OANDA – Stocks On A Rollercoaster Ride, Oil Slumps On Dollar And Virus Worries, Gold Shines, Bitcoin Lower

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OANDA – Stocks On A Rollercoaster Ride, Oil Slumps On Dollar And Virus Worries, Gold Shines, Bitcoin Lower
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US stocks went on a rollercoaster ride as investors continue to digest incremental omicron updates, geopolitical tensions increase as the US considers sanctions on Russia and China, and on added volatility from triple witching.

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The Nasdaq recovered earlier losses and turned positive as some traders covered shorts.  Trading will remain very choppy for the rest of the year as investors grapple falling trading volumes over the coming sessions.

Now that South Africa has been dealing with omicron for the last few weeks, traders are closely looking to see how much of an increase they have with hospitalizations and deaths.  Friday’s South African COVID data provided some optimism as hospitalization rates declined as 1.7% of COVID cases were admitted to hospitals. Omicron was always viewed as more transmissible and optimism still remains that it might not cause more severe illness than delta.  The Moderna and Pfizer vaccines appear to be holding up nicely against omicron and that should allow optimism that countries that are using those vaccines should not have waves that are too disruptive with severe restrictions.

Oil

Crude oil prices were lower on both a strong dollar and as omicron concerns grow as the current virus surge will likely lead to some Americans to cancel holiday travel plans. Covid news may continue to be a drag for oil prices for the rest of the year, but prospects of $100 oil at some point next year will lead to some buying on every critical support level.

Iran’s lead negotiator Ali Bagheri Kani said, “we have made good progress this week.” Iran’s nuclear talks have concluded the seventh round and will likely continue, but expectations for an imminent breakthrough are far too early.  Additional Iranian crude barrels hitting the market won’t be happening anytime soon.

WTI crude appears poised to hover around the $70 area.

Gold

Gold had a great week after a hawkish FOMC decision and dot plots triggered a flattening of the Treasury curve, safe-haven flows improved on omicron worries, all while Bitcoin continues to weaken.  Gold is back above the $1800 and how it performs for the rest of the year may be tricky given the thin market conditions that will shortly settle in.

Omicron remains the biggest risk to the outlook and whether that leads to panic selling of risky assets or triggers some safe-haven flows might have gold trade between the $1775 and $1850 trading range for the rest of the year.

Bitcoin

Bitcoin selling pressure remained in place after reports Russia’s central bank may look to ban new crypto investment.  Today, Russia central bank governor Nabiullina said “we’re skeptical on crypto, to put it mildly. Bitcoin traders are hesitant to buy the dip just yet until perhaps one last push towards the low 40s.

Bitcoin is known for exaggerated moves during illiquid conditions and that will be pretty much the rest of the year. If risk remains the dominant theme for the remainder of the year, the entire crypto space could be vulnerable to another 5-10% of weakness.

Given this year’s outperformance with several altcoins, many traders will closely pay attention to if Bitcoin’s dominance continues to fade.  Bitcoin still has around 40% of the total crypto market cap, while Ethereum is near 20%.  Many traders are gravitating to other coins such as Avalanche, Solana, Polkadot, and Hedera.  If the focus primarily falls on altcoins at the beginning of next year, it may take Bitcoin a long time to return back to record high territory.

Article By Edward Moya, OANDA

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