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Weekly Market Overview | 22 April 2022

Gold

Fundamental analysis
This week saw the price of gold come under pressure as the U.S 10-year Treasury yields rose along with the Dollar index. The strength of the Dollar is important in relation to the yellow metal because a stronger Dollar weakens the appeal of gold as it becomes more expensive for new buyers to enter the market. Coupled with these fundamentals, the U.S Federal Reserve also took a strong hawkish tone this week which further increases the likelihood that the U.S Central Bank will hike interest rates aggressively to fight rising inflation.

Technical Analysis
In terms of technical analysis, gold is still locked within a tight range between $1 900 and $2 000, which means we don’t really have a concrete direction until we break above or below this range in an impulsive manner. However, the current price action is showing us how we recently approached the top of this range around the $ 1 998 area in the form of a corrective ascending channel and broke out of the channel in an impulsive manner, followed by a bear flag continuation pattern, which gives us insight that the next likely move for price is a further downward push towards the bottom of the range around the $ 1 900 area.

Oil

Fundamental analysis
This week came with an announcement by the International Monetary Fund, where they essentially cut their global economic growth forecast for the year. This forecast is in line with the current global outlook as China, the world’s largest importer of oil, announced a new round of measures including daily coronavirus testing from Friday, adding to strict measures to curb the latest outbreaks. This means lower demand for oil and as such a decrease in the price. The burden of slower growth and decreased demand is however balanced out by the prospect of the European Union imposing a ban on Russian Oil which would further tighten the supply over the longer term.

Technical Analysis
In terms of technical analysis, the price of oil is still ranging between the high of $124 and the low of $92. The current price action is forming a correction in the form of a falling wedge after moving upwards in an impulsive manner, which is an indication that the probable move from here onwards is another impulsive move to break above the $109 area, and this is supported by the long term fundamentals mentioned above, prolonging the theme of a decreased supply versus the global demand.

Cryptocurrency

Fundamental analysis
Bitcoin has been testing early buyers of the current range it’s been held inside, by falling 7% since 21 April 2022. This downward correction seems to look like a classic play by marker makers to purge the sell-side liquidity before triggering an impulsive uptrend. This downward retracement is likely to find support around the $40 000 area where investors could enter the market at this discounted level. Market participants can expect more accumulation on this recent dip, leading to a quick recovery that could be the catalyst for the price to move towards the yearly open at $46 198.

Technical Analysis
In terms of technical analysis, the short term outlook might look bearish at first glance to the untrained eye, but through price action, we can see that the current downward move can be categorised as a retracement where further buying is likely to take place at these discounted levels as price bounces for a third time on the trendline. However, if the price breaks below the $40 100 support level we could see BTC taking a dive all the way to the $34 752 area. An impulsive move below this significant support area will create a lower low and invalidate the bullish analysis we currently hold.

The Optimal Play

Fundamental analysis
This week saw the Dollar Index reach the psychological boundary of 101.00, as risk appetite continued to weaken amid increased geopolitical tensions and higher U.S yields. Substantial buying interest was seen early this week on the back of the speech made by FED chair Jerome Powell at the IMF event where a hawkish stance was expressed. In essence, Mr Powell reiterated a tighter monetary policy in an attempt to grapple with record-high inflation levels, which confirms a 50 basis point rate hike in the month of May. The long term view is still firmly in line with a stronger Dollar because The geopolitical landscape still shows no sign of a diplomatic attempt to negotiate a solution to the conflict in Ukraine.

Technical Analysis
The price action is firmly supporting the underlying fundamental outlook mentioned above. In terms of patterns, we can see a clear impulsive break out of the range in the month of March. Since then, the index has found strong support above this range and continues its move on upward in the form of an expanding channel printing higher highs and higher lows, which is indicative of a strong and healthy trend toward the 2022 highs past the 101.00 barrier.

The case for Dollar exposure to one’s portfolio amid these volatile market conditions cannot be overstated. Since the beginning of the war in Ukraine, coupled with the general risk-off sentiment that investors currently have, the greenback has strengthened week after week, and will continue to do so until the global sentiment shifts towards a sentiment that is more conducive for riskier investments. To learn more about how you can diversify your portfolio and gain dollar exposure through an investment that can protect and grow your money, kindly contact us and one of our FSCA approved financial advisors will walk you through how you can go about this.

Weekly Market Overview | 14 April 2022

Gold

Fundamental Analysis
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.

Technical Analysis
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.

Oil

Fundamental Analysis
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.

Technical Analysis
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.

Cryptocurrency

Fundamental Analysis
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.

Technical Analysis
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.

Technical Analysis
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.

Weekly Market Overview | 8 April 2022

Gold

Fundamental Analysis
This week saw a plethora of geopolitical data influencing the risk sentiment on global markets as economic growth concerns re-emerged in the form of a new strain of Covid hitting China and further sanctions being imposed on Russia’s fossil fuel exports to Europe. These sanctions come on the back of Russia being accused of war crimes in the city of Bucha where hundreds of civilians in the town were allegedly tortured, raped and murdered by Russian soldiers.

