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Asian Market Update: Yen Hits Two-Year High as Regional Stocks Follow Wall Street’s Lead

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Improved risk sentiment failed to deter the yen on Thursday, as its rally against the dollar deepened in the wake of stronger than expected U.S. inflation data.

Yen’s Relentless Surge Continues

The Japanese currency climbed to more than two-year highs against the dollar, extending its rally to four straight days. The USD/JPY exchange rate bottomed out at 106.30, its lowest since November 2016. At the time of writing, the pair was down 0.4% at 106.53.

A weaker U.S. dollar has been the primary catalyst behind the yen’s newfound strength. On Thursday, the dollar index (DXY) was on track for its fourth consecutive drop, undoing a two-week rally that climaxed on Feb. 9.

Earlier this month, the Japanese currency benefited from global risk aversion tied to a large-scale correction in U.S. stocks that began Feb. 2. As a regional safe-haven, the yen usually benefits from periods of volatility and heightened uncertainty.

Japan’s Finance Minister Taro Aso has been closely monitoring the yen’s movement over the years, vowing to intervene in the market where necessary to curb excess volatility. In Aso’s view, the yen’s recent strength is not compelling enough for government forces to intervene.

The Bank of Japan (BOJ) has expressed little interest in diverging from its current path of monetary policy now that the economy is finally catching up to years of record stimulus. The Japanese economy expanded much slower than expected in the fourth quarter, but still managed to cap off its eight consecutive quarterly expansion. GDP expanded 0.5% on the quarter for its longest streak of uninterrupted growth in 2018.

Tokyo will likely reappoint Haruhiko Kuroda for a rare second term as BOJ Governor, signaling the government’s continued confidence in the central bank’s direction.

Asia Pacific Markets Rise

Regional stocks chased Wall Street higher on Thursday, with Japan’s Nikkei 225 Index adding 1.2% through the midday. Meanwhile, Australia’s S&P/ASX 200 was also up 1.2%.

Asian markets were far less active than usual as China, South Korea, Taiwan and Vietnam remained closed for Chinese New Year.

Earlier in the day, U.S. stocks posted their fourth consecutive daily advance, as calm returned to Wall Street following the biggest selloff in years.

On the futures side, North American and European equity contracts were down across the board in pre-market trading, pointing to a soft start to the day on Thursday. European futures contracts were down especially hard, with Germany’s DAX 30 shedding 391.50 points. The U.K.’s FTSE 100 futures contract was also down 173 points.

Data watchers can expect a steady stream of market-moving reports in the coming hours. The European Commission’s statistical agency will report on the December trade balance at 10:00 GMT.

The New York session will feature a slew of early releases, including U.S. producer inflation, initial jobless claims and a pair of manufacturing surveys. Later in the morning, the Federal Reserve will report on industrial production for the month of January. The National Association of Home Builders (NAHB) will cap off the session with the monthly housing market index.

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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4.6 stars on average, based on 693 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Market Overview

U.S. Stocks Struggle for Direction as China Lowers Auto Tariffs; Cryptos Teeter on New Yearly Lows

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U.S. stocks struggled for direction on Tuesday, as markets digested the latest round of trade talks between the United States and China. Cryptocurrencies were back on the defensive and dangerously close to setting new lows for the year.

Stocks Sputter

After swinging between gains and losses for much of the day, the S&P 500 Index settled virtually flat at 2,636.78. Financials companies were the biggest laggards, falling 1% on average. Gains in consumer staples and health care helped to offset the loss.

The Dow Jones Industrial Average fell 53.02 points, or 0.2%, to close at 24,370.04. The blue-chip index was down triple-digits earlier.

Meanwhile, the technology-focused Nasdaq Composite Index managed to climb 0.2% to settle at 7,031.83.

Wall Street finished mostly higher on Monday after the major indexes clawed back from brutal intraday losses. Markets are coming off one of their worst weeks of the year, highlighted by a nearly 6% drop in the S&P 500.

Tariffs Reduced

Initial trade talks between the United States and China have yielded positive results after Beijing confirmed it will reduce tariffs on American automobiles to 15% from 40%. The news suggests that both sides are working amicably on a new free trade agreement following a bitter feud that threatened to throw global economic growth off course.

According to The Wall Street Journal, Chinese Vice Premier Liu He delivered the news to Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer during a phone call Monday evening. The tariffs were implemented initially in response to escalating duties on Chinese imports by the Trump administration. The rift between the U.S. and China has cooled following face-to-face meetings between presidents Trump and Xi Jinping on the sidelines of the G20 summit earlier this month. At the time, both sides committed to resolving their trade dispute within 90 days.

