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5 Things to Watch Next Week: The Fed, Crypto-Chaos, All-Time Highs in Stocks, FX-Volatility, Gold at $1300

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1.            What’s Next for the Fed?

All eyes will be on Wednesday’s FOMC meeting, as the central bank is expected to provide the details of its tapering plans. While the bond market predicts no rate hike from the Fed next week, the future of the bank’s balance sheet is at least that important for risk assets and the Dollar.

The Bank of Canada raised its benchmark rate two weeks ago while the Bank of England also took a surprisingly hawkish turn last week, so the global environment definitely favors tightening. Also, the major US stock indices are at or near all-time highs so, despite the mixed economic numbers, the Fed might be comfortable with even a bolder quantitative tightening schedule that would surely cause some turmoil in the main asset classes.

TLT (Long-Term US Bond ETF), Daily Chart Analysis

2.           Bitcoin After a Bubble or Still on the Way Up?

The crypto segment has been shaken by this week’s crash, as the Chinese crackdown on ICOs and crypto-exchanges spread uncertainty in the sector. The previously soaring market was ripe for a correction, but the speed and extent of the move caught a lot of investors off guard, amid the growing chatter on a bubble in the coins. While the stellar gains in the segment do in fact resemble a speculative bubble, and Bitcoin already experienced several boom-bust cycles, whether or not we are after a multi-year top is yet to be seen. For now, the long-term trends in most of the majors are intact and the continuation of the boom is more likely. The next few weeks will be crucial in deciding where we are in the current cycle, as bulls and bears will battle for control amid the accelerated blockchain adoption.

Bitcoin, Daily Chart Analysis

3.           Equities Continue to Defy Valuations

The North Korean escalation, tightening central banks, another miss in US Retail Sales, and so on… A weak stock market would have definitely tumbled in recent weeks, but conversely US equities have been edging higher towards their all-time highs. The Dow closed on a new ATH on Friday and the S&P 500 finished right at the 2500 level, with only the Nasdaq lagging slightly after the mixed reception of Apple’s new IPhones. The Fed might be able to stir things up next week, but despite the extremely high level of the most valuable valuation measures (CAPE, P/S…) and the weak market internals, the price action makes a break-out to new highs very likely here. Calling an exact top in equities is almost impossible but we still think that for anything more than short-term trades, investors are too late to the stock-party now.

4.           Strong Trends in the Major Currencies

FX volatility, which incredibly enough took over stock volatility lately, exploded in some of the major pairs thanks mainly to diverging monetary expectations. The Pound surged by several percents against its most important peers, while the Canadian Dollar continues to be among the strongest majors. That said, the focus is still on the Dollar that lost significant ground compared to the Euro lately, but it showed some strength in recent weeks. With the looming Fed meeting, we expect a two-faced week, as the run-up towards the rate decision is usually choppy while the aftermath tends to be violent. The Bank of Japan’s monetary meeting could also add volatility to the mix, as the Yen also experienced strong moves in both directions in recent weeks.

5.           How low will the Gold-Correction Reach?

As the tensions regarding North Korea eased somewhat (although the crisis is far from being over mind you), despite another missile launch by the country, the primary safe-haven asset entered a slightly overdue correction. The recent key break-out in the precious metal carried it to overbought territory, and although the long-term is clearly bullish now, a move to test the $1300 level is likely, especially if the Fed joins the hawkish central bank trend. But as stocks are near all-time highs, and stock volatility is near record lows, the creeping strength in gold is something to note and increasing one’s holding still seems the way to go.

