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Daily Analysis: Pound Turns Volatile as Brexit-Worries Return

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Thursday Market Recap

Asset Current Value Daily Change
S&P 500 2550 -0.12%
DAX 12982 0.09%
WTI Crude Oil 50.62 -1.25%
GOLD 1296.00 0.61%
Bitcoin 5308 9.55%
EUR/USD 1.1835 -0.20%

While generally speaking, financial markets remained at a standstill, there were “pockets” of volatility especially in currencies (both fiat and crypto) and some commodities. Equities were virtually unchanged globally, although Asian stocks edged higher, and the Nikkei continued to hit two-decade highs.

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The Great British Pound had a rollercoaster ride, as the lead negotiator of the EU-UK Brexit talks told the press that the progress made during the talks has been insufficient. The Pound took a nosedive after the strength of the recent sessions, but despite the significant intraday drop, the currency recovered strongly and finished in the green for the day and above the previous rally high. All in all, the day confirms the trend in the GBP, and we could in for more gains in the Cable and downside in the EUR/GBP pair.

GBP/USD, 4-Hour Chart Analysis

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 With no news coming out from Catalonia, the Euro wobbled and finished unchanged against the Dollar, while losing ground to the Pound and the Yen. The widespread Asian rally dragged the Aussie and the Kiwi higher for the third day in a row, while gold continued to rally as well despite the quiet environment and the hawkish FOMC meeting minutes. The weak and volatile rally in oil ended with a decline to the $50 per barrel price level in the WTI contract, but choppy trading is likely to continue, with the looming OPEC meeting.

Gold, 4-Hour Chart Analysis

Cryptocurrencies

The segment had a very busy session, especially Bitcoin and Litecoin, as the historic rally above $5000 in the most valuable coin made headlines. BTC produced a massive and convincing break-out, reaching up to almost $5400 while Litecoin 10% to its price. LTC is currently testing the key resistance zone near $56, and bulls are anxiously waiting for a break-out. With only for days left until Ethereum’s Byzantium fork, the second largest coin confidently sits above $300, but it failed to show upside momentum amid the BTC rally. The other majors were mixed, with NEO and IOTA remaining under pressure, while Ripple continuing its short-term correction.

BTC/USD, 4-Hour Chart Analysis

Technical Picture

The Nasdaq hit a marginal new high today, despite the overbought readings and the low-momentum trading environment. The benchmark still looks vulnerable here, and at least a dip to 6000 is expected in the coming days, while a test of the long-term trendline at 5900 is also possible. Bulls should wait with opening new positions until a correction, while bears could enter shorts with favorable risk-reward ratios.

NASDAQ, 4-Hour Chart Analysis

Key Economic Releases on Thursday

Time, CET Country Release Actual Expected Previous
14:30 CANADA NHPI 0.1% 0.3% 0.4%
14:30 US PPI Index 0.4% 0.4% 0.2%
14:30 US Unemployment Claims 243,000 255,000 260,000
16:30 EUROZONE Mario Draghi Speaks
14:30 US Crude Oil Inventories -2.7 mill -1.9 mill -6.0 mill

Key Economic Releases on Friday

Time, CET Country Release Expected Previous
2:30 AUSTRALIA RBA Stability Report
Tent. CHINA Trade Balance 266 bill 287 bill
14:30 US Retail Sales 1.5% -0.2%
14:30 US CPI 0.6% 0.4%
16:00 US UOM Consumer Confidence 95.4 95.1

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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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Analysis

Technical Analysis: Litecoin Continues Surge as Bitcoin Tests Highs

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With the crypto world being focused on the historical futures launch, the major coins all enjoyed buying following a hectic weekend, and a volatile week as a whole. BTC itself got another boost from the widespread publicity and the volatile correction of the recent days ended, with the most valuable coin bouncing back towards its all-time high.

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While the long-term picture remains severely overbought, the short-term picture is not stretched and further gains are possible even amid the elevated correction risk. That said, investors should wait for a more favorable entry point to ad dot their holdings, while traders should control position sizes in the light of the long-term setup. Major support levels are now near $13,000, $11,300, and $10,000, with stronger levels still at $8200 and $7700.

BTC/USD, 4-Hour Chart Analysis

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The major altcoins are all up today, but only Monero and Litecoin are still within short-term uptrends, and the segment as a whole is still dangerously overextended, and a deeper correction is very likely in the coming weeks. LTC continued its recent break-out, getting close to the $200 level, and joining the extremely overbought group regarding the long-term momentum, and triggering a long-term sell signal in our trend model. Key support levels are found $100 at $75 and $64, with a weaker primary level at $125.

LTC/USD, 4-Hour Chart Analysis

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Analysis

Long-Term Analysis of the Silver Market

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Silver

The silver market has once again caught investors’ interest as the price is nearing areas not seen since late 2008.

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2017 started at a low point for silver, and it seems it will end the year that way as well, meaning investors who bought at the beginning of the year haven’t suffered nor gained much.

This doesn’t mean, however, that the price hasn’t moved during the year. After the low start of the year, silver quickly tacked on about 18% to a top of $17.50 per ounce.

In terms of fundamentals in the silver market, things look a bit complicated for 2018. There are multiple forces pulling in different directions for the price of silver going forward:

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Positives

  • A sharp stock market correction can be expected to occur some time in 2018. Most likely, this will happen sooner rather than later. Stock market crashes always trigger a flight to safety, meaning gold, silver, and quite possibly bitcoin, can benefit.
  • We are seeing signs that inflation may be starting to rise again, although this is not confirmed yet. Rising inflation is always good for precious metals.
  • If the US federal budget deficit widens as a result of the new tax reform, the US dollar may suffer as a consequence. Goldman Sachs put out a note to investors in November 2017 saying that the US debt is “on track” to reach an “unsustainable” level in coming years. Fed Chair Janet Yellen has also said about the US debt that it is “the type of thing that should keep people awake at night.” Rising debt levels creates uncertainty about the economy, which is generally good for gold and silver.

Negatives

  • Central banks around the world seem committed to raise interest rates in 2018. Rising interest rates are bad for precious metals because it would make it more attractive to put money in the bank.
  • The cryptocurrency bull market is on track to continue, diverting attention and capital away from precious metals as a traditional store of value. However, this one is uncertain, as it may also be considered a positive in the way that the rise of cryptocurrencies brings the inflationary and unsustainable nature of fiat currencies into focus.
  • The US dollar may have hit a bottom in 2017 and trade higher compared to other major fiat currencies going into 2018. A stronger dollar is always bad for precious metals, which are priced in dollars.

Silver chart

When looking at the chart, we can see that silver is back down to were it started the year, which coincides with a major support area where it has turned several times in the past few years.

From a technical perspective, silver has been trading in a triangle pattern on the longer-term weekly chart, with the price now trading very near the lower end of the triangle, adding confluence to our bias that silver will trade up from here.

Silver failed to live up to our prediction from early 2017, and is now even trading well below the level from that time.

A low price by any measure combined with two major technical support levels adds confidence to our trade and makes silver a low risk and potentially high reward trade for 2018.

Depending on your own strategy and investment style, you may want to wait for the price to break out from the current triangle pattern it has been trading in for the past year and a half. You would then give up some of the potential return for an even safer trade. After that, major resistance is found around $17.50 and $18, with lots of upside potential if we can finally break through those levels.

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