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SO much volatility! UK Government to tear up budget in emergency move
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The currency and stock markets have been in a remarkable state of turmoil for many weeks now, and perhaps one of the most exaggerated differentials in price has been between the Western major currencies and the British Pound.
Traders and investors have been turning their back on the Pound Sterling, which has been struggling to retain its long-held status as the world's most valuable currency, and the charts have been displaying a continued downward direction for the British Pound for many weeks, a direction which has only begun to slow over the past few days.
Today, however, the Pound has begun to soar! It is now at 1.13 against the US Dollar, a position it has not visited for many weeks.
Many market commentators and analysts have been highlighting what appears at first glance to be a 'turnaround' for the British Pound, but the reality is that it is far from a turnaround - it is just a minor step up from the days before, as the Pound still languishes at a low value after weeks of decline, punctuated by an array of government U-turns, a mini-budget which was not well received at all, and the most short-lived Chancellor of the Exchequer (Finance Minister) in British history, Kwasi Kwarteng who was shown the door after just a few weeks in his position.
Today, Jeremy Hunt, the replacement for Kwasi Kwarteng, is set to make an emergency statement relating to the outcome of the mini-budget, in which it is anticipated that he will tear it up and start again.
Mr Hunt, the most recent senior government minister to be installed without a single free vote having been cast, is the subject of high expectations from the British public who are weary at the floundering government's effect on the economic situation of the country.
Mr Hunt's reason for issuing a statement today is to attempt to calm the markets. One of the items on the agenda today is a statement to the House of Commons at 3.30pm, bringing forward measures from the Medium-Term Fiscal Plan, which is due on October 31.
Some critics have stated this morning that these statements are aimed at buying the government time, and there are even speculators who have aired their view that newly installed Prime Minister Liz Truss may be ousted by her own political party very shortly, which is perhaps one reason why a relatively cautious view is being taken by investors with regard to the British Pound and stocks listed on the London Stock Exchange's FTSE 100 index.
As an undertone to all of the high profile government chaos and economic pandemonium, the Bank of England has been raising interest rates since the beginning of this year and speculation is currently abound that they may well reach 5% in January 2023, and has been buying bonds to the tune of £65 billion which is in effect a way of printing money to bolster a flagging economy.
Many banks pulled mortgage products off the shelves in the concern that interest rates may rocket, and this has been yet another indicator to traders and investors to be cautious.
It would therefore be prudent to assume that many people will be looking out for the results of today's announcement at 3.30pm UK time.
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Housebuilder stocks take a hard hit as UK market slows down
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The FTSE 100 index is once again below 7000 points today, and although it has risen from its low point of yesterday, it is still languishing at 6,975 as the trading day in London progresses.
This is a 1.3% increase over the previous day, but represents a 2.9% drop over the past 30 days of trading.
One of the main factors in bringing down the value of the FTSE 100 index is the impact that Britain's beleaguered economy is having on housebuilders, and many large British house building companies are listed on the London Stock Exchange and are part of the FTSE 100 index.
For example, Barratt Developments, one of Britain's largest residential construction companies, reported a 12% slowdown in weekly reservations in the period from August 1 to October 1, compared with the same period in 2021 due to what it politely calls ‘the backdrop of rising interest rates and wider economic uncertainty’ - ultimately referring to the rising interest rates putting people off buying houses, and many British banks having withdrawn mortgage products from sale, preventing people from accessing finance in order to buy homes.
Another large, publicly listed house building company, Bellway, recently reduced its its forecast for volume sales this year from 14,000 in its August trading update to ‘a similar level to the prior year’ or around 11,200 homes, which echoes the anticipated slowdown in house purchasing due to the flagging economy and rising interest rates.
Investor behavior has reflected this pessimism as Bellway shares dropped in value yesterday by 1% to £18.07 while Redrow Homes shares also decreased in value by 1.5% to 410p, with shares in Vistry falling 3.6% to 545p.
This has been a pattern that has made itself noticed for quite a few weeks, and the raw materials and mining companies which are included in the FTSE 100 index have been holding their value due to ongoing supply chain problems contributing to high demand for imported minerals and products used for manufacturing, whilst companies whose product relies on the strength of the economy and the ability for consumers to acquire credit have been struggling to maintain any form of growth.
