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5 Things to Watch Next Week: North Korea, the BOC, Ethereum, the Euro, and the US Consumer

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1.            Trump Turns to North Korea Again?

After the recent test of an alleged ICBM (Inter-Continental Ballistic Missile), and more verbal attacks from both sides, the US-North Korean stand-off could take another turn next week. Mr. Trump will return from a crucial G-20 meeting, and given his track record of “at least one outrageous tweet a week” the North Korean threat will likely take center stage again. As we already stated, the current status quo is fragile and there is no easy solution to the situation, so we expect tensions to rise further before anything substantial happens. That said, a perceived escalation could fuel another leg lower in the NASDAQ-DAX led correction, while a bounce in the Dollar and gold is in the cards next week.

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2.           Bank of Canada Joins the Tightening Party?

With the Canadian economy showing promising signs across the board, the BIC is widely expected to raise its benchmark rate on Wednesday. This Friday, the very good Employment Report all but assured the rate hike with the Ivey PMI also posting a blowout reading. The Canadian Dollar already rallied substantially before the decision, and any hint of caution from the BOC could trigger a “Sell-The-News” event, especially against the oversold USD.

USD/CAD 4-Hour Chart Analysis

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3.           Was this the final leg of the Crypto-Correction?

This weekend, the cryptocurrency market was once again headed south, with small cap coins being hit especially hard. The relatively strong major held up well once again, with Litecoin and Dash keeping their short-term uptrends intact. Bitcoin is also acting stronger than the majority of the market as it remained above the crucial $2450 support and bounced back towards $2600 today in early trading. The smaller coins are still not out of the woods yet, as they are only slightly off their lows. Ethereum is seemingly the biggest drag on the market, it ii still relatively weak, lagging BTC for almost two weeks now. The current leg of the ongoing long-term correction shows considerable divergences and that could lead to a broader rally in the segment as soon as next week.

ETH/USD 4-Hour Chart Analysis

4.           The Euro or European Stocks Rise?

European equities are under pressure ever since Mario Draghi’s speech two weeks ago, which sparked a rise in yields globally. As the Euro rallied strongly against its major peers, investors dumped stocks in as the period of easy money seems to be ending (Spoiler Alert: it won’t). As central banks are likely to face renewed pressure to boost the less than stellar economic growth, any tightening move will possibly be temporary, as it was the case in 2008 and 2011 with the ECB. That said the current trends could last for longer, as the major European indices look technically wounded and the Euro is just a hair off its 12-month high compared to the Dollar.

DAX, 4-Hour Chart Analysis

5.           Retail Sales and Inflation Terrible Again?

The last few months saw a clear downtick in the consumer economy of the US, showing signs of a cyclical downturn, as well as the effects of a seven-year high in the savings rate. That data point might be one of the “secret” factors behind the Federal Reserve’s confident tightening plans. As the almost decade-long extreme low interest rates finally reached a limit where consumers are worried about their retirement savings, they slowly started to get ready for more anemic returns, simply by saving more.

We suspect that with the rate hike cycle fully underway, bad news will be bad news again, meaning that stocks will take a nosedive on a weak report— or two weak reports for that matter. The CPI and Retail Sales numbers could turn the Friday’s session into the most active one of the week.

Key Economic Releases of Next Week

Day Country Release Expected Previous
Monday CHINA CPI Index 1.6% 1.5%
Monday CHINA PPI Index 5.5% 5.5%
Tuesday AUSTRALIA NAB Business Confidence 7
Tuesday CANADA Housing Starts 200,000 195,000
Wednesday UK Average Earnigns 1.8% 2.1%
Wednesday UK Unemployment Rate 4.6% 4.6%
Wednesday CANADA BOC Rate Decision 0.75% 0.5%
Wednesday CANADA Monetary Statement
Wednesday UK Janet Yellen Testifies
Wednesday US Crude Oil Inventories -6.3 mill
Thursday CHINA Trade Balance 273 bill 282 bill
Thursday SWITZERLAND PPI Index 0.0% -0.3%
Thursday CANADA NHPI 0.2% 0.8%
Thursday US PPI Index 0.0% 0.0%
Thursday US Initial Jobless Claims 244,000 248,000
Friday US CPI Index 0.1% -0.1%
Friday US Core CPI 0.2% 0.1%
Friday US Retail Sales 0.2% -0.3%
Friday US Industrial Production 0.3% 0.0%
Friday UK Prelim UOM Sentiment 95.2 95.1
Friday UK Manufacturing Production 0.4% 0.2%
Friday CANADA Employment Change 54,500
Friday CANADA Unemployment Rate 6.6%
Friday US Non-Farm Payrolls 175,000 138,000
Friday US Unemployment Rate 4.3% 4.3%
Friday US Hourly Earnings 0.3% 0.2%
Friday CANADA Ivey PMI 53.8
Friday US FED Monetary Policy Report
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Analysis

Daily Analysis: Dollar Falls, Gold Jumps after Yellen’s Final Move

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Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2668 -0.02%
DAX 13125 -0.45%
WTI Crude Oil 56.65 -0.68%
GOLD 1258.00 1.35%
Bitcoin 16,100 -6.32%
EUR/USD 1.1842 0.73%

The Federal Reserve hiked interest rates as expected today, and although the central bank’s monetary statement was slightly more hawkish than expected, the market’s reaction didn’t reflect the much-anticipated move. The worse than expected Core CPI reading that underlined the low-inflation narrative weighed on the recently strong Greenback, while stocks were unchanged after decision and bonds gained ground as yields retreated.

