Daily Analysis: Dollar Suffers Another Major Blow as Precious Metals and Oil Surge

Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2835 -0.99%
DAX 13,414 -1.05%
WTI Crude Oil 65.78 1.32%
GOLD 1357.00 0.71%
Bitcoin 11,310 3.71%
EUR/USD 1.1395 0.60%

The early year trends that have been dominating financial markets continued in earnest today, although the US stock market’s march to new all-time highs ran into an intraday bump. The 1% correction got triggered as the looming trade war fears between the US and China, which got in focus after the new solar panel tariff, got another boost today, while the Dollar got smashed lower after Steve Mnuchin’s comments regarding the benefits of a weaker Greenback.

The major indices climbed to new record highs yet again before the turmoil, although some cracks appeared below the surface of the monster rally, as small caps underperformed and the Nasdaq also closed in the red, with Apple (AAPL) leading the way lower in the tech segment.

Volatility was higher across forex markets as the Davos meeting provided plenty of new impulses, which mostly reinforced already ongoing trends besides the Dollar’s plunge, such as the Pound’s strength, the rally in precious metals. The GBP/USD pair, also known as the Cable, which hit 1.40 yesterday for the first time since the Brexit, surged as high as $1.4250, and closed the day almost 200 pips higher.

GBP/USD, 4-Hour Chart Analysis

Gold reached up to the $1360 level, the highest since the September of 2016, as the rally in the safe-haven commodity continues despite the generally bullish trends in risk-on assets, the rising yields, and the historically low volatility in stocks. Silver also traded on post-Brexit highs, north of $17.50, while WTI crude oil hit the $66 per barrel level, as copper continued to suffer, despite the broad rally in commodities.

Gold, 4-Hour Chart Analysis

Cryptocurrencies

The crypto segment is still clearly in the correction that has been dominant since late December, as BTC is stuck near the $11,300 level, some 40% below its all-time high, while altcoins are also well off their record levels. The early-week slump that drove the value of the majors lower in a concerted fashion ran out of steam, for now, and today some altcoins showed strength, despite the downtrend that is still intact in the sector.

BTC/USD, 4-Hour Chart Analysis

Stellar made headlines after a series of bullish rumors surfaced regarding the coin, while the late leaders of the year-end rally, NEO and Ethereum, also showed strength as correlations broke down slightly. IOTA continued to underperform the segment, while Llitecoin, Dash, Ripple, and Monero remained under selling pressure throughout the session, despite the intraday bounces.

ETH/USD, 4-Hour Chart Analysis

Key Economic Releases on Wednesday

Time, CET Country Release Actual Expected Previous
10:30 GERMANY Flash Manufacturing PMI 61.2 63.2 63.3
10:30 GERMANY Flash Services PMI 57.0 55.6 55.8
11:00 EUROZONE Flash Manufacturing PMI 59.6 60.4 60.6
11:00 EUROZONE Flash Services PMI 57.6 56.5 56.6
11:30 UK Average Earnings 2.5% 2.5% 2.5%
11:30 UK Unemployment Rate 4.3% 4.3% 4.3%
17:00 US Existing Home Sales 5.57 mill 5.72 mill 5.78 mill
17:30 US Crude Oil Inventories -1.1 mill -1.0 mill -6.9 mill

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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.