The trade truce also includes considerations for upending certain elements of the Made in China 2025 plan, which is intended to boost Chinese companies across various industries including artificial intelligence.

Cryptos at Risk

The cryptocurrency market is teetering on the edge of new lows Tuesday, leaving very little doubt that another round of selling was in play. As Hacked recently reported, Stellar (XLM/USD), Litecoin (LTC/USD), Ethereum (ETH/USD) and XRP (XRP/USD) all face considerable risk of setting new lows in relatively short order.

All the majors were down over the past 24 hours, with the notable exception being Tether. The stablecoin has benefited from the recent downturn and is currently trading above parity with the greenback. Tether is now the fifth-larges crypto by market cap with a total value of $1.9 billion. Bitcoin cash has fallen back down to sixth spot following a 35% weekly plunge.

Bitcoin continues to exert significant influence on other cryptocurrencies, with its share of the market growing to 55%. The leading digital currency has posted a series of lower highs and lower lows, a recipe for disaster in the short-run. Technical traders should keep a close watch of the $3,200 threshold as it could be the next to fall amid the relentless downtrend.

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

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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4.6 stars on average, based on 693 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Analysis

Forex Update: Euro and Pound Under Pressure Amid Brexit Chaos

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Forex Market Snapshot

Asset Current Value Daily Change
EUR/USD 1.1318 -0.32%
GBP/USD 1.2515 -0.35%
USD/JPY 113.27 -0.04%
AUD/USD 0.7200 0.14%
GOLD 1,247 -0.23%
WTI Crude Oil 51.63 1.43%
BTC/USD 3,336 -2.10%

The forex market has been very active today with Europe being in the epicenter of the moves. The Euro and the Great British Pound are both trading with a bearish bias, despite an early rally. The initial move higher in the main risk-on currencies was triggered by the Chinese proposal of reducing car tariffs on vehicle’s made in the US, which gave back hope that the US-Chinese talks could be back on track despite the recent arrest of Huawei’s CFO. The brief bounce in Europe was also fueled by the better-than-expected German ZEW Sentiment data, even as the indicator still points to a slowdown.

While the risk rally faded in late European trading, the US Dollar got higher across the board following the better-than-expected Producer Price Index (PPI) report. Analysts expected a flat headline number due to the sharp decline in the price of oil while the more reliable core measure was expected rise modestly. The higher-than-expected producer inflation caused a rise in rate-hike odds and in turn, a bounce in the Dollar.

Technical Analysis

EUR/USD, 4-Hour Chart Analysis

The Euro, which is among the weakest majors from a technical standpoint due to the Brexit troubles the Italian budget debate and the slowing global economy, is back near the 1.13 level, still in a clear long-term downtrend.

The short-term trading range is intact in the pair, and for now, the prior low near 1.12 is not in danger, but despite the very favorable seasonality for the common currency, it failed to maintain its bounce above the key 1.1440 level, pointing to strong selling pressure and likely new lows in January.

GBP/USD, 4-Hour Chart Analysis

The Pound crashed below the 1.27 level following the delay of the key Brexit vote that was supposed to take place today, and the weakest major currency hit new 20-month lows against the US Dollar as we expected.

The pair is still well above its 2016 low near 1.20, but there are no major support zones that could stop the decline, should the political uncertainty persist. Both the short- and long-term trends remain bearish in GBP/USD, and only a quick recovery above 1.27 would help bulls here.

EUR/GBP, 4-Hour Chart Analysis

The EUR/GBP pair broke out above the 0.90 level and the long-standing trading range that has been dominant for almost a year, besides a failed break-out attempt in August. Given the Pound’s overall weakness a move towards the 2017 highs near 0.93 is possible in the coming months and a move above that could open up the way to the historic 0.95 level, and the 0.9750 level which was hit briefly during the panic in 2008.

Gold Futures, 4-Hour Chart Analysis

Gold pulled back below the $1250 level after hitting its highest level since July, and although the precious metal is close to confirming a new uptrend, a failed break-out formation is still in the cards. That said, the long-term outlook is still positive for the safe-haven asset, and should the pull back in US yields continue, gold could be in for a bull run even against the relatively strong US Dollar. The next major resistance zone is found near $1300 while support is at $1215 and $1080.

