be wise to keep an eye on the weekly jobless claims report on Thursday. At the end of the week, there will also be a barrage of key releases ranging from the latest retail sales, industrial production, and consumer sentiment which will provide insight into the health of the US economy.

Oil hit by demand concerns

Oil found itself under renewed selling pressure on Tuesday as fresh Covid-19 curbs in China and fears of a global economic slowdown weighed heavily on the demand outlook.

The global commodity is down over 1.5% this morning with an appreciating dollar adding to the pressure and fueling the downside momentum. While fears of a global recession could keep bulls at bay, oil prices remain pulled and tugged by conflicting forces. On one side of the bearish equation, there are recession fears and Covid-19 restrictions in China. However, bulls could draw support from ongoing geopolitical risks and tightening market conditions. President Joe Biden is scheduled to visit Saudi Arabia this week during a tour to the Middle East.

Looking at the technicals, WTI has the potential to target the psychological $100 level if bears can charge through the $102 level. Brent seems to have created fresh resistance around $107.50 with a breakdown below $105 signaling a selloff towards $102.

Commodity spotlight – Gold

Gold is struggling to nurse deep wounds inflicted by last week’s brutal selloff.

The precious metal has been smothered by an appreciating dollar and expectations over the Fed maintaining an aggressive stance towards higher interest rates. Prices are trading around $1730 as of writing, with the next key level of interest found at $1700. The precious metal looks depressed and could be instore for more pain if the pending US CPI report meets or exceeds market expectations. If prices are able to breach $1700, the next key level of interest can be found at $1680.

Daily Pivots: (S1) 162.79; (P) 163.63; (R1) 164.22; More...

Intraday bias in GBP/JPY stays neutral and further fall is in favor with 165.26 minor resistance intact. On the downside, below 160.37 support will target 155.57 key support level next. On the upside, above 165.26 minor resistance will turn bias back to the upside and bring retest of 168.67 high instead.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Sustained break of 61.8% retracement of 195.86 (2015 high) to 122.75 (2016 low) at 167.93 will be a long term bullish signal, and could pave the way back to 195.86 high. This will now remain the favored case as long as 155.57 support holds, even in case of deep pull back.

Daily Pivots: (S1) 137.52; (P) 138.35; (R1) 138.80; More....

Intraday bias in EUR/JPY stays neutral and further fall is in favor with 139.78 minor resistance intact. On the downside, below 136.86 will target 132.63 support. Decisive break will turn outlook bearish for 124.37 support. On the upside, above 139.78 minor resistance will turn bias to the upside for stronger recovery.

In the bigger picture, up trend from 114.42 (2020 low) is seen as the third leg of the pattern from 109.30 (2016 low). Further rally is in favor as long as 134.11 resistance turned support holds, even in case of deep pull back. Firm break of 139.78 will target 149.76 (2015 high. However, sustained break of 134.11 will be a sign of medium term bearish reversal and turn focus to 124.37 support for confirmation.

Daily Pivots: (S1) 0.8428; (P) 0.8459; (R1) 0.8475; More...

Further decline is expected in EUR/GBP with 0.8531 minor resistance intact. Rebound from 0.8201 should have completed at 0.8720, after rejection by 0.8697 medium term fibonacci level. Further fall would be seen to retest 0.8201/48 support zone next. On the upside, above 0.8531 minor resistance will turn intraday bias back to the upside for 0.8720 resistance instead.

In the bigger picture, rejection by 38.2% retracement of 0.9499 to 0.8201 at 0.8697 argues that rebound from 0.8201 is merely a corrective move. That is, down trend from 0.9499 (2020 high) is now over. Sustained break of 0.8201 will resume such decline and target 61.8% retracement of 0.6935 to 0.9499 at 0.7917. This will now remain the favored case as long as 0.8720 resistance holds.