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Daily Analysis: Stocks Stay Bullish as Dollar Rally Fizzles

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Thursday Market Recap

Asset Current Value Daily Change
S&P 500 2502 -0.12%
DAX 12600 0.25%
WTI Crude Oil 50.55 -0.22%
GOLD 1295.00 -1.61%
Bitcoin 3658 -5.89%
EUR/USD 1.1936 0.35%

The Fed’s “historic” monetary meeting resulted in a strong initial move by the Dollar and a less pronounced dip in equities, as markets were surprised by the hawkish tone of the central bank. The move in the currency got mostly reversed against the Euro and the Pound today, while the Yen remained under pressure, together with gold. The safe-haven assets hit new multi-week lows, with the precious metal dipping below the key $1300 level, probably concluding its correction.

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Donald Trump announced a new wave of sanctions against North Korea recently, but the move didn’t cause major movements in the markets, and most asset classes are near their pre-Fed levels, as only short-dated Treasuries were re-priced thanks to the hawkish Fed statement.

DXY, Daily Chart Analysis

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Central bankers caused some turmoil down under as well, with the Aussie and the New Zealand Dollar reversing some of their recent gains after the RBA governor Lowe’s dovish words.  Stock markets barely budged, proving their relative strength yet again, and Japanese and European equities hit new rally highs in early trading. The major US indices are still just below their all-time highs, with continued strength in the financial sector, and a slightly lagging tech segment.

AUD/USD, 4-Hour Chart Analysis

Cryptocurrencies

Bitcoin and Ethereum are leading the market lower yet again as the forces that led to the deep correction remained dominant even after last week’s crash and the following surge. Almost all of the major coins are still in short-term downtrends, with only IOTA and Dash showing meaningful relative strength before today’s bearish shift. BTC quickly declined below the key $3800 support, and it’s now likely headed towards $3500 while a re-test of the crash lows is also in the cards, despite the much-improved long-term prospects.

BTC/USD, 4-Hour Chart Analysis

Technical Picture

The DAX continues to drift higher in the face of the short-term overbought readings on the MACD. The German index is very close to the next major resistance level at 12,650 and a rally towards the 12,825 level is also very likely in the coming week. Another leg higher in the Euro could hold the rally for a while, but as long as the relative strength of European equities persists, short-term traders should buy the dips.

DAX, 4-Hour Chart Analysis

Key Economic Releases on Thursday

Time, CET Country Release Actual Expected Previous
Tent. JAPAN BOJ Rate Decision -0.10% -0.10% -0.10%
Tent. JAPAN Monetary Statement
14:30 CANADA Wholesale Sales -1.5% -0.9% -0.5%
14:30 US Unemployment Claims 259,000 300,000 284,000
14:30 US Philly Fed Index 23.8 17.2 18.9

Key Economic Releases on Friday

Time, CET Country Release Expected Previous
9:30 GERMANY Manufacturing PMI 59.0 59.3
9:30 GERMANY Services PMI 53.8 53.5
10:00 EUROZONE Manufacturing PMI 57.2 57.4
10:00 EUROZONE Services PMI 54.8 54.7
14:30 CANADA CPI Index 0.2% 0.0%
14:30 CANADA Retail Sales 0.4% 0.7%

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Analysis

Crypto Update: Coins Hit 6-Week Highs as Rally Continues

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Bullish price action is still dominant in the cryptocurrency segment today, despite the recent lofty gains, and the overbought short-term picture in the ace of most of the majors. Correlations continue to break down, as more and more coins are in confirmed uptrends, with the total value of the market hitting $400 billion for the first time since early March.

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The top digital currencies are mixed today in the generally positive environment, with Bitcoin Cash, IOTA, Ethereum Classic, Dash, and Monero showing relative strength, in the face of the slightly overbought short-term momentum readings. While this is not the best moment to enter new short-term trades with regards to the majority of the coins, the long-term setup favors further gains in the coming weeks.

BTC/USD, 4-Hour Chart Analysis

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Altcoins have been leading the market higher in the last couple of weeks, and Bitcoin is still stuck below the $9000 level, as it continues to slightly lag behind from a short-term perspective. The coin ran into the strong resistance zone between $9000 and $9200 after breaking out of the broad declining trend.

Now a pullback is likely, given the slight weakness, with a possible test of the prior swing high at $8400. In case of a bullish move, the next target is at $10,000, and long-term investors should still add to their holdings on the short-term dips.

ETH/USD, 4-Hour Chart Analysis

Ethereum kept on creeping higher to marginal no rally highs in the last couple of days, nearing the $650 level despite the overbought short-term picture. Short-term traders should still not enter new positions here until the overbought readings are cleared, while long-term investors could still add to their holdings during the pullbacks.  Resistance zones are ahead near $735 and $780, while primary support is between $555 and $575.

Altcoins Diverging but Bulls Remain in Control

XRP/USDT, 4-Hour Chart Analysis

As we noted, the correlation between the coins is lower than during the downswing, and that confirms the bullish price action in the segment. Ripple is trading in a consolidation pattern near the $0.84 level, and although the overbought momentum readings are not yet fully cleared, the trend is clearly bullish and a new short-term buy signal is likely in the coming days.