Gold Futures, Daily Chart Analysis

Key Economic Releases This Week

Day Country Release Expected Previous
Monday EUROZONE Final CPI 1.5% 1.5%
Tuesday AUSTRALIA Monetary Meeting Minutes
Tuesday GERMANY ZEW Economic Sentiment 12.3 10.0
Tuesday CANADA Manufacturing Sales -1.4% -1.8%
Tuesday US Retail Sales 0.2% 0.3%
Tuesday US Existing Home Sales 5.46 mill 5.44 mill
Wednesday UK Crude Oil Inventories 5.9 mill
Wednesday US FOMC Rate 1.25% 1.25%
Wednesday US FOMC Statement
Wednesday US FOMC Press Conference
Thursday JAPAN BOJ Rate Decision -0.10% -0.10%
Thursday JAPAN Monetary Statement
Thursday CANADA Wholesale Sales -0.9% -0.5%
Thursday US Unemployment Claims 300,000 284,000
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 300,000 284,000
Thursday US Philly Fed Index 17.2 18.9
Friday GERMANY Manufacturing PMI 59.0 59.3
Friday GERMANY Services PMI 53.8 53.5
Friday EUROZONE Manufacturing PMI 57.2 57.4
Friday EUROZONE Services PMI 54.8 54.7
Friday CANADA CPI Index 0.2% 0.0%
Friday CANADA Retail Sales 0.4% 0.7%

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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 320 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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Analysis

Pre-Market: Trade War Optimism Sparks Another Bounce in Stocks

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Global stocks are markedly higher today before the US open, Donald Trump’s quite aggressive negotiating seem to be paying off, at least with regards to China, as in the wake of the pronounced weakness in Chinese assets, and the notable slowdown in the economy, the country wants to reopen the talks with the US.

Shanghai Composite, 4-Hour Chart Analysis

The Shanghai Composite hit a new bear market low overnight before recovering above support into the close, and the Dollar’s rally also ran into resistance, thanks to the Yuan’s bounce of its fresh 13-month low. Emerging market assets are also somewhat higher today, with the help of the Turkish Lira’s continued bounce, but the segment is still deeply wounded technically, and more pain is almost inevitably ahead, as the negative trends still stand.

 

DAX Index, 4-Hour Chart Analysis

Walmart’s great earnings report also fueled the pre-market rally in US futures, as the retail segment in the largest economy still seems to be doing just fine, despite the global woes. The major US indices are after an orderly looking correction, in stark contrast with their European and Asian peers, which are stuck in broader downtrends or even full-blown bear markets.

Nasdaq, 4-Hour Chart Analysis

Yesterday’s tech selloff, which was triggered by the weak report of Chinese giant Tencent has almost been erased after the better than expected numbers of Cisco restored confidence in the market-leading segment. Nvidia (NVDA) will also report after the market close, and as the earnings season is drawing to a close, we can conclude that corporate profits had a blowout quarter in the US, even as cracks in the global economy appeared.

Momentum is still clearly on the side of the FAANGS and the whole US tech sector even after discounting Facebook’s recent plunge, but should the tightening cycle of the Fed continue to drain liquidity from financial markets and should the rising trend in rates persist, we expect valuations to suddenly matter soon.

Dollar Pulls Back

Dollar Index (DXY), 4-Hour Chart Analysis

The possible resumption of the US-Chinese trade talks sparked a, so far, weak correction, which also due from a technical standpoint, with the EUR/USD pair finding support near $1.13, and with the broader Dollar Index running into resistance near the 97 level. The rally in the reserve currency is no danger by any means, as the break-out is clearly intact, but a deeper pullback would help risk-assets in the coming days.

WTI Crude oil, 4-Hour Chart Analysis

Commodities are slightly higher thanks to the relief rally in emerging markets and the dip in the Dollar, but the previously stronger crude oil is just holding up above the $65 support, while gold is clearly below $1200, and copper couldn’t get back anywhere near yesterday’s break-down level close to $2.70.

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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 320 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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Analysis

Crypto Update: Market Stabilizes but Bulls Not Out of the Woods

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The cryptocurrency segment looks much better than any time in the last 10 days, as the major coins managed to hold up above the liquidation lows hit on Tuesday. While the bounce stabilized the market, there is still substantial fragility following the steep selloff, and until further bullish moves, traders shouldn’t enter full positions.

That said, finally, there are signs of relative strength among the top coins as correlations are slightly lower, and some of the bearish leaders managed to recapture key resistance levels. Litecoin is trading right at the crucial $56 level, while Monero is above the $90 level, and as we noted before the exhaustion of their downtrend is a positive sign or the whole segment.

