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5 Things to Watch This Week: The Crypto-Rally, US Inflation, the Russia-Gate, the Shaky Stock Market, and China

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1.            New Highs ahead for Cryptocoins?

Bitcoin’s Fork Day came and gone without a major earthquake, and the largest cryptocurrency surged to new all-time highs over the weekend in the aftermath of the August 1 events. The SegWit activation fueled optimism regarding the future of BTC, while the forked Bitcoin Cash has been losing ground ever since an initial rally. The other major coins also staged an advance last week, but most of them are still well off their prior highs. That said, the moves in the segment can turn from small to huge really quickly, and we wouldn’t be surprised on another strong wave of buying, especially after Ethereum finally left its declining trend. With only Ethereum Classic and Ripple being still in downtrends, it’s possible that we will see several coins trying to break-out to uncharted territory.

Ethereum, 4-Hour Chart Analysis

2.           US Inflation in Focus after Bullish Jobs Data

With the Jackson Hole symposium just around the corner, this was the event where Ben Bernanke announced Quantitative Easing first, mind you; all eyes are on the “not-too-stellar” US economic numbers, which led to a protracted Dollar decline lately. As the market is pricing in a slower tightening cycle, last Friday’s decent Employment Numbers gave some relief for Dollar bulls, after the lackluster readings in the consumer segment in recent month. The Fed’s favorite inflation measure will be coming out on this Friday to shed some more light on the trends, as the CPI index was running below the central bank’s 2% target lately. The Dollar has become definitely oversold, but a huge negative surprise would likely push the EUR/USD above, or at least near, the key 1.20 resistance, while a higher than expected number could fuel the Dollar’s bounce.

EUR/USD, Daily Chart Analysis

3.           Trump Feeling the heat: Impeachment in the Works?

Although impeachment is still a far-fetched idea, there have been signs recently of a bipartisan “coalition” against the methods of Donald Trump, and that could have important implications down the road. Special counsel Mueller summoned a grand jury in the case of the Russian involvement in the elections, pointing to a possibly long and damaging investigation for the Trump-campaign and the POTUS himself. Also, the markets are starting to react to domestic political developments in the US differently, as that could mean a source of volatility in the near future after a period of historically low risk during the “Trump Rally”. So any further news on the President’s weakness could lead to a sell –off in stocks and the already suffering Dollar.

4.           How Long will the Two-Faced Rally Last?

As the earnings season is getting close to its conclusion, stock investors still face several questions regarding the market’s health. While the Dow has been hitting all-time highs for a record-breaking 8 days straight, the broader indices are notoriously lagging the mega cap benchmark. That behavior is far from the ideal breadth, but this internal weakness has been persistent for months and months, without breaking the rally. That said, the Dollar’s weakness played a huge part in the latter part of the advance and if Friday’s bounce turns into a significant correction, US stocks might underperform the global indices just like European equities did for several weeks now. With that in mind, we wouldn’t jump on the stock-train right now, as the signs are all there that lower prices are ahead in the coming weeks.

5.           Commodities Focused on the Dollar and China

The Chinese CPI and PPI indices and the always crucial Trade Balance data will come out during the otherwise calm week regarding economic releases, and commodity traders are watching closely. Industrial metals have been rallying together with Chinese stocks lately, while precious metals and oil were mostly lifted by the decline in the Dollar. With the latter trend probably entering a correction, positive Chinese data would be needed to keep the bullish momentum. For gold, the long-term picture still looks promising, but oil has run into strong resistance at $50 per barrel, and although the top of its trading range is still higher, odds favor a decline in the most traded commodity.