These developments increase the likelihood of Russia’s exclusion from the global economic environment being prolonged and as such increase uncertainty and risk appetite from investors. This combination of factors revived gold’s appeal as a safe-haven asset this week as it bounced off the $1 913 level and held its consolidation within the range of $1 944 and $1 913 per ounce.

Technical Analysis
In terms of technicals, the head and shoulder pattern has fulfilled itself as previously discussed in the last two editions of this newsletter, from the $1 966 area, down to the $1 890 area in the form of an impulsive move. Following this impulse from the monthly low on the 29th of March, we have had a corrective move back to the $1 950 area in the form of an ascending channel, followed by an extended consolidation in the form of a bear flag where the price has been ranging this week as discussed above.

What we can project from here onwards, should the price exit the bear flag, is an impulsive move downwards to continue the trend towards the $1 884 area. Conversely, if the flag fails and price breaks above the $1 960 level in an impulsive nature, we can expect a small correction back towards the top of the current range at $1 940 and expect the bulls to enter the market and flex their muscles, leaving the $1 980 area open to being challenged.

Oil

Fundamental Analysis
This week we see global oil prices head for their second weekly drop since the United States announced its largest-ever oil reserve release last week, causing the price to fall below $100 a barrel briefly. This drop in price is a direct cause of increased supply entering the market, and we can expect a further drop in price because of the announcement made by the International Energy Agency, which has the market expecting an additional 120 million barrels of crude and oil products from emergency stockpiles aimed at cooling global oil prices following Russia’s invasion of Ukraine and the subsequent sanctions that have followed.

Technical Analysis
In terms of technicals, we saw the price pullback at the beginning of the week to form weekly highs around the $105 area, where sellers took control and moved the price further down to the low of the week on Thursday around the $92 area. The underlying fundamentals support a further move down to around the $90 area where we could see buyers potentially enter the market. Our clue for this potential reversal is in the corrective manner the price is approaching these key levels in the form of descending channel. This sluggish behaviour is an insight into what could unfold next – buyers entering the market and shifting the order flow.

Cryptocurrency

The Bitcoin price is at an interesting juncture in its progress over the past two to three weeks. After breaching a massive hurdle around the $45 000 area, the price broke out, edged higher and then started correcting back into the range over the last couple of days. Despite this pullback, the general probability is still pointing towards further upside potential towards the $52 000 level.

Technical Analysis
In terms of technicals, we are back inside the range that we popped out of two weeks ago. However, the nature of this pullback is corrective and this gives us insight into what is probable – an impulsive move upwards.

Buyers are likely to enter the market around the $40 000 – $41 000 demand zone and if this scenario plays out as projected then we could see bulls take control of the market and head to the final hurdle of $52 000, and a break above this will open the door for bullish momentum to test the $60 000 psychological level that was set last year around October. Conversely, if this setup fails, then we could see sell pressure move all the way from the current price to the $36 000 level.

The Optimal Play

The U.S. dollar index made a robust move to 100 for the first time in nearly two years today, this comes on the back of the prospects of a more aggressive pace of Federal Reserve interest rate hikes forecast for May. Factors influencing this exuberance range from geopolitical uncertainties stemming from the economic costs of the war in Ukraine as well as the upcoming French elections which are poised to be a nail-biting event for the Euro-zone. While the fundamentals may have been fluctuating, we have expected and even predicted this surge in the strength of the greenback for three weeks now in previous editions of this newsletter just from our technical analysis.

Looking Back

Last week’s prediction:
In our technical analysis last week we identified a reversal pattern in the form of a falling wedge forming around the key support area of 97.70. We predicted that buyers would enter the market and move price all the way to the top of the range that we have just broken out of in the middle of this week.

This week’s results:
The pattern has fulfilled itself as predicted, and if you had dollar exposure on your portfolio at the time that we made this projection, your portfolio would be in significant profits. The impulsive nature of this move gives us a clear insight that this strength is likely to be sustained and open the way for the price to reach the 101 mark as investors pile onto the safe-haven currency.

If you would like access to an investment that can protect and grow your capital through dollar exposure, kindly contact Aluma and one of our FSCA approved financial advisors will get in touch and discuss how we can diversify your portfolio for you.

Weekly Market Overview | 1 April 2022

Gold

As discussed in last week’s newsletter, the price of Gold hit the target level of around $1 900 per ounce following sell pressure caused by the fundamentals as well as the technicals. A low of $1 889 was hit by Tuesday as the New York Session began trading, which prompted buyers to enter the market at this discounted price – the lowest in the month of March.

Fundamental Analysis
In terms of fundamentals this week, investors are eyeing geopolitical risks, as well as inflation data coming out of Europe, which will undoubtedly have an effect on Interest Rate hikes. In terms of U.S economic data that is expected this Thursday afternoon, a higher inflation printout is likely to seal in a 50-basis point May FED rate hike. The knock-on effect of these rate hikes is that it makes holding onto and lending out cash more profitable, often resulting in investors withdrawing from other assets.

Technical analysis
In terms of Technical analysis, If the overall bearish momentum continues, the price could fall further towards the $1 900 mark again, below which a test of the March 29 lows of $1 890 will be inevitable, and if that level breaks, sellers could flex their muscles all the way to around the $1 877 level. Conversely, a break above the $1 938 level could trigger buyers to take control of the market and open the way to test the $1 957 level.