XMR/USDT, 4-Hour Chart Analysis

The bounce and the following stability triggered a few upgrades in our trend model after spending almost 1 month in the sell zone, but there are still no majors on a buy signal as the segment-wide downtrend remains intact. Bitcoin remains the strongest coin from a technical perspective, while Ethereum and Ripple, which showed weakness for weeks, are also in better shape, even as they face very strong resistance levels.

ETH/USD, 4-Hour Chart Analysis

Ethereum managed to hold up above the $275-$280 level during the overnight pullback, and now it faces the $300 resistance level again, trying to build on the recent rally. While the short-term downtrend is intact, and the oversold longer-term momentum readings could fuel a rally in the coming weeks, but now the coin is in a structural bear market after the break below $400.

The coin is now neutral from a short-term standpoint, but a move below $275 would point to another test of the lows. Further resistance is ahead at $3335 and $360, while strong long-term support is at $260.

Bitcoin Still Below $6500 as XRP Nears $0.30

BTC/USD, 4-Hour Chart Analysis

Not much has changed for Bitcoin in recent days, but relatively speaking the largest coin showed significant strength. That said, until BTC doesn’t show bullish momentum, traders still shouldn’t enter positions, as the structurally important $5850 level is still not far below the current price level. A move above $6500 would trigger a short-term buy signal, but further strong resistance levels are ahead at $6750 and $7000, while support is still found at $6275 and $6000.

XRP/USDT, 4-Hour Chart Analysis

Ripple and Ethereum are in very similar technical setups, and XRP is also facing strong resistance at $0.30 after finding support overnight near $0.275. After the panicky spike below $0.26, the odds of a durable increased, and should the coin stay above the overnight lows, the coin could avoid another short-term sell signal. While traders should still stay away from entering full positions here, a bottoming process might already be underway.

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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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4.6 stars on average, based on 320 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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Analysis

Ethereum Takes Baby Steps to Recovery as Global Markets Surge 10%

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Following the first serious rebound from the last week’s carnage the global market gained 10% overnight, pushing back through the $200 billion barrier after a brief dip to $190 billion yesterday.

Ethereum Price Recovery

The rebound was not distributed equally, with many of the altcoins which had previously lost the most now benefiting in turn. Ethereum made a strong push in the last twenty-fours as it climbed from a near year-long low of $254.56 up to the current range in the $280’s, where it sits at the time of writing.

The 11% gains for the day sound good, but amount to relatively little in dollar value considering how much the coin lost in recent weeks. At one point during the night ETH climbed to a unit price of $290 – but that’s as far as it could go during this particular twenty-four stretch.

The sudden surge over the last twenty-four hours wasn’t enough to take Ethereum to the £300 mark, although that could be achieved following another 5% growth. The current $284 price per ETH is still one of the lowest witnessed in the last 11 months, so there’s still plenty of scope for investors to jump on board.

Predictably, USDT trades are the most popular today, making up close to 20% of the daily total as a significant portion of ETH becomes un-tethered. Wash-trades, or transaction mining on multiple exchanges once again comes close to equalling the actual recorded daily volume of $1.8 billion.

Global Surge Re-Rearranges Altcoins

While nothing could be termed normal in the crypto world, several coins have returned to their former market cap positions from before the dip. EOS is back in 5th place after temporarily being ousted by Stellar, and Cardano has returned to 8th spot after briefly giving up its place to Tether.

TRON and IOTA are still lingering outside the top ten, with Monero holding strong in the 10th spot previously occupied by TRON, and then IOTA in recent times.

Correlation and Causation

You’ve probably seen the Google Trend charts which show an alignment between ‘cryptocurrency’ Google searches, and the total cryptocurrency market cap. Right now the search volume is as low as it has been since before the surge of 2017 – but that isn’t necessarily an indicator of a lack of interest. It just means that people aren’t typing the word ‘cryptocurrency’ (or Bitcoin, which has an immensely larger search volume) into Google any more.

It says nothing about the number of people checking CoinMarketCap every day, and it doesn’t let you know how many people have suddenly become interested again after seeing prices drop to such long-time lows.

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 38 rated postsGreg Thomson is a full-time crypto writer and digital nomad. He eats ICOs for breakfast and bleeds altcoins. Wherever he lays his public key is his home.




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