Today, Bellway Homes announced that it has scrapped its plan to build 1,000 more homes this year, demonstrating that a large company which knows its market well is not prepared to invest in building homes that may not be able to be sold, or which would have a limited audience due to the unfavorable conditions toward mortgages at the moment.
During 2021, the FTSE 100 was the darling of investors. It rose above 7,000 and remained at such lofty heights for over a year. During that period, stamp duty (property purchase tax) had been postponed for properties up to a certain value, causing house building company stocks to rise, and big pharma was making a lot of revenues on the back of mandatory vaccines in many countries.
Only now has it begun to dip below the 7,000 mark and the companies causing this to take place are a telling sign of the situation of the overall economy.
Therefore, the pound's lamentable performance recently appears to be intrinsically linked to the performance of the FTSE 100 index.
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BTCUSD and XRPUSD Technical Analysis – 18th OCT 2022
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BTCUSD: Bullish Engulfing Pattern Above $18237
Bitcoin was unable to sustain its bearish momentum and after touching a low of 18280 on 13th Oct, it started to correct upwards touching a high of 19893 on 14th Oct.
The price of bitcoin has bounced back from its lows due to heavy buying pressure seen below the $19000 levels.
We can see the formation of an ascending channel pattern above the support level of $19000 on the hourly chart of BTCUSD.
We can clearly see a bullish engulfing pattern above the $18237 handle which is a bullish reversal pattern because it signifies the end of a downtrend and a shift towards an uptrend.
Bitcoin touched an intraday low of 19475 in the Asian trading session and an intraday high of 19694 in the European trading session today.
Both the STOCH and Williams percent range are indicating overbought levels which means that in the immediate short term, a decline in the prices is expected.
The relative strength index is at 56 indicating a STRONG demand for bitcoin, and the continuation of the buying pressure in the markets.
Bitcoin is now moving above its 100 hourly simple moving average and above its 200 hourly exponential moving averages.
Some of the major technical indicators are giving a STRONG BUY signal, which means that in the immediate short term, we are expecting targets of 20500 and 21000.
The average true range is indicating LESS market volatility with a strong bullish momentum.
- Bitcoin: bullish reversal seen above $18237
- The STOCHRSI is indicating an oversold level
- The price is now trading just below its pivot level of $19651
- Some of the moving averages are giving a BUY market signal
Bitcoin: Bullish Reversal seen Above $18237
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The long-term bullish phase has now resumed and the price of bitcoin is expected to become super bullish above the $20000 level.
We can see that any dips below the $19000 level remain well supported. We are now heading towards the important resistance level of $20000 which if broken will pave the way towards $22000.
We can see the formation of a bullish harami pattern in the 30-minute time frame.
The Adaptive Moving Average AMA20 is giving a Bullish signal in the daily timeframe.
The immediate short-term outlook for bitcoin is strongly Bullish, the medium-term outlook has turned bullish, and the long-term outlook remains neutral under present market conditions.
Bitcoin’s support zone is located at $19326 the ichimoku baseline, and the prices need to remain above this level for continuation of bullish reversal in the markets.
The price of BTCUSD is now facing its classic resistance level of 19731 and Fibonacci resistance level of 19785 after which the path towards 20500 will get cleared.
In the last 24hrs, BTCUSD has decreased by 1.36% by 262$ and has a 24hr trading volume of USD 29.008 billion. We can see an increase of 42.42% in the trading volume compared to yesterday, due to increased buying seen in the global crypto markets.
The Week Ahead
The price of bitcoin is moving in a strongly bullish zone above the $19000 level. Further upsides are projected at $20500 and $21000 as the immediate targets.
We can see the formation of bullish engulfing lines in the weekly time frame. The price of bitcoin is back over the pivot point which indicates a bullish scenario in the weekly time frame.
The daily RSI is printing at 50 which indicates a neutral level and a move towards the consolidation phase in the markets.
The prices of BTCUSD will need to remain above the important support level of $19000 this week.
The weekly outlook is projected at $21000 with a consolidation zone of $20500.
Technical Indicators:
The MACD (12,26): is at 96.10 indicating a BUY
The ultimate oscillator: is at 51.65 indicating a BUY
The rate of price change: is at 2.053 indicating a BUY
The bull/bear power (13): is at 366.28 indicating a BUY
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EUR/USD and EUR/JPY Could Climb Further Higher
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EUR/USD is slowly moving higher above 0.9800. EUR/JPY is also rising and might climb further higher above the 147.25 zone.