Oil

As predicted, the price of oil per barrel fell as sellers took control of the market following a pullback towards the $116 level. The price dropped all the way to the identified level around $98 on Tuesday where profit-taking was seen as the talks between Ukraine and Russia came back yielding positive results.

Fundamental Analysis
The bear market is set to continue as investors react to the news trickling out this Thursday that the United States is considering the release of up to 180 million barrels from its strategic petroleum reserve, the largest in nearly 50 years. This additional supply flowing into the market will help plug the hole left by Russian oil since it’s been banned, which in turn will drive the price of oil to cheaper levels and alleviate some of the pressure caused by rising energy costs as well as inflation. Such a release would help the oil market to rebalance in 2022 by increasing supply by 1 million barrels per day over the course of six months.

Technical analysis
in terms of the technicals on the charts, we see how the price has impulsively moved from the $116 level and broken out of the ascending channel we identified last week and hit the target of $100 located at the bottom of this continuation pattern. Now we are in a bearish flag ranging sideways just outside the channel, which is usually followed by another impulsive move to the downside in line with the overall directional bias and order flow. A break below the $99 level will leave sellers in control all the way to the $92 level.

European Markets

European stocks were varied in their performance but held near the highs they reached earlier in the week when investor sentiment became more positive about peace talks regarding the ceasefire in Ukraine. Europe’s STOXX 600 was down 0.1%, just below the one-month high it hit on Tuesday, while The FTSE 100 rose 0.2% despite European stocks edging lower. France’s CAC was 1.1% lower and the DAX lost 1.7% in Frankfurt by the end of trading on Wednesday.

Going into the trading session on Thursday, investors have their eyes set on key inflation data being released from countries in the EU, following Wednesday’s data showing surging inflation in Germany and Spain. Readings on Thursday morning showed that French inflation had hit 5.1% and Italian inflation data is due later in the afternoon. This data could be the catalyst in sealing in the potential for a 50 basis-point interest hike in May from monetary policymakers in the European Union.

US Markets

The U.S. equities rally fizzled out on Wednesday as investors reviewed Inflation data and geopolitical risks. This pullback from these highs comes on the back of four straight days of gains that erased all the losses sustained since Russia invaded Ukraine over a month ago.

A 1.2% rise in the S&P 500 on Tuesday left the index less than 4% below its all-time high and just 2.8% down year-to-date, but by early trading on Thursday the index had fallen by 0.63%. Meanwhile, The Dow Jones Industrial Average came down by 0.19% and the tech-heavy Nasdaq shed 1.2%. Market analysts expect stocks as well as equities to trend higher by end of the year. The benchmark U.S. 10-year yield rose to 2.557% on Monday, its highest level since April 2019, as traders wait patiently for key inflation data to be released to motivate further rate hikes from the FED.

Cryptocurrency

This week saw the biggest buying spree from a single Bitcoin account this year when Terraform Labs, received $139 million worth of Bitcoin on March 30, taking its total to about $1.5 billion in Bitcoin, making Terraform the second-largest holder of Bitcoin in the world. This immense volume fueled exuberance in the market and could be the catalyst for an upside surge towards the psychological $60 000 mark.

Technical analysis
In terms of the technicals, the Bitcoin price action for the last week and a half has caused it to break above some crucial psychological levels as predicted in last week’s newsletter. We are likely to see a pullback towards the $44 000 area, followed by a small consolidation before any further upward momentum. This move is likely to allow Ethereum, Ripple and other altcoins to rally as well.

The Optimal Play

Following last week’s assessment of the strength of the Dollar, there was a sharp rally on Monday and Tuesday. But this was short-lived as fundamentals kicked in based on increasing optimism stemming from the ceasefire talks between Russia and Ukraine. These talks increase investors’ risk appetite, which subsequently means a withdrawal from safe-haven assets like the Dollar and Gold.

Technical Analysis
In terms of Technical Analysis, this week’s decline was absolutely inconsequential with regard to changing the general outlook for the strength of the dollar. It simply continues to consolidate after a breakout above the mid-2020 highs. A Breakout followed by a consolidation increases the chance of a continuation. Our clue for this lies in the sluggish way in which the price approached the 97.80 level.

We can see a falling wedge followed by an impulsive move away from this level. A big wave up in the USD Index is likely just around the corner, which could open the way for bulls to rally past the psychological 99.35 level and break out of this consolidation pattern.

Having dollar exposure to your portfolio is still a great hedge against the geopolitical uncertainties in the world right now as well as the record-high inflation numbers. For any information on how to access a product that can give your investment portfolio the kind of exposure you need to protect and grow your investment in these uncertain times, kindly contact Aluma and one of our FSCA accredited financial advisors will contact you.

Weekly Market Overview | 25 March 2022

Gold

Thursday’s New York trading session saw gold finally break out of its weekly consolidation area and make a move to the upside as bulls took control of the market. Surging oil prices continue to increase fears over rising inflation, which has been benefitting gold. Other factors influencing the price movements include risk trends, FED monetary policies, as well as updates to the war in Ukraine, keep risk appetite low.

