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Analysis

5 Things to Watch Next Week: The ECB Meeting, Crypto-Correction, North Korea, Stock Volatility, Dollar Bounce

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1.            Will Draghi Finally Show his Cards?

The European Central Bank will hold its monetary meeting on Thursday, and the financial world will be watching closely. The president of the central bank hinted several times on the dialing back of the extremely easy policies, but the bank also expressed that a strong Euro is not welcomed by it. As the momentum of economic numbers has been better in Europe than in the US lately, the common currency surged higher against the Dollar and its other important peers. The ECB is still expected to announce the tapering of its bond-buying program soon, but the timing of the moves and the exact scheduling will be crucial for forex markets, so expect huge moves should Mario Draghi announce any details.

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2.           Cryptocurrencies Entering Next Correction?

The crypto segment has been in a strong uptrend ever since the mid-July bottom, and most of the major coins rose by several 100%. The total value of the market catapulted from $55 billion to around $175 billion in the meantime, and sentiment got overly optimistic, with public interest hitting historic highs. While we expect the megatrend to continue, the market seems ripe for a durable top and an orderly correction. In the crypto world, these corrections are often violent, so leveraged traders should be cautious in the coming period as volatility will likely rise substantially. All eyes are on BTC that led the rally, and will likely be the clue for the coming period as well. For now, primary support held the most valuable coin just below $4500 after the weekend spike lower, but watch for a break below that for a confirmation of the move.

Bitcoin, 4-Hour Chart Analysis

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3.           The World Reacts to the Hydrogen Bomb Test

North Korea conducted a successful nuclear test, and one that was possibly involving a hydrogen bomb, with a magnitude more power than its previous test. While the test doesn’t mean that the country is capable of delivering such a bomb with a ballistic missile, the event is definitely a worrying sign, and could lead to an escalation of the situation, with more sanctions and tensions between the US and China as well. Safe haven assets got bid aggressively in early Monday trading in Asia, with the Yen and Gold surging by close to 1% at the open, while stock futures being down quite substantially too. The next steps of the superpowers could define sentiment globally and could contribute to a risk-off period in the coming weeks.

Gold, 4-Hour Chart Analysis

4.           September Brings Volatility Again?

Stock markets traditionally get more active post-Labor Day, and we expect this year to be no different in this matter. Trading volumes will likely jump during the holiday-shortened week, especially after the crucial ECB meeting, and volatility basically has one way to move off its recent single digit lows (as measured by the VIX). That said, the exact timing of the likely correction is impossible, and given the recent strength in the major indices, we wouldn’t be surprised by another push higher in US equities. Investors shouldn’t forget about the overvalued state of the market though and should keep their exposure controlled.

5.           Did the Dollar Hit a Major Bottom?

As the EUR/USD pair surged past 1.20 last week, the last remaining Dollar bulls likely threw in the towel, but the wave of selling abruptly stopped and the battered currency bounced back strongly. The Dollar index got another hit on Friday, from the bearish Employment Report, but the Greenback recovered well once again, possibly signaling a more durable bottom, and a vacuum of sellers after the huge drop. The next few weeks will be crucial for the currency, with the much-awaited tax-reform of Trump, and central banks being in the center of attention.

DXY (Dollar Index), Daily Chart Analysis

Key Economic Releases Next Week

Day Country Release Expected Previous
Monday UK Construction PMI 52.1 51.9
Monday US Bank Holiday 0.2% 0.3%
Monday CANADA Bank Holiday 180,000 209,000
Tuesday AUSTRALIA Rate Decision 1.5% 1.5%
Tuesday AUSTRALIA RBA Monetary Statement
Tuesday UK Services PMI 53.6 53.8
Tuesday US Factory Orders -3.1% 3.0%
Wednesday AUSTRALIA GDP 0.8% 0.3%
Wednesday CANADA Trade Balance -3.8 bill -3.6 bill
Wednesday US Trade Balance -44.6 bill -43.6 bill
Wednesday CANADA Rate Decision 0.75% 0.75%
Wednesday CANADA Monetary Statement
Wednesday US ISM Non-Manufacturing PMI 55.5 53.9
Thursday AUSTRALIA Retail Sales 0.2% 0.3%
Thursday AUSTRALIA Trade Balance 0.95 bill 0.86 bill
Thursday UK Halifax HPI 0.2% 0.4%
Thursday EUROZONE ECB Rate Decision 0.00% 0.00%
Thursday CANADA Building Permits 2.2% 2.5%
Thursday EUROZONE ECB Press Conference
Thursday US Unemployment Claims 245,000 236,000
Thursday US Crude Oil Inventories -5.4 mill
Friday JAPAN Final GDP 0.7% 1.0%
Friday CHINA Trade Balance 321 bill
Friday UK Manufacturing Production 0.3% 0.0%
Friday CANADA Employment Change 15,000 10,900
Friday CANADA Unemployment Rate 6.3% 6.3%

