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Daily Analysis: What’s the FED Up To?

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Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2505 0.01%
DAX 12571 0.08%
WTI Crude Oil 50.77 1.72%
GOLD 1290.00 0.61%
Bitcoin 3992 0.17%
EUR/USD 1.1998 0.02%

While the Fed-Day, the interest rate decision of the US central bank, is usually an important event, today’s meeting is even more so, with the trends of the coming months being in the hands of Janet Yellen & Co. There is a huge amount of confusion among investors and bond traders about the future of the US interest rates and the Fed’s balance sheet, and a lot of the bank’s plans should be revealed today. We expect a hawkish Fed tonight, but the current rate hike cycle will probably be the weakest in history, as the mountain of debt is still hanging over the global economy.

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The QE operations drove market returns in the last 8 years while fueling a yield-seeking speculative episode in several asset classes. With that in mind, the reversal of those operations will likely have a profound effect on the returns of the next years, even though we expect a quick return to money printing on the first sign of trouble. That thought has been boosting the price of gold and, in part, cryptocurrencies, in recent months, as the trust in fiat currencies continues to erode.

Gold, Daily Chart Analysis

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Global stock markets are close to their all-time highs before the Fed, and although valuations are sky high in the US, the rising trend are intact and bears are nowhere to be seen. Most of the major indices are unchanged today, as the Volatility Index (VIX) shot up again as hedging continued in earnest. Forex markets have been choppy and mixed, as expected with the Aussie, the New Zealand Dollar, and the Great British Pound gaining some ground, as British Retail Sales came in well above expectations. Oil is also higher after the US inventory release, while gold ticked up before the key announcement.

S&P 500, 4-Hour Chart Analysis

Cryptocurrencies

Most of the major coins are stuck in narrow trading ranges after last week’s crazy price action. Dash, Bitcoin, and IOTA are still showing strength while NEO lost some of its short-term momentum after the huge bounce off the crash lows on Friday. The segment calmed down considerably after last week’s storm, as the majors settled down following the post-crash surge. While the short-term declining trends are mostly intact in the most valuable currencies, there has been no clear trend in the last couple of days, as the market settled down before the next major move. A move lower is still the most likely scenario, despite the recent crash, although durable new lows are not expected in the segment.

ETH/USD, 4-Hour Chart Analysis

Key Economic Releases on Wednesday

Time, CET Country Release Actual Expected Previous
10:30 UK Retail Sales 1.0% 0.2% 0.3%
16:00 US Existing Home Sales 5.35 mill 5.46 mill 5.44 mill
16:30 UK Crude Oil Inventories 4.6 mill 2.8 mill 5.9 mill
20:00 US FOMC Rate 1.25% 1.25%
20:00 US FOMC Statement
20:30 US FOMC Press Conference

Key Economic Releases on Thursday

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

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Analysis

Technical Analysis: Bitcoin Hits First Correction Target as Volatility Reigns Supreme

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The violent correction that created a full-on panic in the cryptocurrency segment continues to unfold in a rather orderly way from a technical standpoint, reflecting the extreme nature of the preceding rally. That said, the percentage losses in some of the coins are huge, and the collapse of Bitconnect accelerated the process, spreading uncertainty among investors, and sentiment quickly got bleak.

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Bitcoin remains in the center of attention, and the most valuable coin finally breached the $10,000 level today, causing another strong wave of liquidation in the majors, that could be the base of a more durable bottom, and a consolidation in the coming days after the crazy last couple of days.

The coin is now oversold from a short-term perspective, and although further losses are likely before the end of the cycle, given the still only neutral long-term momentum readings, a counter-trend move is possible in the coming days. Below, $9000, strong support levels are still found at $8200 and near $7650.

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BTC/USD, 4-Hour Chart Analysis

Altcoins got slaughtered in the two-day crash with Ripple leading the way lower, while Ethereum also lost its relative strength amid the broad sell-off and its recent trendline break. ETH got close to the next major support level at $740 during today’s move, and as the short-term momentum is now oversold, a bounce to the zone around $1000 could be ahead. We still expect the correction to continue in the token, as the long-term momentum remains overbought, with key support at $625 and near $575.

ETH/USD, 4-Hour Chart Analysis

Ripple fell as low as the $0.85 support level during the crash, and although the coin rebounded above $1 afterward, it remains 70% off its recent all-time highs. Long-term investors could already accumulate small positions on the short-term sell-offs, although the correction will likely continue, and a prolonged consolidation phase might also be ahead. Key support levels are now found at $0.85 and $0.68, while resistance is ahead at $1.25.

XRP/USDT, 4-Hour Chart Analysis

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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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Analysis

Market Update: Bitcoin at $10,000, Ripple at $1, Ethereum below $1000 as Carnage Continues

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Yesterday’s China induced technical breakdown led to an unmitigated disaster in the crypto segment, as all of the majors crashed, erasing hundreds of billions of market cap in the process. The collapse of the alleged Ponzi scheme of Bitconnect added insult to injury and caused another wave of selling in late trading, driving the price of Bitcoin to $10,000, a bit earlier than expected.

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BTC/USD, 4-Hour Chart Analysis

The most valuable digital currency rebounded as much as 15% after the late-session crash, but the selling pressure remained strong and today BTC briefly traded below yesterday’s low, with most of the majors holding up above the crash low.

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That said, the sell-off is unlikely to be over and volatility is probably here to stay for the week, with violent swings in both directions. The coin is still likely to push lower, with a possibly lengthy bottoming phase, so a quick recovery to the record highs is unlikely, but strong support is found below $10,000 at $9200, $8200, and $7650.

Traders should be aware of the elevated risk in short-term positions here, while long-term investors could slowly accumulate positions on the sell-offs, as the coins are headed to oversold territory.

A Little Perspective

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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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Analysis

Long-Term Cryptocurrency Analysis: Broad Correction Enters Next Phase

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The overbought BTC-led correction that has been the dominating technical process in the cryptocurrency segment in the last month or so continued in earnest today, amid the intensifying regulatory steps concerning the sector. The three-week-long consolidation that followed the initial mini-crash concluded with a sharp sell-off overnight rearranging the long-term charts, while likely kicking off another volatile period.

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While most of the crash lows held up today in early trading in the majors, especially in the case of the late leaders like Ethereum and NEO, some of the relatively weaker coins are already trading below the December minimums. We expect most of the majors to follow Dash and LTC, the weakest of the largest coins, lower and trade below the previous lows, as sentiment will likely swing to a bearish extreme.

The $11,300 level has been in the center of attention throughout the session today and the most valuable coin experienced heavy trading around the level as expected. As the daily MACD is still in neutral territory, the coin could be in for another leg lower, but after the 40% correction and the rather lengthy consolidation, investors could be looking for entry points during the move near the key support levels at $10,000, $9000, and the stronger levels at $8200 and $7700.

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BTC/USD, Daily Chart Analysis

As Ethereum is in a different part of its cycle the long-term momentum readings are still overbought, and that could mean a more protracted correction for the second largest coin. That said, following a multi-month consolidation like the one in Ethereum before, we still expect the token to outperform BTC from a long-term technical standpoint. ETH is now below the short-term trendline, and it’s likely to dip below $1000, and the prior top at $850. Further key levels are found at $740, $625, $575, and near $500.

ETH/USD, Daily Chart Analysis

Let’s see the outlook for the other major altcoins after today’s bloodbath.

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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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