In terms of technical analysis, the price at the time this article was written is $1 956.50 with bulls eyeing the $1 980-00 level to complete a head and shoulder pattern where sellers could potentially enter the market and test the upward momentum. However, this upward momentum is moving in a corrective way in the form of a bearish continuation pattern, which gives us insight into the fact that this could be a pullback. If this downside scenario plays out, we could see bears flex their muscles down to the $1 930 level and a break below this level could make way for the price to retest the monthly low last seen on the 16th of March around the $1 900-00 level.

Oil

As European Union leaders meet to discuss the possibilities of banning Russian Oil in the block, investors watched on with keen interest on the outcome of this summit held on Thursday. However, as news trickled out that policymakers had decided to delay the ban, oil prices slipped around the $116 mark. In terms of sheer volume, Russia services 45% of EU gas imports, 25% of oil imports, and 45% of coal, which indicates their extreme dependency.

This hesitation to ban Russian oil is largely driven by the fact that Europe as a whole will face escalation in unemployment and a serious drop in manufacturing activities, which will affect the European economy negatively. An immediate embargo on Russian oil might be a good idea in principle to hurt the Russian economy but not a wise decision for the European economy.

In terms of technical analysis, we see that oil approached this $116 level sluggishly in a corrective pattern, forming an ascending channel, and coupled with the fundamentals, we could see sellers take control and drive the price down to test the $100 level and a break below that could open the way for a retest of the low of this range last seen on the 15th of March around the $93 level.

U.S Markets

Market sentiment remained dampened in early trading on Friday morning as geopolitical headlines dominate the buyers of major stocks amid the absence of major data and events on the economic calendar. The Dow Jones Industrial Average rose 1% in Thursday’s stock market trading while The S&P 500 index popped 1.4%, with Nvidia stock and other chipmakers among the best performers. The Nasdaq composite gained roughly 1.9% and U.S 10-year Treasury yields retreated from the previous daily close of around 2.37%. Overall, The stock market rally continues to show strong action, bouncing back from Wednesday’s lows. There are buying opportunities present at these levels, but many stocks have already extended from these discounted lows.

European Markets

European indices have seen a strong rebound this week off the monthly lows as the “risk-on” sentiment fueled demand. In the wake of a 13% decline in the UK 100 index from the highs that we last saw in February, a rebound off of the 6 800 level allowed bulls to take control and drive prices back above the 7 000 level before running into a wall of resistance at the key psychological level of 7 500, which are levels last tested before the invasion of Ukraine. In stark contrast, however, the Stoxx Europe 600 index finished down 0.21% to 453.07 while the French CAC 40 index fell 0.39% to 6,555.77, and the German DAX remained flat at 14,273.79.

Bitcoin

The outlook for the near future is set to be decided as prices reach the upper range of a consolidation area on the back of a two-week rally. As the Thursday trading session drew to a close we saw Bitcoin price tag the upper trend line of the ascending triangle that has been forming at $44 000. This technical pattern was discussed in last week’s newsletter and is composed of trend lines drawn across equal highs and higher lows.

In terms of technical analysis, a break above the high of this consolidation area could set the stage for bulls to drive the price to $53 855, but buyers need to overcome multiple hurdles to reach this target destination. If the price closes the week above $52 000 this will constitute a higher high relative to the highs formed in December 2021 and could potentially bring about the start of an uptrend. In such a case, market participants can expect Bitcoin to head for the $60 000 psychological barrier, bringing the total gain to 36% from the current level around the $44 000 mark.

The optimal play

The appeal for The U.S Dollar’s safe-haven status increased this week as the Federal Open Market Committee prepared investors for the subsequent interest rate hikes that are expected in May and minutes from the NATO meeting in Brussels came out. In essence, U.S President Joe Biden discussed further sanctions on Russia and formulated a strategy to strengthen NATO with its NATO counterparts by establishing four new battle groups in Slovakia, Romania, Bulgaria, and Hungary, which may strengthen their collective defence force, particularly on the Eastern flank. This has further escalated tensions, which is likely to cause a minor delay in the ceasefire between Russia and Ukraine. This delay has massive implications for the disruptions we’ve seen in the global economy and the knock-on effect on the Dollar index saw it rally in the New York trading session on Thursday to the 99.00 key resistance level.

In terms of technical analysis, the index is forming a consolidation pattern on the back of a clear impulsive move. An Upper trendline forming from a high reached on the 7th of March at 99.41 can be connected to a lower trendline forming from a February low at 95.77, which may continue to react as strong support for potential buyers to come in at a discounted level with the aim of rallying past the initial high set at the 99.41 level.

This is in line with the above fundamental analysis that is forecasting a stronger Dollar against a basket of global currencies. Conversely, a break below the 97.70 level will be a trigger for sellers to take control and sell into a bear market with the target being the 95.77 low.

As always, Aluma advises caution when speculating on the strength of the currency markets as the potential to lose your initial investment exists, but if you have Dollar exposure through Aluma’s Listed Global Note then the capital protection provided through our partnership with one of the big four banks in South Africa will provide a good safety net for any downside scenario potentially occurring.

