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Analysis

5 Things to Watch Next Week

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Asset Current Value Weekly Change
S&P 500 2414 1.35%
DAX 12591 -0.38%
WTI Crude Oil 49.87 -1.25%
GOLD 1268.00 1.13%
Bitcoin 2210 7.43%
EUR/USD 1.1179 -0.26%

 

1.            Will the Crypto-Crash last?

It’s been a long weekend for cryptocurrency traders, and for the first time in a while, the dominant trend was bearish. The major coins experienced several snapback rallies in the nervous, sometimes borderline panicky, environment. This morning’s healthy bounce could mean that we have seen the worst of the decline, but volatility is expected to remain elevated, with the next couple of sessions being crucial to the market. As the improving fundamentals and the lofty gains attracted more and more investors, and directed media attention to Bitcoin et al., the question is how new buyers will support the fragile market.

2.           More New Highs Ahead for Two Faced US Market?

The major US indices recovered with a 7-day winning streak after the mini sell-off that pushed global stocks lower. European and Asian indices are lagging US equities, as the British election suddenly turned questionable, while the Manchester terror attack also weighed on sentiment. The surprise Chinese downgrade sparked a battle between sellers and the “Invisible Hand” of the Chinese leadership, as the negative announcement was followed by a pretty obvious intervention by the PBC. As fewer and fewer stocks participate in the US rally, a deeper correction is more and more likely, although the short-term momentum is still bullish.

3.           What’s Next for Oil After the OPEC Meeting?

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WTI Crude Oil, 4-Hour Chart Analysis

The OPEC meeting ended with the expected 9-month extension of the cartel’s production cut, and although there are signs that the crude oil market is slowly healing, the crucial commodity spiked lower after the announcement. Saudi Arabia also plans to curb imports to the US to limit global supply, as the country’s budget is severely hurt by the declining revenues. The long-term effects of the moves are questionable, as the rapidly improving cost-effectiveness of the US shale industry is actually being helped by them, and the “shale-cap” on prices is expected to fall even lower from the current $60 level.

4.           Job’s Friday In Focus Before the Fed’s Next Meeting

US rate hike odds declined significantly last week despite the recovery in stocks, and the better than expected GDP growth number. The May employment report will be the last crucial release before the central bank’s next meeting, and although the consensus still points to a tightening move in June, the further schedule of the Fed is uncertain. A negative surprise could put pressure on the Dollar once again, especially Trump’s position remains vulnerable.

5.           Gold at Make or Break Levels

Gold showed relative strength in the last couple of weeks, and it remained near its one-month highs, despite the rebound in US stocks, and the general stability in risk assets. The metal is trading between important support and resistance levels at $1260 and $1275 respectively. While the long-term trend looks to be finally turning higher, a decline below $1240 could lead to a test of the $1200 level.

Gold Futures, 4-Hour Chart Analysis

Key Economic Releases of the Week

Day Country Release Actual Expected Previous
Monday EUROZONE Eurogroup Meeting
Tuesday EUROZONE Manufacturing PMI 57 56.5 56.7
Tuesday EUROZONE Services PMI 56.2 56.5 56.4
Tuesday GERMANY IFO Business Climate 114.6 113.1 112.9
Tuesday CANADA Wholesale Sales 0.90% 1.10% -0.20%
Tuesday US New Home Sales 569,000 611,000 621,000
Wednesday EUROZONE ECB Prsident Draghi Speaks
Wednesday CANADA BOC Rate Decision 0.50% 0.50% 0.50%
Wednesday CANADA BOC Statement
Wednesday US Existing Home Sales 5.57 mill 5.60 mill 5.70 mill
Wednesday US Crude Oil Inventories -4.4 mill -2.4 mill -1.8 mill
Thursday UK Revised GDP 0.20% 0.30% 0.30%
Thursday US Initial Jobless Claims 234,000 236,000 236,000
Friday JAPAN National Core CPI 0.30% 0.40% 0.20%
Friday US Core Durable Orders -0.40% 0.40% 0.00%
Friday US Prelim GDP 1.20% 0.90% 0.70%
Friday US UOM Consumer Sentimnet 97.6 97.6 97.7

 

