October 2021 Macro Market Commentary

Bitcoin -

Bitcoin reached a new all-time high on 20th October at $66,998 from strength that began in the early weeks of October. The July intra monthly low of $29,337 remained a key level, which formed on 20th July, and the September low set at $39,585 created a higher low and indicated an uptrend is in place.

• The U.S. Securities and Exchange Commission (SEC) approved bitcoin futures based exchange traded funds (ETFs) this month with the ProShares Bitcoin Strategy ETF (BITO) launched on 19th October and the Valkyrie Bitcoin Strategy ETF (BTF) a few days after on 22nd October. Unsurprisingly, regulated futures exchanges' open interest in bitcoin contracts increased in parallel with the price of bitcoin, which reached a new high. A third fund by VanEck called the Bitcoin Strategy ETF (XBTF) is expected to be available to the market early November.
• El Salvador’s President Nayib Bukele announced the government Treasury acquired 420 more bitcoin on 27th October as bitcoin price fell from the new all-time high, bringing the total number of bitcoin held to 1,120 worth $67.2 million if priced at $60,000.

DAILY TREND: UP

Bitcoin reached a new all-time high at $66,998 in late October and peaked, ending the month at $62.384 or 6.9% below the new high.

UPCOMING HIGH IMPACT EVENTS

• No major events listed

US Dollar -

The U.S. Dollar Index ® (USDX) closed -0.20% in October at 94.12, after a month of trading with little significant direction. During the last week of October the USDX retested the previous resistance area created September 2020 at 94.33 - 94.74 for the second time in the month but failed to break through leaving a fresh twelve-month high at 94.57.

• Nonfarm Payrolls data published by the U.S. Bureau of Labor Statistics on 8th October showed September payrolls increased by 194,000 falling significantly below expectations where the forecast was an increase of 500,000 jobs. The USDX reaction was quite lack-luster with the market closing down 0.16% on the day.
• FOMC Minutes released on 13th October provided a detailed summary of the Federal Open Market Committee discussions held at September's FOMC meeting where the tapering was one of the headlines. The meeting minutes suggest this could start as early as mid-November to mid-December with a possible rate hike at the end of 2022.
• Retail Sales data for September (Month on Month) published an unexpected increase of 0.7% against the forecast rate of a drop in retail sales by 0.2%. In addition, the August data had an upward revision to 0.9%.

DAILY TREND: UP

INDEX WEIGHTING:
EUR 57.6% | JPY 13.6% | GBP 11.9% | CAD 9.1% | SEK 4.2% | CHF 3.6%

The U.S. Dollar Index ® continued to drop at the start of October after reaching an area of resistance during the prior days trading session at 94.33 - 94.74 (shown on a weekly chart) leaving the September high at 94.52 where the bears gained control after 4 straight positive trading days. ISM Manufacturing PMI data for September was announced on 1st October at 61.1 (showing expansion) this data was above expectations and the previous month’s data but was not enough to hold the market. The U.S. Dollar Index ® closed down for the first day of October trading by 0.21%.

However, even considering the negative start to the month, the week still ended positive (weekending 1st October) with the U.S. Dollar Index ® printing the largest percentage gain since mid-August +0.76%.

The early bearish sentiment after the market closed on the first day of October trading continued when the markets re-opened for trading on Monday until the U.S. Dollar Index ® found more buyers willing to step in, which coincided with a Daily 10 SMA that had provided some support since mid-September. The market took a bounce from this and continued to rally, helped a few days later by positive ADP jobs data (U.S. Dollar Index ® 6th October +0.31% for the day). Propelling the U.S. Dollar Index ® towards the high of the year at 94.52 (from 30th September), where it just fell short and pulled back to leave a fresh weekly high of 94.45 for the first full week of trading in October. Disappointing Nonfarm Payroll data added to the bearish tone although the market found support once more from the Daily 10 SMA closing the week at 94.07 with no change.