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Analysis

Technical Analysis: Litecoin and NEO Jump as Bitcoin Trades near $8000

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The cryptocurrency segment continued its bullish run, as the total value of the coins climbed above $230 billion for the first time ever, while Bitcoin also posted marginal new highs. The most valuable currency is still overbought regarding the long-term picture, and we continue to expect a deeper correction in the coming period, despite the recent strong rally. Support levels are still found $7700, $7000, and $6700 while the $8000 level is ahead as a major obstacle.

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BTC/USD, 4-Hour Chart Analysis

Litecoin has been the most active major besides Bitcoin, as it rallied strongly after breaking out above the key $64 resistance and it breached the next target at $75 before heading below $70 again. The coin remains in bullish long- and short-term patterns, and we expect a move above the major resistance zone ahead with the next target found at $82.50.

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Litecoin/USD, 4-Hour Chart Analysis

NEO is showing strength in the second half of the session, while Monero is recovering well from a short-term dip, similarly to IOTA and Ethereum Classic. Ethereum continues to represent stability in the segment, while Ripple failed to build up momentum so far after yesterdays spike higher. With still most of the altcoins being in bullish setups, let’s see the short-term charts.

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Analysis

XRP Looking to Make a Significant Rally

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The XRP/USD pair went into a deep correction after hitting 0.29490 a month ago. It nosedived to the major support level of 0.19052. The pair consolidated for a few weeks which gave the market the legs to test resistance at 0.22924.

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Technical indicators show that the pair was ready to breach its immediate resistance, which it did this morning. Now that resistance has broke at 0.22924, it’s time to buy. This successful breakout will take the pair to 0.23997 first and 0.26563 next before hitting the target of 0.26796 which is coincidentally a major resistance level.

Technical indicators hint that the market would most likely be overbought by the time it hits 0.26796. Should it respect the major resistance level, the likelihood of the market turning extremely bearish increases. Therefore, it is recommended to closely watch your trail stops to preserve your gains.  

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Summary of Strategy

Buy: As close to 0.22924

Support: 0.22224 and 0.20081

Target: 0.26796

Stop: If the market breaches 0.20081 as next reliable support is 0.19052

 

Disclaimer: The writer owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

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Analysis

Technical Analysis: Ripple Breaks Out as Bitcoin Tests Highs

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Cryptocurrencies are having another bullish session as the total value of the market surged to a new all-time high near $225 billion, with the help of the rally in BTC and Ripple, and despite the drop in the value of Bitcoin Cash. The most valuable coin its record high yet again after the brief but steep weekend correction, despite the still overbought long-term picture. We still urge traders and investors to wait for a deeper correction before entering new positions here, with support levels found at $7000, $6700, and $6000.

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BTC/USD, 4-Hour Chart Analysis

Ripple has been the other main mover of the day so far, as the coin skyrocketed on huge volume and breached the $0.26 level before turning lower and stabilizing near $0.23. The coin triggered a short-term buy signal by moving above $0.2250 and it remains bullish on both time-frames, despite the pull-back, with another major target level ahead at $0.30.

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Ripple/USD, 4-Hour Chart Analysis

The other majors are little changed expect IOTA, which further added to yesterday’s gains and reached overbought readings, while Ethereum Classic and Dash continue to drift lower in short-term correction patterns. Let’s see the detailed analysis of the short-term charts.

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