Weekly Market Overview | 14 April 2022
This week gold hit a monthly high amid continued geopolitical uncertainties. Market commentators believe that this increased demand for the safe-haven asset is largely being driven by the fact that the ceasefire talks that have been ongoing for the past two weeks are proving to be fruitless because Russia appears to be preparing to launch a major offensive in the east of Ukraine.
Further pressure on the price has been influenced by the recent U.S Consumer Price Index figures that were released this past Tuesday. CPI is a measure of the average change over time, in prices paid by urban consumers for a basket of consumer goods and services. Although the numbers were in line with expectations, the price reacted by $15 to $20 following the release of the CPI figures.
In terms of technical analysis on the Weekly timeframe, we have just set a new higher low around the $1 892 level where buyers entered the market at a discounted price in relation to the $2 066 level. From here onwards we can expect the bulls to take control of the market and drive price all the way back to the $2 000 psychological level where sellers will likely challenge the buyers.
The price of oil slid this week as trading volume was thinned by the long weekend in Europe, most of Asia as well as the United States. The decreased number of active buyers because of the Easter holidays was one of the underlying factors this week in the easing of prices.
Geopolitics also contributed to the pressure on the price, on the back of the announcement made on Wednesday by the International Energy Agency. The alliance forewarned the market that from May onwards Russian Oil would be excluded altogether from the international market to the tune of 3 million barrels per day and this decreased supply would be filled by the strategic oil reserves that are planned to be released over the next 6 months. Despite all these factors, the general trajectory for the price of oil is still rising, because ultimately the international demand still outpaces the supply.
Following last week’s projection, buyers entered the market as anticipated around the $92 level. The falling wedge reversal pattern fulfilled itself and we can see how impulsively the price moved away from the buy zone, which shows us that buyers are currently controlling the order flow. From here onwards we can expect a minor pullback, followed by a move to the upside to challenge the key level around the $108 level where sellers could enter the market.
This year has seen a 17.3% drop in the value of Bitcoin from highs around the $48 234 level, but a recovery is firmly in sight as a basket of fundamental factors continue to increase the attractiveness of holding onto the asset. The price recovered this week from a correction and was buoyed by record-high inflation numbers. Because Bitcoin has typically been considered a hedge against inflation, rising CPI numbers are usually followed by a spike in the price per bitcoin.
Further exuberance from investors was seen this week as the LUNA Foundation Guard increased their buying and accumulation of the cryptocurrency. LFG’s total balance is now sitting at 42 406 BTC, and the foundation made a recent purchase of $100 million in Bitcoin, which fueled a further rally in the market.
In terms of the technicals, the chart pattern is still pointing towards an overall bullish outlook. Since the price pierced the significant consolidation it’s been held in since January, it pulled back inside the range. However, this move down is just a correction and we expect buyers to take control of the market and push the price past the recent high of $48 371. Conversely, if the buy pattern fails then we can expect a deeper pullback down to the $36 000 area.
The Optimal Play
The strength of the Dollar drifted slightly lower this week after climbing to record highs this year, hitting the 100.50 level in relation to a basket of 6 other major currencies. The attractive nature of this safe-haven asset is still a continuing theme amongst investors as geopolitical uncertainties, as well as record-high inflation numbers, continue to lower investors’ risk appetite to put their money into riskier assets and seek new opportunities in emerging markets.
In terms of Technical analysis, the price action continues to suggest further upside potential in the near term. The next target for buyers will be the May 2020 high around the 100.86 level. We can see how impulsively the price has moved out of the tight sideways range that it has been locked in since the beginning of March. If the buying impetus persists, then the April 2020 peak at 100.93 could return to the investors’ radar.
Overall the Dollar continues to be a great hedge against all the uncertainties currently inherent in the global financial markets. A truly savvy investor knows the value of a diversified portfolio, especially in times when the market is volatile. If you would like to add Dollar exposure to your portfolio, kindly contact us and one of our FSCA accredited financial advisors will advise you on the range of options available to you from Aluma.