Key Economic Releases of Next Week

Day Country Release Expected Previous
Monday EUROZONE ECB President Draghi Speaks
Tuesday AUSTRALIA Building Approvals 3.20% -13.40%
Tuesday GERMANY Prelim CPI Index -0.10% 0.00%
Tuesday CANADA Current Account -11.4 bill -10.7 bill
Tuesday US Personal Spending 0.40% 0.00%
Tuesday US CB Consumer Confidence 120.1 120.3
Wednesday CHINA Manufacturing PMI 51 51.2
Wednesday CHINA Services PMI 54
Wednesday GERMANY Retail Sales 0.40% 0.10%
Wednesday EUROZONE Flash CPI 1.50% 1.90%
Wednesday CANADA GDP 0.30% 0.00%
Wednesday UK Chicago PMI 57 58.3
Wednesday US Pending Home Sales 0.70% -0.80%
Thursday AUSTRALIA Capital Expenditure 0.60% -2.10%
Thursday AUSTRALIA Retail Sales 0.30% -0.10%
Thursday UK Manufacturing PMI 56.5 57.5
Thursday US ADP Employment Growth 181,000 177,000
Thursday US Initial Jobless Claims 239,000 234,000
Thursday US ISM Manufacturing PMI 54.7 54.8
Thursday US Crude Oil Inventories -4.4 mill
Friday UK Construction PMI 52.7 53.1
Friday CANADA Trade Balance 0.0 bill -0.1 bill
Friday US Non-Farm Payrolls 186,000 211,000
Friday US Hourly Earnings 0.2% 0.3%
Friday US Unemployment Rate 4.4% 4.4%
Friday US Trade Balance -45.5 bill -43.7 bill
Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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2 Comments

2 Comments

  1. Angie

    May 30, 2017 at 1:24 am

    Hello . Does anyone have any thoughts as to the future of the Australian dollar vs Euro and USA dollar.
    Thoughts of the future Australian economy and share market

    • Mate Cser

      May 30, 2017 at 7:04 pm

      Hello Angie, I expect the Aussie to continue its decline against the Dollar (I have been expecting 0.6 for a while, which still seems to be a good target), while the Euro is a bit more tricky, considering the sorry state of some of the Eurozone economies. The Chinese slowdown, the pressure on commodity prices, the oversized financial sector, and the crazy housing market are all huge risks at this point, so I’d definitely be defensive with Australian assets right now. I will post an article on Australia and Canada in the coming two weeks, if you have any questions until then, let me know!

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Analysis

Crypto Update: Coins Consolidate Above Support but Downtrend Still Intact

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It has been a very quiet weekend for the major cryptocurrencies so far, as the predominantly bearish week ended with range trading and a collapse in volumes across the board. Most of the top coins failed to gain back the ground they lost during the steep selloff, with only Binance Coin and VeChain showing meaningful bullish momentum.

The relatively strong Ethereum, EOS, and Ripple remained stable, with ETH hovering around the $500 level, EOS trading north of the key $10 support despite the network’s technical issues, and Ripple being stuck in a narrow range just below the widely-watched $0.54 resistance level. The total capitalization of the market has been virtually unchanged at $280 billion, as both Bitcoin and Ethereum flatlined.

BTC/USD, 4-Hour Chart Analysis

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Bitcoin is trading right at the short-term support level near $6500, holding up just above the April low, with the crucial long-term support zone near $5850 that is vital for the whole segment. The coin is clearly in a short-term downtrend, while also being relatively weak on all time frames. The oversold short-term momentum readings are now cleared and that could point to a test of the lows in the coming days.

 

ETH/USD, 4-Hour Chart Analysis

Ethereum also cleared the short-term oversold readings, but it failed to leave the vicinity of the $500 support/resistance level. Despite the coin’s undoubted relative strength, and the still bullish long-term setup, the short-term trend signal remains a sell, and the declining trend is intact. Traders should still not enter new positions here, while investors could add to their holdings on the short-term selloffs. Strong resistance is ahead between $555 and $575, while further support is found at $450, $400, and $380.

Divide Widens between Leaders and Laggards

LTC/USD, 4-Hour Chart Analysis

Although short-term correlations skyrocketed during last week’s decline, the divergence between the relatively strong and weak coins got even more pronounced, with the likes of Litecoin, Dash, and Monero severely lagging the broader market. Litecoin got stuck below the $100 level after the breakdown last week, and it is below the long-term base pattern, as it failed to show relative strength during the weekend. Immediate support is found at $90, but new lows are likely in the coming days, as the short-term downtrend remains dominant. 

BNB/USDT, 4-Hour Chart Analysis

As a positive outlier, Binance Coin remained bullish amid the broad decline, holding on to the relative strength that it has been showing for several weeks. The coin’s stability is encouraging, and it’s nearing its rally highs with today’s surge, while having a good chance of resuming its uptrend, even as another segment-wide selloff could cause a jump in volatility again.

For now, the market is torn between bullish and bearish forces, and investors should focus on the technicals of BTC and ETH, while also keeping an eye on the leaders of the rally for signs of sutained strenght.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Long-Term Cryptocurrency Analysis: Bull Market in Jeopardy

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As the crucial rally attempt that we pointed out in our previous long-term analysis failed, and the major coins sold off heavily afterwards, the segment is now in a difficult situation. While Bitcoin and especially Ethereum are still in bullish setups, the most valuable coin is now close to a major breakdown that could lead to structural bear market as we laid it out back in January.

