Daily Analysis: Dollar Sell-Off Continues as Stocks Still in Holiday Mode

Friday Market Recap

Asset Current Value Daily Change
S&P 500 2668 -0.65%
DAX 12917 -0.48%
WTI Crude Oil 60.12 0.47%
GOLD 1305.00 0.61%
Bitcoin 14,350 -1.75%
EUR/USD 1.2003 0.51%

As cryptocurrencies are still all the rage, traditional financial markets have been in holiday mode, especially US equities, with the major exchanges experiencing very low volumes and narrow trading ranges, despite a sizeable last-minute drop, as most trading desks were closed until next week. With investors sitting on lofty yearly gains, the sell-off is barely visible on the charts, and the overall technical setup is also stable.

That said, the under the hood trends that emerge in the holiday period are often important, even given the small size of the movements, as without the algorithms, and the day-trading noise, the markets are usually more natural.

DOW 30 Futures, 4-Hour Chart Analysis

If that will be the case this time around for 2018, then we should brace ourselves for a flat to negative stock market, a plunge in the Dollar, and a big period for gold and oil, as these have been the apparent short-term trends.

The Greenback got hit from all directions recently, with the EUR/USD pair breaking above 1.20 again, gold topping $1300, and the Dollar index nearing its September lows after a two-month rally. The Japanese Yen has been relatively weak amid the Dollar bashing up until this week, but some risk-on currencies gained an impressive amount of ground, like the Aussie and the Canadian Dollar.

Dollar Index (DXY), 4-Hour Chart Analysis

European stocks still look vulnerable, with the Euro’s strength weighing on them, and both the EuroStoxx 50 and the DAX declined by almost 1.0%, which is quite a margin given the overall volatility in the markets. The indices on the old continent are also well below their all-time highs, while their US peers are consolidating just below record levels.

DAX, 4-Hour Chart Analysis

Cryptocurrencies

The crypto segment had two hectic days before the weekend, with another round of rotation between the majors, and this time Ripple being the beneficiary of capital flows. The rest of market was choppy with a bearish tilt in the case of most of the coins, but the lows from last Friday are still well below the current price levels, with BTC stabilizing near the $14,500 level. The support zone near $13,000 level should be in the crosshairs of investors for now, as a break below that could open up the way towards the mini-crash lows and the historic $10,000 level.

BTC/USD, 4-Hour Chart Analysis

While the charts of most of the majors still suggest more correction in the coming weeks, the relative strength in Ripple and Ethereum is encouraging, and another round of the ongoing bull could follow the inevitable consolidation. The overall size of the market continues to hover around $600 billion in a volatile fashion, and the first weeks of the New Year could turn out to be crucial for the sector after the recent surge in publicity and capitalization.

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Author:
Trader 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.