During the following week of trading, the U.S. Dollar Index ® saw the bulls return pushing prices higher after another positive reaction from the Daily 10 SMA sending the market upwards where the weekly resistance area was waiting. The U.S. Dollar Index ® again struggled to find its way through and saw increased selling pressure sending the market lower leaving a new twelve-month high at 94.57 (12th October).

September’s Core CPI data released on 13th October gained 0.2% (Month on Month), with Core CPI data Year on Year stable at 4% (same as prior month’s data) however; it is the third highest reading since July’s high at 4.5%, the highest since the financial crisis 2007-2009, highlighting the inflationary pressures and concerns of further price rises. The U.S. Dollar Index ® initial reaction saw prices rally into a resistance area 94.47 - 94.56 on a 4-hour chart before dropping. The FOMC detailed minutes released later in the day were not enough to entice the bulls back and the market sliced straight through the Daily 10 SMA that it had not closed below since early September. A few days later the MACD had a crossover on 14th October on a Daily chart, which indicated a sell signal for those bears who may not have entered earlier, and after a few days of sideways action, the market dropped again.

The biggest daily drop came on 28th October where the U.S. Dollar Index ® had seen weakness exacerbated further by the news from the European Central Bank president commenting on inflation and rate rises for the Eurozone. This news created the Euro to gain strength pushing the US Dollar down (EURUSD) which in turn as the Euro represents almost 58% of the basket within the U.S. Dollar Index ® it had a significant impact.

Prices dropped straight into an area of support on a daily chart 93.20 - 93.38 where on the last trading day of October we saw a significant rebound and the market rallied to close up 0.83% on the day, posting one of the largest one-day moves of the year so far.

The U.S. Dollar Index ® ended the month negative but left a new twelve-month high at 94.57. The trend remains up on a Daily chart although October's price action has been more sideways and has remained trading between a resistance area of 94.33 - 94.74 and a support area of 93.20 - 93.38.

The U.S. Dollar Index ® closed at 94.12 with a -0.2% change.

UPCOMING HIGH IMPACT EVENTS

• Wed 3 Nov ADP Employment Change (Oct)
• Wed 3 Nov ISM Services PMI (Oct)
• Wed 3 Nov Fed Interest Rate Decision and Monetary Policy Statement
• Wed 3 Nov FOMC Press Conference
• Fri 5 Nov Nonfarm Payrolls (Oct)
• Wed 10 Nov CPI (Oct)
• Fri 12 Nov Michigan Consumer Sentiment (Nov)
• Wed 17 Nov Retail Sales (Oct)
• Wed 24 Nov FOMC Minutes
• Fri 26 Nov Durable Goods Order (Oct)
• Tue 30 Nov GDP Annualized (Q3)

South Korean Won -

The South Korean Won closed the month at 1,174 against the U.S. Dollar as the Won retraced after it reached a high of 1,200 having weakened 11% against the U.S. Dollar since the beginning of the year at 1,081.

• The Won has lost more than 7% since June as the U.S. Dollar gained and as South Korean authorities had tightened restrictions to curb a rise in virus infections.  Stock outflows added to the pressure on the Won, with overseas investors withdrawing $7.9 billion from local equities in the second quarter according to Bloomberg.
• The third quarter fared much better as foreign funds flowed back into stocks listed on the Korean stock exchange with Samsung Electronics and LG Electronics showing strong quarterly earnings as demand for semiconductors and consumer electronics increased.

DAILY TREND: UP

USDKRW moved higher throughout September showing continued weakness in the South Korean Won (Quote currency in the pairing) since the Daily uptrend was established in July after it broke out around 1,138.

The Daily 20 EMA had acted as support throughout September enabling buyers to enter into the markets on the pullbacks extending U.S. Dollar strength and South Korean Won weakness. This continued into October when eventually on 12th October the USDKRW reached an area of resistance 1,200 - 1,205 on a Daily chart where selling pressure came in and the market pulled back.