Important Takeaways for EUR/USD and EUR/JPY
- The Euro started a recovery wave and was able to clear the 0.9800 resistance zone.
- There is a key bullish trend line forming with support near 0.9835 on the hourly chart.
- EUR/JPY started a strong increase and settled well above the 145.50 zone.
- There is a major bullish trend line forming with support near 146.90 on the hourly chart.
EUR/USD Technical Analysis
The Euro formed a base above the 0.9660 zone and started recovery wave against the US Dollar. The EUR/USD pair was able to clear the 0.9720 and 0.9750 resistance levels.
There was a clear move above the 0.9800 level and the 50 hourly simple moving average. The pair even climbed above 0.9850 and traded as high as 0.9875 on FXOpen. It is now consolidating gains near the 0.9850 zone.
EUR/USD Hourly Chart
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On the downside, the pair might find support near the 0.9835 level. Besides, there is a key bullish trend line forming with support near 0.9835 on the hourly chart. The trend line is near the 23.6% Fib retracement level of the upward move from the 0.9702 swing low to 0.9875 high.
The next major support sits near the 0.9810 level and the 50 hourly simple moving average, below which the pair could even test the 50% Fib retracement level of the upward move from the 0.9702 swing low to 0.9875 high.
If there is a downside break below the 0.9790 support, the pair might accelerate lower in the coming sessions. In the stated case, it could even test 0.9720.
On the upside, an immediate resistance is near the 0.9885 level. The next major resistance is near the 0.9920 level. The first major resistance is near the 0.9950 level. A clear move above the 0.9950 resistance might send the price towards 1.0000. If the bulls remain in action, the pair could revisit the 1.0050 resistance zone in the near term.
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UK inflation officially goes over 10%
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During the last year in which many Western nations have experienced high levels of inflation, there have been official figures which have been relatively conservative estimates, and unofficial figures which have suggested that inflation in the United States and Britain has been into double digits for quite some time.
It is, however, the official figures which tend to have an impact on the currency and stock markets, therefore today's revelation that the British economy has begun to experience 10.1% inflation is of great interest.
The news channels this morning were quick to highlight the inflation level going over the 10% threshold, however very little effect has been shown with relation to the value of the British Pound against the Euro or US Dollar.
This is perhaps because the anticipation has been steadily building over time, hence this is perhaps not a surprise, and generally it is surprises that tend to create sudden volatility in the financial markets.
What it does depict is that double digit levels of inflation in the UK have been reached, and this is not a good sign for the economy which continues to decline. The British Pound today remains at around 1.12 against the US Dollar, continuing its low value which, despite a few small movements upwards over recent days, represents a steady decline over the past weeks which followed a long period of rapid depreciation.
What we perhaps can learn is that despite the new Chancellor of the Exchequer Jeremy Hunt having almost completely reversed the mini-budget issued by recently installed Prime Minister Liz Truss, a clear sign of an unstable government and a weakening economy, the Pound has not suddenly crashed to even lower levels.
Perhaps it has bottomed out, or investors and traders have understood that the declining economy and suddenly unstable government in a usually extremely stable and calm nation is now a relatively long term matter, and that the state of the economy is now somehow measurable.
Therefore, despite the sensationalist headlines, the value of the Pound against its Western major peers is a case of business as usual.
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ETHUSD and LTCUSD Technical Analysis – 20th OCT, 2022
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ETHUSD: Bullish Harami Pattern Above $1263
Ethereum was unable to sustain its bearish momentum and after touching a low of 1205 on 13th Oct, the price started to correct upwards against the US dollar. The price of Ethereum touched a high of 1342 on 14th Oct after which we can see a shift towards the consolidation phase in the markets.
We have seen a bullish opening of the markets which indicates the present bullish trend.
We can clearly see a bullish harami pattern above the $1263 handle which signifies the end of a bearish phase and the start of a bullish phase in the markets.
ETH is now trading just above its pivot level of 1291 and moving into a mildly bullish channel. The price of ETHUSD is now testing its classic resistance level of 1294 and Fibonacci resistance level of 1296 after which the path towards 1300 will get cleared.
The relative strength index is at 47 indicating a neutral demand for Ether and a shift towards consolidation phase in the markets.