Weekly Market Overview | 18 March 2022

Gold

As demand for anti-risk assets tapered off this week, the yellow metal took advantage of the weaker dollar on the back of an interest rate hike on Wednesday by 25 basis points. This however comes as a surprise because gold has historically been sensitive to rate hikes from the FED as it increases the opportunity cost of holding onto the asset. The only inference one can make is that the market has remained positive and resilient because of the confident stance FED chair Jerome Powell has in the U.S economy. He noted that “the American economy is very strong and well-positioned to handle tighter monetary policy”, and seemingly the markets welcomed the central bank’s confidence in the economy despite numerous uncertainties.

With this in mind, investors should be cautious in their approach amid signs of progress between Russia and Ukraine in their ceasefire talks. This optimism over a potential diplomatic solution to the war could potentially cap the gains that gold has made as a safe-haven asset during the war, which means that buyers should manage their expectations of the price smashing above the $2 070 level before committing to a bullish outlook. Conversely, there is strong support around the $1 900 level where new buyers could enter the market as this area represents a new higher low and offers a discount for new buyers to enter the market with a view to retest the $2 070 mark and potentially surpass it or range between the new high and this newfound level of support.

U.S Markets

It’s no secret that the pandemic came with loose monetary policy that left a lot to be desired from a fiscal point of view, with record debt being added by means of several stimulus measures. However, the U.S Federal Reserve hinted on Wednesday that this would be coming to an end as it plans a more aggressive policy and plans six further interest rate hikes for 2022 to fight record-high inflation.

In terms of stocks, Wall Street indexes rose overnight to close out their biggest three-session percentage gains since November 2020. The S&P 500 and Dow Jones each rose 1.2% and the Nasdaq 1.3%. These results come on the back of Powell expressing high confidence in the economy coupled with the historical data that suggests tighter monetary policy has often been accompanied by solid gains in stocks.

European Markets

Following the rate hikes in the U.S, the Bank of England followed by raising their interest rates on Thursday by 0.75% as expected in an attempt to grapple with rising inflation. The stark difference though is that it had a much more gentle tone in its forecast in terms of future rate hikes for the remainder of the year but remained watchful as inflation is predicted to reach around 8% in April – almost a percentage point higher than previously forecast. Coupled with that, the impact of the war in Ukraine is yet to be felt hard by Europeans as energy costs are set to jump in the autumn when regulated tariffs are reset, on top of a 50% rise coming next month.

In terms of stocks, the pan-European STOXX 600 index rose by 0.2% and was on track to erase losses recorded in the month of March when fears about the Ukraine conflict pounded financial markets, while the German DAX gained 3.76% alongside the French CAC 40 index rising by 3.68% and the FTSE 100 index adding 1.75% by midweek.

Oil

On the back of information coming to light from both sides of the delegations regarding the progress of ceasefire talks and their lack of tangible progress, the oil price rose sharply and back over $100 overnight and Brent crude futures were up another 2% to $108.73 in early trade along with commodity exporters’ currencies. The effect that these talks have on the oil price is significant because if they collapse or stall, the current tight sanctions are prolonged and as such continue the disruption of oil supply in the world.

In terms of technical analysis of the chart itself, we see strong support coming in at the $92 level this week, which is in line with the fundamentals discussed above. As we head into the weekend and the fourth week of the war, we could see the price range between the key levels of $92 and the $109 level while investors wait for clarity and a way forward.

Cryptocurrency

Bitcoin remained unphased on Friday morning on the back of comments made by three European regulatory agencies warning investors that they could lose all their money. The European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA) “warn consumers that many crypto assets are highly risky and speculative.”

This however remains in stark contrast to what many other commentators are saying, as there is a growing consensus that the fact that nation-states are able to hold all the permissions for one to participate in the global financial system is increasingly making people seek alternative forms of finance. The sanctions on Russia’s financial system is regarded in some circles as the day Fiat-currency lost its prominence over alternatives because you cannot cancel the largest energy producer from a monetary system without massive repercussions. Arthur Hayes, the co-founder of the cryptocurrency exchange Bitmex affirms that these repercussions may push individuals and nation-states to transact and store their money in different ways, and these include Bitcoin as well as Gold.

Source:https://www.fxstreet.com/cryptocurrencies/news/bitcoin-weekly-forecast-btc-eyes-53-000-but-indicators-suggest-otherwise-202203180500

In terms of technical analysis, the consolidation continues with the formation of a bullish setup. A breakout from this formation could be the key to triggering a bull run. A break above the horizontal resistance barrier at $44,418 will trigger a move to $53,629. If this bullish setup plays out as such, the price will likely make a run for the $60,000 psychological level and perhaps the all-time high at $69,000 if bullish momentum sustains. However, if it breaks below $34 700, then we could see a bearish scenario that could test the $29 000 level.

The Optimal Play

As the U.S dollar continues its mild recovery after a four-day pullback on the back of peace talks between Russia and Ukraine, geopolitical concerns have appeared late in the week and this has caused the dollar index to bounce at the 97.70 level where strong support has been found by new buyers of the currency. This perceived increase in risk aversion since the peace talks have stalled has given strength to the Dollar in relation to a basket of other global currencies. Investors are advised to keep a keen eye on the call between President Biden and China’s Xi Jinping regarding the war in Ukraine, as this could provide greater clarity about the direction of the strength of the dollar in the current economic climate.