This resistance area was also nested within bigger resistance seen on both the weekly and monthly charts, extending the range upwards to 1,208. On the 13th October the USDKRW dropped posting the biggest one day loss for the U.S. Dollar against the South Korean Won of -11.16 (-0.93%) since the daily uptrend was established. Leaving a new 15-month high at 1,200.50 before falling to create a month low at 1,165 a drop of 2.9% over a 10-day period.

The USDKRW pulled back slightly towards the end of October to
close at 1,174 with a -0.8% change for the month.

UPCOMING HIGH IMPACT EVENTS

• Wed 10 Nov Unemployment Rate
• Thr 24 Nov BOK Interest Rate Decision

Singapore Dollar -

The Singapore Dollar closed the month at $1.3478 against the U.S. Dollar after the USDSGD reached a high at 1.3626 and tested a resistance area leading to a 1.50% decline over the coming weeks. The pair clawed back some of these losses to end the month -0.7%.

• Gross Domestic Product (GDP) data for Q3 from The Ministry of Trade and Industry showed GDP continues to expand albeit falling slightly below expectations posting a growth of 6.5% Year on Year against estimates of 6.6%. This still falls within the growth outlook set by policy makers of between 6 - 7%. The Singapore economy expanded by 0.8% Quarter on Quarter following a contraction of 1.4% posted in the second quarter.
• The Monetary Authority of Singapore (MAS) slightly raised the slope of the S$NEER policy band, from zero percent previously. The appreciation “will ensure price stability over the medium term while recognizing the risks to the economic recovery” quoted from the MAS Monetary Policy Statement - Published 14th October.
• Industrial production data released on 26th October 2021 by the Singapore Department for Statistics showed a dramatic decrease in production compared to the prior months data and significantly below expectations. Reports published -3.4% Year on Year (September data) and -2.8% Month on Month (September data).

DAILY TREND: UP-NEUTRAL

USDSGD early October seemed to have found some support from the Daily 10 SMA that the pair was bouncing off and closing above for the first 5 trading days of the month signifying U.S. Dollar strength and Singapore Dollar weakness.

However, the pair was struggling to gain any significant strength due to an area of resistance at 1.3615 - 1.3656 (from August) and after reaching this area the pair began to pull back.

This resistance area had been challenged on the last trading days of September and held. Again, this proved to be the case on the 6th October retest where the pair reached a high at 1.3626.

USDSGD from this point saw the bears return and the pair continued to fall pausing momentarily at a small pocket of support 1.3513 - 1.3534 converging with Daily 50 SMA before breaking down to test a larger area of support evident on both the daily and weekly charts at approximately 1.3380 - 1.3420. Leading to a strengthening of the Singapore Dollar as this is the quote in the pairing.

The USDSGD closed at 1.3478 with a -0.7% change.

UPCOMING HIGH IMPACT EVENTS

• No major events listed

Chinese Yuan -

The Chinese Yuan Renminbi closed the month at $6.4045 against the U.S. Dollar. The USDCNH broke below September's trading range of 6.4233 - 6.4880 which it had been trading within, establishing a four month high against the dollar by taking advantage of the U.S.Dollar weakness and easing of concerns surrounding the property market.

• China’s GDP data came in below expectations at 4.9% for Q3 (Year on Year) against expectations of 5.2% and previous data released at 7.9% for Q2 (Year on Year). The manufacturing sector in particular felt the impact of large increases in energy prices due to supply issues, which led to power cuts in some areas ultimately affecting production.  Manufacturing was also affected by localized Covid outbreaks at some of the ports, which the authorities have worked to contain.  In addition, President Xi Jiping sought to reshape sectors from private tutoring, consumer technology and real estate by introducing tougher regulations.
• China posted a trade surplus of $66.76 billion in September beating expectations ($46.80 billion) and August’s data.  The United States trade deficit with China continued to grow with China recording a surplus of $42.00 billion (based on Customs data), again up on the previous month's $37.68 billion.  The USDCNH posted a drop on the day of 0.46%, signifying a strengthening of the Yuan (as the Yuan is the quote in the pairing).
• China’s Non-Manufacturing PMI data and NBS Manufacturing data for October came out on 31st October with disappointing results, both fell short of expectations and also below previous months data.  Concerns grow around the NBS Manufacturing data falling below 50 (benchmark for contraction/expansion) at 49.2 against an expected 49.7 signaling a slight contraction.  This could have an impact on the Aussie Dollar with this being one of their largest import partners for raw materials.