WTI Crude Oil, 4-Hour Chart Analysis

Key Economic Releases Next Week

Day Country Release Expected Previous
Monday AUSTRALIA AIG Construction Index 56.0
Monday JAPAN Leading Indicators 106.2% 104.6%
Monday SWITZERLAND CPI Index -0.3% -0.1%
Monday UK Halifax HPI 0.3% -1.0%
Monday EUROZONE Sentix Investor Confidence 27.8 28.3
Tuesday CHINA Trade Balance 60.2 65.7
Tuesday CANADA Housing Starts 206,000 213,000
Wednesday CHINA CPI Index 1.5% 1.5%
Wednesday CHINA PPI Index 5.6% 5.5%
Wednesday CANADA Building Permits 54.4 54.3
Wednesday US Nonfarm Productivity 0.8% 0.0%
Wednesday US Crude Oil Inventories -1.5 mill
Thursday JAPAN PPI Index 2.3% 2.1%
Thursday UK Manufacturing Production 0.0% -0.2%
Thursday UK Goods Trade Balance -11 bill -11.9 bill
Thursday CANADA NHPI 0.5% 0.7%
Thursday US PPI Index 0.1% 0.1%
Thursday US Initial Jobless Claims 244,000 240,000
Friday GERMANY Final CPI 0.4% 0.4%
Friday US CPI Index 0.2% 0.0%
Friday US Core CPI Index 0.2% 0.1%
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 297 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: Divergence Deepens as Altcoins Fall, Bitcoin Flat

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The unusual discrepancy between BTC and the rest of the cryptocurrency market continued today, with the top 10 coins all losing ground with the exception of Bitcoin itself. Tuesday’s surge, which carried the segment to $300 billion in total market cap quickly fizzled out, at least as far as the major altcoins are concerned, but the largest digital currency is still holding on above the strong $7000 and $7350 support/resistance levels.

Altcoins are on short-term sell signals according to our trend model, but Bitcoin is still on a buy signal as the declining trend was broken by the break-out that remains intact, despite the segment-wide weakness.

Given the mixed, but one-sided setup, and the lack of bullish follow-through, odds still favor a bearish outcome, and traders should remain cautious with new positions here, even in BTC, the positive outlier. A broad trend change would require a meaningful leadership, and until that develops, a test of t eh June lows remains likely, with the possibility of new lows in the coming week as well.

BTC/USD, 4-Hour Chart Analysis

While Bitcoin failed to durably stay above the $7500 level, bulls successfully defended the support zone near $7350, despite the overbought short-term momentum readings. The coin is well above the line-in-the-sand $7000 level and the long-term support near $5850 that was in danger just one week ago.

Although the altcoin weakness makes BTC’s rally suspicious, the short-term bullish pattern is intact, as is the buy signal in our trend model. Further support is found at $6750, and $6500, while primary resistance is still ahead at $7650.

Selling Pressure Apparent in Altcoins

ETH/USD, 4-Hour Chart Analysis

All intraday rally attempts have been sold so far in most of the major altcoins, and Ethereum is just holding up above primary support at $450 despite the rally in the beginning of the week. The coin is on a short-term sell signal, and a test of the June lows is likely after the failed break-out. Strong resistance is ahead at $500 and between $555 and $575, while support is found at $420, $400, $380, and $360.

XMR/USDT, 4-Hour Chart Analysis

While Monero has been holding up relatively well in the last couple of days after getting stuck below the $150 level during the Tuesday surge, but the coin is still among the structurally weak majors, being on a long-term sell signal. As the other bearish leaders, NEO, LTC, and Dash are also trading below key long-term levels, we expect the coin to fall back below the $125 support and likely test the June lows in the coming weeks.

XRP/USDT, 4-Hour Chart Analysis

The third largest coin Ripple is already testing the $0.45 level after drifting lower ever since the Tuesday rally, and as its relative weakness is still clear, a break below that level seems to be imminent. Below that, the crucial long-term support zone near $0.42 could stop the decline of XRP again, but a move under that could trigger a long-term sell signal.

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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4.6 stars on average, based on 297 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

Forex Update: Boring Means Long-Term Sustainability for EUR/INR

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Billionaire investor George Soros once said, “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” As an experienced investor, I couldn’t agree more. There’s a lot of waiting and sitting involved but that’s how money is made in investing. The Euro/Indian Rupee (EUR/INR) pair seems to be the perfect embodiment of this quote.

Looking as far back as 1999, it appears that EUR/INR has been in an unstoppable bull run since the second half of 2002. If you invested in the pair a decade and a half ago, you would have more than doubled your money. Chances are you didn’t, but don’t fret because you can always invest today. EUR/INR looks as strong today as it did back then.

In this article, we show how EUR/INR is looking strong on all counts despite being boring.

