5 Things To Watch Next Week + ChartBook

Eurozone CPI on Tap as Recession Odds Spike Higher


DAX 30 Index, 4-Hour Chart Analysis

The severe weakness in the European economic indicators has been the most important negative catalyst in financial markets recently, and bond markets have been the most affected by it. The total outstanding amount of negative-yielding debt rose back above $11 trillion due to the slowdown and the concerted dovish shift by the central banks, and in recent weeks, yields hit new multi-month and even multi-year low across countries and maturities.

The CPI has been a reliable indicator of economic activity in the Eurozone in recent years, and this month, analysts expect a 1.5% reading in the Consumer Price Index. The core measure is forecast to drop to 0.9%, but given the weakness in some of the recent releases, we wouldn’t be surprised by an even lower number.

The German DAX index, which has been boosted by the rally in Chinese and US equities this year, is still in bear market territory, and despite the persistent weakness in the Euro and the central banks’ efforts to reignite growth, it remains only 10% above its December low. That is an alarming sign for bulls, even in light of the close to full recovery in the major US indices.

Major Coins Hug Resistance Levels as Bulls Hope for Break-Out

Bitcoin/USD, 4-Hour Chart Analysis

Although the major cryptocurrencies had an overall bullish week, the progress made was negligible from a long-term perspective, and we are still far from a confirmed long-term trend change in the segment. The top coins are trading near very important resistance levels, with BTC hovering just above the $4000-$4050 zone, Ethereum eyeing the $145 level, while Ripple is stuck in the vicinity of the $0.31 level, that has been dominating its market for months now.

With the clear bearish long-term pressures in mind, bulls would need much more technical evidence to trust the short-term rally attempts, even though the counter-trend move that started in February might still resume. Next week, we will continue to keep a close eye on Litecoin, EOS, and Ethereum, but should BTC remain relatively strong, it could be the new leader of the move.

While a broad rally would trigger several buy signals in our trend model, regarding the short-term time frame that is, we have to remind traders to apply strict risk management rules, as odd continue to favor the resumption of the damaging bear market in the crypto segment.

No-Deal Brexit or Another Twist Coming Up?

EUR/USD, 4-Hour Chart Analysis

While there were signs that this week would be Theresa May’s last one as Prime Minister, Mrs. May is still, with a possible 4th vote on her Brexit deal with the European Union (EU). Although this could very well be a bad joke, the deal is actually still on the table, even after three failed attempts. Until April 12, the country has to decide on a deal, a no-deal Brexit, or a longer extension of the deadline.

While several EU officials warned that the no-deal option is the most likely now, that’s likely just part of the negotiating process, and we will get closer to a longer extension next week. That said, anything is possible, but it would be shocking if the original plan would be accepted by the MPs.

Monday’s session in the House of Commons could already be crucial, with another possible round of voting on the 8 options refused by the Parliament this week. Should an option be accepted, Theresa May should approve it before even trying to implement it with the EU. This ‘new deal’ option would likely lead to a further extension to the deadline, and given the high level of uncertainty, financial markets could have a volatile week, with not just the Pound, but the EUR/USD, which is near the key 1.12 level again, going haywire due to the votes.

WTI Crude Oil Battles with $60 Price Level as OPEC Supply Cuts in Focus

WTI Crude Oil, 4-Hour Chart Analysis

With the help of the supply cuts by the OPEC countries and Russia and the global risk-on sentiment, oil remained very strong in recent months in the face of the economic slowdown in China and Europe. The WTI crude oil contract is trading near the $60 per barrel level, close to its highest level since mid-November, and despite the late-2018 rout, the crucial commodity now has recovered half of its losses since bottoming out just above $40 in December.

While the next OPEC meeting, and extraordinary one, will only be held in mid-April, we expect a big week for the Black Gold, as especially Russia’s role in the extension of the supply cuts is in question, and a premature ending to the output-reduction could cause a steep correction in the oil. Demand remains tepid due to the struggling global economy, and although the OPEC+ countries already exceeded our expectations regarding the cuts, in light of the recovery in price, the incentives to sustain the lower supply levels are even lower now.

From a technical perspective, the commodity is in a clear short-term uptrend, with strong resistance ahead just below the $65 price level, which could be a good final target for the recovery.

Big Week of US Economic Numbers Ahead

Besides the key Eurozone CPI, there will be several key economic releases coming out almost every day from the US but the Great British Pound could also remain volatile, and not just because the Brexit chaos. On Monday, we will have the mentioned Eurozone CPI, the British Manufacturing PMI, the US ISM Manufacturing PMI, Construction Spending and the much-awaited Retail Sales report.

The US Durable Goods report will likely steal the show on Tuesday, but the Eurozone PPI and the RBA’s rate decision and statement could cause volatility in the Aussie.  The Chinese Caixin Services PMI, the ADP Employment report and the ISM Non-Manufacturing PMI are all scheduled for Wednesday,  the ECB Monetary Meeting Accounts and the Canadian Ivey PMI will be released on Thursday, and the week will end with a bang thanks to the US and Canadian Employment Reports, with especially the US numbers having the potential to shake up markets.

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Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.