In terms of technical analysis, the index seems to be currently ranging between a high of 99.40 and a low of 97.67. A break above 99.29 would open the door to the 99.41 level, which is a monthly high and the dollar would potentially rally to the 99.97 level which was last tapped in May 25 2020. On the flip side, the next down barrier emerges at the 97.72 level which is the weekly low, followed by 97.71 then 97.44 which was the monthly high in January.

With that being said, investors are advised to remain watchful of the different fundamental and technical factors that are lined up as the week draws to a close and as we enter the latter half of the Month. If the Dollar rallies according to the scenarios discussed above and you would like exposure on your portfolio, the Aluma Multi-Asset Global Note is still the perfect blend of offshore exposure to diversify your portfolio adequately while providing capital protection to your investment.

Weekly Market Overview | 11 March 2022

As mounting pressure continued this week from global onlookers for policymakers to put more pressure on Vladimir Putin, President Joe Biden announced a ban on Russian fossil imports, including oil, in response to the country’s invasion of Ukraine.

While Russia views this as an act of aggression and plans to work on a broad response to these sanctions that will be swift and felt in the West’s most sensitive areas, the effects on the global oil price will undoubtedly be felt by consumers in the form of soaring energy, gasoline and food prices.

Gold

As predicted in our newsletter last month, the demand for the yellow metal as a safe haven has caused it to touch the $2 000 mark per ounce, as investors continue to withdraw from risk assets and emerging markets, into the US Dollar as well as gold. On a technical analysis of the chart itself, combined with the fundamentals in terms of the continued geopolitical uncertainties, we could see gold extend its gains well into this $2 000 territory and find strong support around the $1,955 mark, where new buyers will most likely enter the market and define this zone as a new higher-low fair-value price, in relation to the rally that will ensue now that we are trading into the $2 000 area.

U.S Markets

Treasury yields spiked amid increased volatility on Wednesday morning, with the benchmark 10-year note adding close to 1.85%, as inflation fears led investors to offload bonds from their portfolios.

In terms of Stocks, U.S Futures were buoyant at the London Open, as investors continued to assess a surge in commodity prices and high inflation while the war in Ukraine continues. Futures that are linked to the Dow Jones Industrial Average rose by 1.1%, while S&P 500 futures climbed by the same amount together with the tech-heavy Nasdaq 100 futures.

As gasoline prices hit their all-time highs in the United States at $4.17, the highest price since 2008, energy and food prices are sure to follow suit and it remains to be seen if the Federal Reserve will be able to manage a soft economic landing to avoid an economic recession.

European Markets

European stocks and shares saw a rebound on Wednesday morning as investors bought at price levels that were significantly lower as the market took a beating amid the uncertainties that sparked fears about growing Western sanctions on Russia after it invaded Ukraine.

The pan-European STOXX 600 index rose 2.6% after a four-day run of losses, and London’s FTSE 100 gained 1.6%. Meanwhile, the DAX futures contract in Germany traded 1.2% higher and the CAC 40 futures in France climbed 2.1%.

On the back of these mixed results, the ECB is set to meet on Thursday, with chief Christine Lagarde likely to prove that a lid can be kept on euro-area inflation, which has already leapt to a bigger-than-expected 5.8% – the highest figure in the bloc’s two decades.

Oil

As Europe plans to taper off its oil imports and the U.S bans fossil fuel imports from Russia, the loss of Russian oil will undoubtedly leave a void not easily filled in the global market and will cause significant pressure on global production, which will take time to ramp up to pre-pandemic levels again.

This is creating the perfect storm of factors that are keeping the price of oil at record highs as the U.S. and other major buyers will compete for limited supplies, creating a higher demand than is able to be supplied which could potentially create upheaval unseen in decades. On the back of the U.S ban, crude oil rose by 7% to trade above $128 per barrel. It ended the day 3.6% higher at $123.70. Brent crude oil, the international benchmark, jumped 7.7% to $132.75, before trading off the highs. At the end of the session on Tuesday evening, the gains stood 4.3% higher at $123.21.

Cryptocurrency

While Ukrainians and Russians switch to an alternative for international transactions, bitcoin and other cryptocurrencies temporarily gained some value this week as financial sanctions continued on Russia.

However, this exuberance was short-lived as price retreated and is now, at the time of the writing of this article, resting at $39 212,20 per Bitcoin, and seems to be held in consolidation between roughly $45,000 and $35,000 and has been doing so for the last two months. This pullback from record highs comes as investors withdraw their money from risk assets and reinvest it in safe havens like the US Dollar and Gold. Market analysts are in agreement that the technical overview, as well as the fundamentals, aren’t pointing to any particular directional bias, but a seasoned investor is prepared for either scenario. If we see a break above this Consolidation area above $46 000 then we would be heading to retest the all-time highs around the $60 000 mark, but a break below the $36,754 support level could be the catalyst to a crash to $30,000 or $23,251.

The Optimal Play

As global tensions don’t seem to be subsiding anytime soon, a measured approach is still the best course of action in the current financial climate. Exposure to the World’s reserve currency, the U.S Dollar is still the safest bet and will continue to strengthen as the fundamentals keep pushing the Dollar Index even higher since the beginning of 2022.