We can see that the Williams percent range is back over -50 indicating the bullish tone present in the markets.
The STOCHRSI is indicating an overbought market, which means that the price is expected to decline in the short-term range.
Some of the technical indicators are giving a STRONG BUY market signal.
Some of the moving averages are giving a BUY signal and we are now looking at the levels of $1350 to $1400 in the short-term range.
ETH is now trading below both the 100 & 200 hourly simple and exponential moving averages.
- Ether: bullish reversal seen above the $1263 mark
- Short-term range appears to be mildly bullish
- ETH continues to remain above the $1200 level
- The average true range is indicating LESS market volatility
Ether: Bullish Reversal Seen Above $1263
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ETHUSD is now moving into a mildly bullish channel with the price trading above the $1200 handle in the European trading session today.
ETH touched an intraday low of 1271 in the Asian trading session and an intraday high of 1294 in the European trading session today.
We can see the formation of a bullish harami pattern in the weekly time frame.
The commodity channel index is indicating a neutral level and fresh upsides are expected in the markets towards the 1300 handle.
Ethereum’s price continues to move into a bullish zone against the US dollar and is expected to move above the $1300 levels.
The daily RSI is printing at 43 indicating a weak demand in the long-term range.
The key support levels to watch are $1232 and $1251, and the price of ETHUSD needs to remain above these levels for the continuation of the bullish reversal in the markets.
ETH has decreased by 0.40% with a price change of 5.16$ in the past 24hrs and has a trading volume of 8.465 billion USD.
We can see a decrease of 15.87% in the total trading volume in the last 24 hrs which appears to be normal.
The Week Ahead
The price of Ethereum continues to remain well supported above the $1200 level, and has now started to move higher aiming at the $1300 level.
We can see the formation of a major bullish trend line in place from $1263 towards $1359 levels.
The immediate short-term outlook for Ether has turned mildly bullish, the medium-term outlook has turned neutral, and the long-term outlook for Ether is neutral in present market conditions.
The price of ETHUSD will need to remain above the important support level of $1273 which is a 38.2% retracement from 4-week low.
The weekly outlook is projected at $1400 with a consolidation zone of $1375.
Technical Indicators:
The average directional index ADX (14): is at 35.00 indicating a BUY
The ultimate oscillator: is at 69.59 indicating a BUY
Bull/bear power (13): is at 3.83 indicating a BUY
The commodity channel index (14): is at 59.91 indicating a BUY
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Gold Price Drops While Crude Oil Price Aims Fresh Increase
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Gold price started a fresh decline and traded below $1,650. Crude oil price is holding the $84.25 support and might start a fresh increase.
Important Takeaways for Gold and Oil
- Gold price failed to surpass $1,680 and started a fresh decline against the US Dollar.
- There is a key bearish trend line forming with resistance near $1,638 on the hourly chart of gold.
- Crude oil price is showing positive signs above the $84.25 support zone.
- There is a major bullish trend line forming with support near $83.80 on the hourly chart of XTI/USD.
Gold Price Technical Analysis
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Gold price failed to gain strength for a move above the $1,680 resistance against the US Dollar. The price started a fresh decline and traded below the $1,650 support level.
There was a clear move below the $1,640 support zone and the 50 hourly simple moving average. The price traded as low as $1,622 on FXOpen and recently there was a recovery wave. The price was able to clear the $1,630 resistance zone.
However, the price failed to clear $1,645 and started another decline. It traded below the 50% Fib retracement level of the upward move from the $1,622 swing low to $1,645 high.
It is now trading below the $1,630 level. There was also a move below the 76.4% Fib retracement level of the upward move from the $1,622 swing low to $1,645 high. An immediate support on the downside is near the $1,622 level.
The next major support is near the $1,620 level, below which there is a risk of a larger decline. In the stated case, the price could decline sharply towards the $1,600 support zone.
On the upside, the price is facing resistance near the $1,635 level. The first major resistance is near the $1,638 level. There is also a key bearish trend line forming with resistance near $1,638 on the hourly chart of gold.
The main resistance is now forming near the $1,645 level, above which it could even test $1,650. A clear upside break above the $1,650 resistance could send the price towards $1,680.