Some of the weaker coins are already below the large-scale consolidation patterns that developed after the year-end run-up, and as the divergence between the leaders and the laggards widens, the path of the two dominant coins even more importance.

BTC/USD, Daily Chart Analysis

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Bitcoin failed to trigger a short-term buy signal throughout the Ethereum-led rally in May and early June, and that technical weakness still persists, as BTC is now trading right at the April low, testing the key long-term base pattern.

A break below the strong support zone near $5850 would be the first similar event since the beginning of the bear market in 2014, and it could lead to an extended period of bearish bias for Bitcoin after the spectacular bull run of 2017. For now, the bull market is intact, with support found near between $6000 and $6275, at $5850 and below that at $5500, while resistance is ahead at $6500, $7000, $7350, and $7650.

ETH/USD, Daily Chart Analysis

Although Ethereum is clearly stronger from a technical perspective compared to Bitcoin, the coin is struggling to hold the key $500 level, as it is resumed its short-term downtrend. The April lows are well below the current price level and the long-term setup is bullish, so long-term investors could still add to their positions during the selloffs. Resistance above $500 is ahead between $555 and $575, while strong support is near $450, $400, $380.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 276 rated postsTrader 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.




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Altcoins

Crypto Psycho:  Crazy Price Action

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Say what you will about the cryptocurrency bubble of 2017 not making sense, what about the action lately?  Prices are acting terribly. Professor John Griffin claims last year’s bitcoin rally was manufactured by Bitfinex. Economist Nouriel Roubini proclaims bitcoin is going to zero. The founder of Crypto Asset Management says about bitcoin: “We are shorting it like maniacs at the moment.”  If that is not enough, technical indicators keep barking downtrend.

Over the past week already depressed prices have fallen further with things like bitcoin down 14%+, Ethereum 17% and XRP 21%.  Yes, there were those stories about the CFTC digging into price manipulation and demanding more data from Coinbase and other exchanges. And then there was the hack on that small exchange in South Korea.  But nobody could reasonably pin the blame of this week’s performance on these two factors.

MarketWatch quoted Matt Hougan, head of global trading at Bitwise Asset Management: “The big story to me is the absence of positive news”.  There is some truth to this but that is only part of the story. As we pointed out in a recent article, most serious investors in crypto don’t pretend to understand what is causing the mess.  

When bitcoin evangelist Alistair Milne published a survey of his Twitter followers, 81% of them had nary a clue.  Interestingly enough though, almost half of these respondents checked the box “Crypto iz ded”.

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What exactly to conclude from this is open to interpretation but one thing is clear.  It is a big part of the problem long term investors face today. Crypto psychology sucks, the worst it has been since the Mt. Gox hack of 2010.

Good News Being Ignored

One of the barriers to progress in the crypto wars was the issue of regulatory clarification. Are cryptocurrencies simply digital assets or a class of securities that fall under the regulation of the Securities and Exchange Commission?

That question has now been answered.  On Thursday, the SEC’s announced that both bitcoin and Ethereum were not securities but digital assets.  However, the good news does not end here.

William Himman, representing the SEC, clarified the position of Initial Coin Offerings.  In cases where the ICO does not convey equity ownership of an enterprise and where the digital asset is sold only to be used to purchase a good or service available through the network on which it was created, it does not qualify as a security.

This represents one huge step forward in clarifying the regulatory environment and yet the markets response was brief and uninspiring as the full week’s performance unfortunately demonstrates. Honestly, this is a bit bizarre.

Other Good News Being Ignored

Crypto Asset Management may be short selling lots of currencies, but they are not alone.  According to www.bfxdata.com/swaphistory/usd  margin interest in bitcoin and Ethereum is in excess of $1.2 billion.  While this is down from around $2 billion last December it still represents a sizable pool of future buyers.

It’s In The Mind

For digital asset prices reflect not only investor sentiment but also those who represent ultimate users.  For a digital currency to represent a storehouse of value, it must have public trust. Right now that appears to be at a low.

According to the British publication London Loves Business, the story is pretty clear. Headlines state “71% of the UK public think the value of Bitcoin will either decrease or collapse over the next six months.”  According to LLB,  this represents a 10% fall in investor confidence since the same question was last asked in April’s 2018 poll and a 24% fall in investor confidence from November’s 2017 poll figures.  In other words, the price of bitcoin holds the same implication for investors as it does for potential users.

This Too Shall Pass

Mob psychology often proves wrong and this negative mindset appears to be feeding off of itself right now.  Even one of crypto’s biggest critics Warren Buffett would agree that betting against the mob has been a big part of his investment strategy. At some point the mob will once again be proven wrong when short sellers get spooked and forced to cover positions or value investors will filter over from an overpriced U.S. equity market.  Either way, there is value in the crypto market that has not existed for quite some time. In the end, 71% of the Brits surveyed will be proven wrong also.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 81 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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