Among the other recent leaders, IOTA triggered short-term sell signal, reaching the strong resistance zone near $2.2. EOS, Stellar, Cardano, and NEO are consolidating their gains, while Dash, Monero, and ETC are trading slightly above last week’s highs, but traders shouldn’t chase them higher here, as a short-term correction is likely soon.

Stay tuned for our detailed long-term technical analysis coming out later on today.

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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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Analysis

Bitcoin and Gold are Trading Inversely With One Another

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Advocates of bitcoin often compare the digital currency to gold for its finite supply and store-of-value characteristics. While BTC hasn’t come close to dethroning gold as the world’s most trusted safe-haven, it has steadily outperformed bullion amid the latest recovery. This has some people asking whether virtual currencies are eating away into gold’s demand.

Inverse Relationship

Strategists have identified a strong inverse trading pattern between gold and bullion stretching all the way back to the fall, right around the time that cryptocurrencies rebounded from a China-induced selloff. As bitcoin and other cryptos surged, gold experienced a steep fall from a high above $1,351 in early September to a low of $1,241 just three months later.

As bitcoin cooled down in the new year, gold resumed its upward trajectory and eventually peaked near $1,370 at the end of January.

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Below are the charting patterns for gold and bitcoin going back one full year.

The latest divergence is easy to spot. Since hitting a settlement high of $1,360 on Apr. 11, bullion has declined 2%. Over the same period, bitcoin surged 27%.

Bitcoin’s oversized percentage move relative to gold is a reflection of underlying volatility in the cryptocurrency market. Crypto assets as a whole are but a tiny fraction of gold’s $7.8 trillion worth. That said, the digital asset class peaked above $830 billion earlier this year, making the case for a trillion-dollar market more believable.

Systemic Risks

Proponents of bitcoin’s safe-haven status generally agree that the cryptocurrency is well suited to outperform the market during periods of heightened economic and political instability. This is generally believed to be the period in which gold prices thrive. However, unlike gold, bitcoin has also outperformed during periods of relative calm.

The second-largest bull market in history started off as a positive for gold as prices crossed $1,900 a troy ounce in 2011. However, bullion hasn’t been able to hit anywhere near those levels ever since. Bitcoin, on the other hand, has been the world’s best-performing currency (if one calls it that) in six of the past eight years.

Although the charts seem to indicate an inverse relationship between gold and bitcoin, it’s much more difficult to prove that investors are swapping one asset for the other at any given time. There’s some anecdotal evidence to suggest this is the case but a lack of trading data makes it difficult to conclude definitively one way or the other.

Supply and demand factors must also be weighed in analyzing the price trajectory of both assets. Gold’s total supply is increasing by an average of less than 2% annually, according to the World Gold Council. At the other end of the spectrum, the final bitcoin is expected to be mined in 2140, with total supplies engineered to decline until that date.

On the demand side, gold has been losing its allure as investors continued to pile into stocks. In 2017, appetite for bullion fell by 7%, with gold-backed ETFs plunging to one-third of the previous year’s demand. On the other hand, bitcoin’s demand has skyrocketed as more traders noticed its meteoric rise.

One area in which bitcoin has an advantage over gold is non-correlation. As the above examples clearly demonstrate, BTC is not correlated with the broader market. Gold, on the other hand, is influenced by risk-off sentiment, geopolitics, interest rates and inflation, among others. At present, these factors may play into the hands of bullion as investors prepare for the new business cycle.

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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4.5 stars on average, based on 343 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Technical Analysis: Bitcoin Tests $9000 as Altcoins Pull Back after Strong Rally

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The cryptocurrency segment is in a short-term correction after a great week that saw several key resistance levels fall, as the major coins kept up the bullish momentum and hit new rally highs after a shallow correction. Ethereum and the smaller altcoins continued to outperform Bitcoin on the way higher in the last couple of days, but today, Bitcoin is holding up relatively well amid the pullback, indicating a slight change of behavior.

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BTC/USD, 4-Hour Chart Analysis

Bitcoin broke out of its lengthy declining trend, rallying quickly up to the key $9000-$9200 zone as expected, even though the momentum of the move has been relatively weak, and the coin failed to enter the zone, with the lower resistance line halting the advance, for now. The currency should remain above the declining trendline, but another short-term consolidation phase could be ahead as altcoins are likely entering a correction. Further resistance is ahead at $10,000 and $10,500 while support is found near $8400 and $7800.

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ETH/USD, 4-Hour Chart Analysis

Ethereum hit the $625 level as we expected and it also broke out of its declining trend, after confirming a new short-term advance earlier on this week. Traders shouldn’t enter new positions here, as the coin is stretched from a short-term perspective, while investors could still add to their holdings on the pullbacks. Support is now found between $555 and $575, and below that zone at $500, while strong resistance is ahead between $625 and $645 and near $740.

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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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