With rising global inflation, global supply chain bottlenecks, record-high oil prices coupled with the sustained conflict in Ukraine, the U.S Dollar will only continue its rally as investors keep their Risk-off sentiment which reinforces the conviction that now is a good time to contact Aluma Capital to gain exposure to the U.S Dollar as it continues to surge.

Within a number of days, the Russia-Ukraine War has put significant pressure on global markets.

European Markets

As EU leaders come together in a show of force against the war, financial sanctions have rocked Russia’s economy and threatened to further fuel worldwide inflation. These sanctions were however strategically designed to avoid disrupting essential energy exports from Russia, which Europe largely relies on to power their factories, heat homes and fill gas tanks, which cushioned the surge in energy prices but did not mitigate completely against increased volatility.
In terms of Stocks, European stocks continued their slump this week as Russian Markets remained isolated from the global economy. The Central Bank of Russia kept the local stock market closed for a second day after the U.S. barred transactions with it, and as a result, the central bank went on to lift interest rates to 20% from 9.5% this week.

The Stoxx Europe 600 ended just 0.1% lower on Monday despite heavier losses early in the day, and skidded 2.4% by the end of trading on Wednesday, while the German DAX and the French CAC 40 each fell nearly 4%. In stark contrast, the U.K FTSE helped limit the damage as it leans more towards commodity producers and only lost 1.7% by Wednesday.

U.S Markets

While Wallstreet had its eyes firmly fixed on the negotiations between Russia and Ukraine, the U.S. stock indexes finished sharply higher on Wednesday, with gains gathering steam after Federal Reserve Chairman Jerome Powell outlined plans to begin dialling back the central bank’s easy-money stance to fight inflation while playing down the prospect of a larger-than-usual increase of benchmark rates in March. The central bank plans to raise its benchmark interest rate, currently in a range between 0% and 0.25%, at its meeting in two weeks. Powell said he supported a 25 basis point increase, rather than a larger 50 basis point increase.

On the back of this, the Dow Jones Industrial Average rose 596.40 points, or 1.8%, ending at 33,891.35, while the S&P 500 index climbed 80.28 points, or 1.9%, closing at 4,386.54, as each of the broad-market benchmarks sectors advanced. The Tech-heavy Nasdaq Composite Index rose 219.56 points, or 1.6%, finishing the trading day at 13,752.02, after hitting an intrasession low at 13,493.90.

Oil

As energy prices continue to surge, oil settled on $110.60 per barrel at the end of trading on Wednesday, the highest in 11 years. This will undoubtedly be felt globally at the gas pump for ordinary consumers. In response to this, The U.S. and other countries in the International Energy Agency agreed on Tuesday to release an additional 60 million barrels of oil from their emergency reserves, in an attempt to alleviate any supply shortfall caused by Russia’s invasion of Ukraine. In addition to that OPEC+, made up of the Organization of the Petroleum Exporting Countries and its allies, offered no surprises at its monthly meeting by agreeing to boost production in April by another 400,000 barrels a day in an attempt to bring rising global energy costs down.

Gold

Investors have been kept on their toes as the demand for the safe-haven yellow metal continues amid the conflict between Russia and Ukraine. At the end of the trading session on Wednesday, gold held its ground at $1,926.10 per ounce and U.S. gold futures rose 0.4% to $1,930.50. Although gold is considered a safe investment during political and economic uncertainty, rising U.S. interest rates increase the cost of holding the asset, so this becomes a double-edged sword for investors, and as peace talks between Russia and Ukraine continue, investors need to be cognizant of the reality of a better economic outlook and how it will weigh on gold. So one potential scenario is a spike towards those all-time highs of over the $2 000 mark over the next two weeks before the effect of higher interest rates and increased stability on the geopolitical front start to pull gold prices down again.

CryptoCurrency

In week two of Russia’s invasion of Ukraine, it is clear to see the wide-reaching implications of the invasion itself on the global economy, but also the reaction that nation-states have had by imposing financial sanctions on Russia. On the back of these developments, Bitcoin prices have surged as investors appear to view the volatile cryptocurrency as a safe haven for their money and Russians and Ukrainians seek alternatives to their country’s financial institutions. Evidence for this is seen in the sharp spike in the value of Bitcoin as it gained over 25% in just the past week since the beginning of the conflict.

The Optimal Play

While Moscow continues its offensive on Ukraine, there is light at the end of the tunnel as both sides indicate they are ready to resume talks to end the conflict. The U.N. General Assembly also voted on Wednesday to condemn Russia’s Ukraine invasion while calling for an immediate end to the clashes.

However, investors still remain cautious amid these developments, and currently, the sentiment is still leaning towards Dollar exposure as a hedge against the current geopolitical instability. In this regard, Aluma’s Listed Global Note is an ideal investment vehicle to give your portfolio the desired offshore Dollar exposure that is required to protect and grow your capital as the demand for its safe-haven status continues.

The 2022 Budget Speech and how it affects your retirement and investments.

One can liken The minister’s speech to the classic game of Jenga, where the focus was on preventing the tower from falling apart but still strategically removing certain blocks from the structure. Essentially it was a budget that was designed to strike a balance between keeping money in the pockets of South Africans while still supporting economic growth.