Key Economic Events Tomorrow

ChartBook

Forex

USD/JPY, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

EUR/JPY, 4-Hour Chart Analysis

AUD/JPY, 4-Hour Chart Analysis

GBP/JPY, 4-Hour Chart Analysis

USD/CHF, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

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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4.7 stars on average, based on 413 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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Market Overview

Les Minimum Wage

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Hi Everyone,

Master of the house, President Macron has heard the people singing a song of angry men. Though it’s possible he has a heart full of love, many French citizens still see him as living in a castle on a cloud.

If you’ve never heard the play Les Miserables, or if you’d like to listen to it again, here’s a good version on YouTube. Personally, I haven’t been able to stop listening to it since the Yellow Jacket protests began.

France has recently become the most taxed nation in the OECD, which could explain why the ongoing protests are one of the worst in the country’s history.

Macron’s plea yesterday and his promise to raise the minimum wage may calm nerves just a bit, but the problem may yet persist. We’ll need to see how things progress over the next few days.

Certainly, the economic impact of a wage increase and less taxes is probably the least of the market’s woes at this exact moment. Nor the estimated $11 billion loss for small businesses.

What’s most concerning for global markets though is not just Paris. As central banks begin to engage in economic tightening we’ll need to keep our eyes open and hope this doesn’t spread.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Resistance at 24601
  • Brexit Drops the Pound
  • Two Biggest Crypto Markets

Please note: All data, figures & graphs are valid as of December 10th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Stocks sunk to new depths yesterday with the Dow Jones reaching its lowest point since May 4th. The drop came as volatility increased and bond yields continued to slide.

Though things were indeed looking down, at the end of the day came a miraculous recovery and US Indices began a rally somehow managing to end in the green.

Most other markets were already closed by the time the rally came in and so did not reap the benefits. Perhaps more notable is that the banking sector didn’t recover at all.

In this graph from Bloomberg, we can see the Bank Index (white) against the tech sector (blue).

Stocks today are decidedly flat today. Perhaps it’s a coincidence but the Dow Jones is showing a heavy resistance line exactly at 24601. If it manages to get over that line, the recovery could very well sustain a bit longer.

As the US Dollar continues to range, we’ll keep our eyes on Crude Oil’s lows and Gold’s highs, both of which are seeing a test at the moment.

Brexit

Theresa May managed to pull another short-term victory by delaying a critical vote in Parliament. At this point, she can clearly see that there isn’t sufficient backing to pass her current Brexit deal. So now she heads to the EU to see if there’s another victory to be had. Perhaps one that will somehow help garner support at home.

At this point, some observers have pointed out that she might be trying to wind down the clock. If the current deal is better than no deal, and there isn’t sufficient time to negotiate a new deal, the perhaps the government will have no choice but to accept the deal that’s on the table.

In any case, as May addressed members of the parliament yesterday the British Pound sank to new lows (purple circle). On the bright side though, we’re seeing a strong recovery coming in this morning.

Crypto Regions

Results are now coming in for India’s provincial elections. Unrelated, but in an interesting turn of events the Governor of the Reserve Bank of India has stepped down. Even though Urjit Patel says that he’s stepping down for personal reasons, it hasn’t stopped pundits from speculating as to why he’s leaving the post after serving the shortest term since 1992.

The most common theory is that Patel was facing increased pressure from the government to employ a looser monetary policy, something he presumably was not prepared to do.

The reason I’m telling you all this in the crypto section is because India is by far one of the largest potential markets for crypto adoption and it was the RBI who set up the current crypto-blockade in the first place. There is now a committee to select the next RBI Governor and this can actually be a good thing for crypto outlook in the country, depending on who they pick. Well, it can’t be worse anyway.

In any case, the new Governor, whoever it may be will probably have their hands full with everything else going on anyway. As well as the finance ministry. So, unfortunately, this whole thing could get swept up in politics. However, this new progression might prove to be a wild card for crypto enthusiasts.

Meanwhile, it seems that China, the largest potential market for crypto adoption, has stepped up their rhetoric against digital assets. The People’s Bank of China is showing us how on top of things they are by clarifying that STO‘s (a term that has only recently gained popularity) will not be tolerated.

Though there are no Chinese laws against Security Token Offerings, it seems the punishment is now banishment.

The above two updates may not have much effect on short term prices but the second one is proving to be a popular talking point on crypto social media as we continue testing the lows and searching for the floor.

Passez une super journée!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

eToro is a multi-asset platform which offers both investing in stocks and cryptocurrencies, as well as trading CFD assets.

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

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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4.7 stars on average, based on 138 rated postsSenior Market Analyst at Etoro.com.




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