DAILY TREND: DOWN

The USDCNH started the month with the Yuan (Quote currency in the pairing) gaining strength driven by the weakening of the U.S. Dollar after the USDX reached a significant resistance area sending the U.S. Dollar lower.

The USDCNH tested near lows of the trading range 6.4233 - 6.4880 that was established during September trading.

The lows of the range continued to hold early October sending the pair higher but the USDCNH struggled to break through the Daily 200 SMA sitting above where the bears were waiting and the pair dropped and the Yuan began to gain further strength.

The USDCNH tested the lows of the range this time for multiple consecutive days with the bulls defending the lows.

Eventually the range gave way and the USDCNH dropped significantly leaving the biggest one day slide for the U.S. Dollar against the Yuan since May 2021 with a -0.83% change for the day, resulting in the Yuan trading at its strongest value against the U.S. Dollar since June 2021.

The USDCNH closed at 6.4045 down by -0.7%.

UPCOMING HIGH IMPACT EVENTS

• Wed 10 Nov CPI (Oct)
• Mon 15 Nov Retail Sales (Oct)
• Mon 22 Nov PBOC Interest Rate Decision
• Tue 30 Nov Non–Manufacturing PMI & NBS–Manufacturing PMI (Nov)

Asia Tech -

Technology stocks in Asia recovered from their lows early in the month as focus shifted momentarily to less China technology oriented concerns, brought about by the property developer China Evergrande’s debt repayment concerns and strong price performance by U.S. technology stocks.

• All eyes are on Prime Minister Fumio Kishida since he was chosen to head the Liberal Democratic Party (LDP) in the lead up to the general election on 31st October. Prime Minister Kishida is focused on the idea of a “digital garden city” aimed at using new technologies to boost regional economies, which favors growth in the technology sector.
• Taiwan semiconductor stocks continued to show strong growth on continued supply issues with third quarter earnings reports from Taiwan Semiconductor Manufacturing Co. posting higher than-expected profit.
• Korea’s KOSPI Composite Index rose in the first half of October supported by strong interest in technology heavyweights such as Samsung Electronics and SK Hynix. Third-quarter earnings for Samsung Electronics reported record sales revenue, but there are concerns over rising inflation leading to a faster than expected rate hike.

DAILY TREND: DOWN

Price fully re-traced to the August low before it rebounded in October and peaked at the 78.6 Fibonacci retracement level.

UPCOMING HIGH IMPACT EVENTS

• Wed 10 Nov China CPI (Oct)
• Mon 22 Nov PBOC Interest Rate Decision
• Tue 30 Nov China Non-Manufacturing PMI

Oil -

Brent crude oil made a new high at $85.77 to end the month 7.7% higher versus September at $83.53.

• Brent crude oil continued its momentum higher and rose to a new three-year high in October as demand continued to recover to pre-Covid levels. OPEC+ is expected to meet its commitment to increase production levels by 400,000 barrels per day in November as they had done in prior months since August.
• Traders are focused on talks between Iran and the European Union that may lead to a revival of a 2015 nuclear deal according to Bloomberg. The outcome of these talks could have an impact on Iranian oil production which had been under United States sanctions which restricted Iran’s oil exports.

DAILY TREND: UP

Brent price reached a new high of $85.77 on 25th October. Brent remained positively correlated to the U.S. Dollar during October. Supply remained tight as demand continued to increase.

UPCOMING HIGH IMPACT EVENTS

• OPEC+ countries maintains its outlook to increase supply of oil in August by 400,000 barrels per day through to December

Key Figures -

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TRADDICTIV · Research Team