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EUR/USD, 4-Hour Chart Analysis

The major indices are hovering near their all-time highs with the DOW leading the way higher, hitting a new record for the second day in a row. While volatility Is expected to remain low as we approach the end of the year, market internals and valuation levels are still concerning from a long-term perspective, and stocks outside the US are also negatively diverging. The action in crude oil could be slightly more interesting as the commodity is starting to act in a slightly bearish manner after a grinding multi-month rally.

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WTI Crude Oil, 4-Hour Chart Analysis

The Brexit process is still in the center of attention in Europe, although volatility took a nosedive on the old continent as well, and it’s unlikely that the Christmas period will be much different, given the predictable drop in volumes and trading activity. The date of the next election in the financially and politically troubled Italy has been set to March 4th next year, and the early date caused some turmoil in the countries assets, which dragged the Euro Stoxx 50 lower today, together with the DAX and the other major indices.

Cryptocurrencies

As the total market cap of the crypto-market crossed the incredible $500 billion mark, Ripple, NEO, and Ethereum made headlines with lofty gains in the face of the severely overbought readings elsewhere in the segment. While XRP and NEO are still not overbought from an investment perspective, Ethereum reached our final target for its break-out and triggered a long-term sell signal.

ETH/USD, 4-Hour Chart Analysis

The previously surging IOTA continued its correction, Litecoin consolidated in a relatively narrow range, while Dash, ETC, and Monero scored marginal new highs before turning lower together with BTC. The most valuable coin that has lost some of its momentum “mojo” in recent days fell back below last week’s highs, and that could mark a failed break-out and a start of the deeper correction that seems more and more likely.

BTC/USD, 4-Hour Chart Analysis

Key Economic Releases on Wednesday

Time, CET Country Release Actual Expected Previous
11:30 UK Average Earnings 2.5% 2.5% 2.3%
11:30 UK Claimant Count Change 5,900 3,300 6,500
11:30 UK Unemployment Rate 4.3% 4.2% 4.35
15:30 US Core CPI 0.1% 0.2% 0.2%
15:30 US Crude Oil Inventories -5.1 mill -3.6 mill -5.6 mill
21:00 US Fed Rate Decision 1.5% 1.5% 1.25%
21:00 US FOMC Statement

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Technical Analysis: Volatility on the Rise Again, as Ripple and Ethereum Hit Targets

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Ripple has been the star of today’s session in the cryptocurrency segment, as the only major coin on a long-term buy signal in our trend model continued yesterday’s break-out, and surged to a new all-time high. The currency cleared the $0.425 level that marked the top in May, and after the more than 6-month long consolidation phase, it promptly neared the $0.50 level.

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While the short-term momentum indicators are now stretched, the coin is still in an encouraging long-term setup, although the best period to buy already passed. The coin could be dragged lower in the case of the expected broad correction in the segment, but we expect XRP to outperform in the coming period, with support levels found at the prior high and below that in the range between $0.30-$0.32.

XRP/USDT, 4-Hour Chart Analysis

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Ethereum has been the other top coin on the rise, as the second largest digital currency surged past the final range projection target of the break-out two weeks ago at $685 in the aftermath of the launch of the BTC futures on Monday. The ETH token is now also on a sell signal on all time-frames, and we advise investors and investors to wait for the next major correction to establish new positions. Support levels are now found at $575, $500, $480, and $400.

ETH/USD, 4-Hour Chart Analysis

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Analysis

Technical Analysis: Bitcoin Grinds Higher as Records Tumble in Altcoins

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The historical surge in the segment, which is the second such move this year, continued today, with another round of break-outs in some of the major altcoins and tepid gains for BTC investors. Ethereum, Ripple, Dash, and first and foremost Litecoin was leading the charge, with the recent star LTC topping $300, just after a day of hitting the $200 mark.

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Litecoin defied all odds after reaching extremely overbought readings, and the coin rode the speculative wave, turning exponential, not unlike IOTA and Bitcoin previously. With the coin being stretched in an unprecedented way on all time-frames, investors could even consider selling their core positions at the current levels, as a deep correction is almost granted in the coming period. The first meaningful support level is found at $125, and a re-test of the $100 level is probable during the next major correction.

LTC/USD, 4-Hour Chart Analysis

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Ripple finally ended a long period of relative weakness today, and the only major on a long-term by signal jumped over primary resistance at $0.26 and crossed the $0.30-$0.32 too in the euphoric sentiment. As the coin is not long-term overbought following the 6-month long consolidation, the buy signal in XRP remains intact, with the only major resistance level being found at the all-time high near $0.425.

XRPUSDT/USD, 4-Hour Chart Analysis

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