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Watch FXOpen's October 17-21 Weekly Market Wrap Video
In this video, FXOpen UK COO Gary Thomson sums up the week’s happenings and discusses the most significant news reports.
- Semiconductor war between China and the US
- The US puts pressure on the price of oil
- UK inflation officially goes over 10%
- How UK’s political drama is affecting financial markets
Watch our short and informative video, and stay updated with FXOpen.
https://www.youtube.com/watch?v=RQPFCRyl2Ss&t=2s
FXOpen YouTube
Disclaimer: CFDs are complex instruments and come with a high risk of losing your money.
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GBP/USD Gains Momentum, EUR/GBP Eyes Fresh Increase
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GBP/USD started a recovery wave and climbed above the 1.1300 resistance. EUR/GBP is trading above the 0.8650 support and might eye a fresh increase.
Important Takeaways for GBP/USD and EUR/GBP
- The British Pound started a fresh increase after it broke the 1.1250 resistance against the US Dollar.
- There was a break above a major bearish trend line at 1.1290 on the hourly chart of GBP/USD.
- EUR/GBP started a downside correction after it failed to clear the 0.8780 zone.
- There was a break below a contracting triangle with support near 0.8720 on the hourly chart.
GBP/USD Technical Analysis
The British Pound found support near the 1.1050 zone against the US Dollar. The GBP/USD pair started a recovery wave and was able to clear the 1.1150 resistance zone.
There was a decent increase above the 1.1250 level and the 50 hourly simple moving average. The pair even climbed above the 1.1300 level. During the increase, there was a break above a major bearish trend line at 1.1290 on the hourly chart of GBP/USD.
GBP/USD Hourly Chart
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A high was formed near 1.1408 on FXOpen and the pair is now correcting gains. On the downside, an initial support is near the 1.1280 level. It is near the 38.2% Fib retracement level of the upward move from the 1.1061 swing low to 1.1408 high.
The next major support is near the 1.1235 level and the 50 hourly simple moving average. It is near the 50% Fib retracement level of the upward move from the 1.1061 swing low to 1.1408 high. Any more losses could lead the pair towards the 1.1180 support zone or even 1.1150.
On the upside, an initial resistance is near the 1.1350 level. The next main resistance is near the 1.1400 zone. A clear upside break above the 1.1400 and 1.1410 resistance levels could open the doors for a steady increase in the near term. The next major resistance sits near the 1.1500 level.
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Currency roller coaster continues as GBP see-saws on Boris Johnson exit
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The famous British sense of humor has made its presence felt at a time of despair once again, with pictures circulating the internet of 10 Downing Street, the Prime Minister's residence, with a revolving door superimposed instead of its famous black wooden effort.
This symbolizes the unusually short periods in office held by premiers that are being perceived by the public in an ordinarily utterly stable country.
Since Liz Truss left office after just 44 days as Prime Minister following Boris Johnson's dishonorable exit from office, her only legacy being a disastrous budget which temporary chancellor Jeremy Hunt reversed, the continual downward movement of the British Pound against the Euro and US Dollar that has been evident for many months turned into volatility as a result of suspense and uncertainty.
Over the months which led to the end of Boris Johnson's premiership, the British economy tanked and the Pound devalued consistently, and suddenly dived further when Liz Truss took office.
When she left, Boris Johnson resurfaced, claiming that he was eligible to return to office, with 102 votes in favor of his re-appointment as Prime Minister.
Late last night, however, Mr. Johnson announced that he would not be returning to office.
This changing set of events has caused the British Pound to 'see-saw' in value, gaining as much as 0.9% to hit a high of $1.1401, before paring gains to be up about 0.4% at $1.134.
Britain's credit rating has been affected by the political misadventures that have led the country to economic crisis, and the apparent instability of the current government. Moody's, a respected global credit and referencing agency, has downgraded the UK's outlook from 'stable' to 'negative'.
Gilt and sterling markets were turbulent towards the end of last week as investors considered the leadership race, and whilst Mr. Johnson claimed he had 102 votes, opponents expressed their doubt that he had more than 50.
All the while, it is important to note that the UK has had a new head of state, King Charles, and an entire new government, and now potentially two new Prime Ministers, all having taken place without one single free vote being cast by the public.
With the Pound so volatile and the economy in disarray, the markets are responding appropriately - with caution - and therefore volatility is abound whenever yet another twist or turn takes place.
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