Cautiously Optimistic

While this might come as a surprise to most, the state of South Africa’s economy is actually far less hostile than when the former finance minister Tito Mboweni read his version of the Budget Speech over a year ago after the world economy went into a recession because of the Covid 19 pandemic. One of the key drivers of this was a spike in commodity prices on the back of the economic rebound, which benefited South Africa because it resulted in a much high than anticipated mining tax revenue, and this gave the government much-needed breathing space on the fiscal front.

Overall The estimated tax revenue collection for 2021/2022 is R1.55 trillion, which is R182 billion more than last year’s estimate. This is mostly as mentioned from the mining sector, but personal income tax and value-added tax also played a role in this increase.

Investments

In the main, there aren’t any taxation increases on the cards in terms of investments this year. This comes as a welcome reprieve because the two taxes that hit investors the hardest were dividend withholding tax and capital gains tax (CGT). The capital gains tax inclusion rate for individuals and special trusts remains at 40%, and for other taxpayers at 80%.

Dividends tax remains at 20% on dividends paid by resident and non-resident companies for shares listed on the JSE. Foreign dividends received by individuals from foreign companies (shareholding of less than 10% in the foreign company) are taxable at a maximum effective rate of 20%.

Retirement lump sum taxation

There weren’t any changes announced in terms of retirement fund contributions. The first R500 000 of a retirement lump sum remains tax-free. The maximum retirement fund contribution an individual can make is still limited to 27.5% of taxable income. It is further limited to R 350 000 or 27.5% of taxable income before the inclusion of a taxable capital gain. The amounts contributed to pension funds, provident funds and retirement annuities can still be deducted within limits during the course of a tax year to reduce tax liability, but smart planning and execution can put money back into your pocket.

Retirement funds will have more flexibility to allocate a greater % offshore
While retirement funds have the most attractive incentives, they have been heavily denigrated for their rigidity in terms of where funds can allocate their capital. Under current legislation, only 30% of the portfolio can be invested offshore, but going forward there are plans in place to raise that cap to 35%. Coupled with this, the treasury is drafting regulations that will allow investors to access a portion of their retirement portfolio before their retirement age in cases of emergency.

Value Added Tax

VAT is charged on the supply of goods and services provided by registered vendors. It remains unchanged at 15%. Alongside ‘sin tax’, this is another tool used by the government to guide the population towards reduced consumption and more saving and investment.

Estate Duty

Estate duty is applied on the property of a deceased South African as well as property belonging to a non-resident of South Africa. Currently, the taxable estate duty is 20% on an estate worth less than R30 million and if it is above that benchmark it is 25%. The minister suggested that no changes would be effected in the 2022 budget.

Conclusion

In conclusion, not much has changed in the financial landscape apart from the changes made in sin tax, therefore Investments and retirement funds held with Aluma will not be affected by the latest budget speech.

However, the fact that there haven’t been any significant escalations in taxation, coupled with personal tax relief through an adjustment in personal income tax brackets and rebates means that individuals should see a net increase in their take-home pay, which leaves more money available to invest. Overall, this year’s budget speech provides an opportune moment to contact Aluma to revise your financial wellness and investments to see where this additional capital can be deployed and go to work for you.

Cashing in on retirement funds

In Minister of Finance, Enoch Godongwana’s maiden budget speech yesterday (23 February 2022), he spoke about government’s proposal to fundamental change the retirement system which will allow partial access to their funds.

Said Godongwana, “Part of this proposal includes the possibility of short-term access, which would be dependent on the approval by trustees of each fund. Consultations are proceeding following the release of a discussion paper last year and the draft legislation on these amendments will be published for comment in the middle of the year”.

“While many South Africans may access the funds to settle debt or for living expenses, there are many that could consider using access to the funds to invest the money in financial products into products that could offer higher returns,” said Dwayne De Waal, COO from diversified asset and fund management firm, Aluma Capital Investments.

De Waal says that depending on the risk profile of the portfolio, a retirement product offered may earn a limited return, but other investment products have the potential to offer higher returns.

One option is to look at multi-asset global notes.

“What makes offshore investing so attractive is that no matter where the Rand stands against the dollar or how it fluctuates, investors are still able to look at a conservative 8% year-on-year dollar based return,” says De Waal.

He adds that even though the Rand has a tumultuous relationship with the US dollar, that offshore investments, especially if they come with capital protection, often present a better investment opportunity. The rand was at 13,40 to the dollar 5 years ago and now it’s at 15,40 to the dollar. That’s a 15% devaluation over the last years on the currency alone.

He does warn though that when drawing a portion of retirement savings that policy holders need to take care to protect the capital. “Don’t put the money in the bank where inflation and costs will eat away at its value,” he said.

“Multi-asset global notes can also be paired with the ability to give a client a gearing with a bank guarantee they can potentially earn returns north of 20% with no capital risk,” said De Waal.

Van Niekerk is interested to see which retirement funds will make use of the proposed changed in legislation. “The decision as to whether investors can access a partial portion of their investment savings will be at the discretion of the trustees of the fund,” he said.

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