Healthy Ascending Channel on the Daily Chart  

EUR/INR dropped to as low as 67.9819 on April 10, 2017 and it was nothing but blue skies since. It is trading within an ascending channel as it generates higher highs and higher lows in a sustainable manner. The ascending channel looks healthy, too, as the trading range is not significantly contracting or expanding.


Daily chart of EUR/INR

If you look at the technical indicators, everything is fairly clear. EUR/INR rallies when it flashes oversold readings. On the other hand, it corrects when it is overbought. You won’t find excitement here and that’s good news for long term investors.

Concluded Corrective Wave on the Weekly

EUR/INR started showing signs of weakness in September 2013 when it posted a shooting star weekly candle. The ensuing pullback drove the pair down to the 65 levels in March 2015 (A-wave). The market has not visited that price area since. It managed to generate a bullish higher low setup at 68 (C-wave). This was a clear signal to investors that the correction was over.

Weekly chart of EUR/INR

With a higher low in place, EUR/INR took out resistance of 76. The new support level was tested and retested before the pair mounted a strong rally. On top of that, we can see a hidden bullish divergence on the weekly RSI, hinting that the uptrend is in a good shape.

Even in the weekly chart, the market is not pulling any surprises. There are no false breaks and no shakedowns. You don’t have to look close to see where the market is headed. EUR/INR is boring and that’s why it is strong.

Major Support Line on the Monthly Intact

Conventional wisdom says to buy low and sell high. The problem with this is that you don’t really know when is the market low. The market can go down as there’s always the possibility that a key support can break. That’s just not the case for EUR/INR.

Monthly chart of EUR/INR

Buying low is fairly simple in this case. All investors have to do is to wait for the price to hit the long-term support. Investors can be confident in doing so because the trend line has been intact for over 15 years. More importantly, it bounces every time it hit the support. It’s not really exciting but it works.

Bottom Line

A famous billionaire trader once said that good investing is boring, and I agree. Look at the charts of EUR/INR and you’ll see why boring investing is good.

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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3.6 stars on average, based on 201 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Pre-Market: China Tries to Support Markets as Global Stocks Slide

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Yesterday’s risk-off shift continued today in early trading with nervous and choppy trading in Asia and Europe, as global financial markets are still haunted by trade war fears and emerging market weakness. The major US indices rolled over after another period of apparent relative strength, with the Nasdaq being the most robust market once again, while most of the key European benchmarks continue to lag behind.

S&P 500 Futures, 4-Hour Chart Analysis

Chinese assets are still in focus before the weekend, as the Yuan’s recent steep devaluation sparked fears of a credit meltdown in the country. With the largest credit bubble in human history casting its shadow on China, some analysts think that with Trump’s trade war, the bug finally found its windshield and the bubble already started to burst.

USD/Yuan, 4-Hour Chart Analysis

All eyes are on the USD/Yuan pair as Chinese authorities are reportedly intervening in the market of the currency, and most likely local equities as well, trying to prevent a serious run on the most important assets.

With the Chinese stock market already in a bear market, and the Yuan trading at fresh 12-month lows against the Dollar, it might be a bit late to stop the slide, but the intervention could cause spectacular short squeezes.

Italy also made headlines today during the European session, as Italian government bonds got slammed lower, as the future of the new finance minister is uncertain, with another round of political turmoil possibly ahead for Europe’s most vulnerable country.

Unicredit (UCG), 4-Hour Chart Analysis

Looking at the charts of Italian banks, it’s clear that the spring turmoil had a lasting effect on the financial system, as Unicredit is on the verge of hitting a new low, and the other large players also remain under pressure, in part explaining the general weakness in European equities.

Europe Still Far Behind amid Mixed Economic Numbers

USD/CAD, 4-Hour Chart Analysis

The economic calendar is almost empty today with regards to the key markets, as the Canadian Retail Sales and CPI reports are the most important releases. The Canadian Dollar rebounded when the USD entered a correction June, but now the currency edging lower again, as the weakness in commodities and the Greenback’s rally are taking their toll. New highs are likely in the USD/CAD pair in the coming weeks, although strong resistance is just ahead at 1.33.

Commodities are little changed today after yesterday’s volatile session, as the bounce in China helped to stabilize the segment. Notably copper is back above the key $2.70 level, while WTI crude oil is trading at $68 per barrel again, and gold is hovering around $1225.

Featured image from 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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