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Daily Analysis: Yen Hits 10-Month High as Florida Braces for Irma

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Friday Market Recap

Asset Current Value Daily Change
S&P 500 2463 -0.11%
DAX 12303 0.05%
WTI Crude Oil 48.12 -1.89%
GOLD 1352.00 0.14%
Bitcoin 4372 -5.29%
EUR/USD 1.2039 0.14%

There has been a distinct duality between forex markets and stock markets in recent days, as the most important safe haven assets, namely gold and the Japanese Yen have been rising strongly amid the geopolitical tensions and the rising risk of hurricane Irma, while equities held up well in the meantime. The only exception is the Nikkei that had it all; a rising currency and the North Korean escalation.

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As far as the rogue nation is concerned, the huge steps that Kim Jong Un took towards delivering a nuclear warhead by a ballistic missile have wider implications than those in the US-China-Korea triangle. Should a country manage to become a real nuclear power amid the direct opposition of the most powerful nation in the world, a domino-effect could be triggered that could multiply the, very small, risk of a nuclear conflict.

USD/JPY, 4-Hour Chart Analysis

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While stock markets mostly ignoring the increased risks, gold surged to $1360 today in early trading, while the USD/JPY pair fell below 108 for a new low. The major US indices are mixed today (with the NASDAQ underperforming) before the weekend break, and although the majority of stocks are after a slightly negative week, the relative strength of equities is apparent. This is especially true in Europe, where even the post-Draghi strength of the Euro (back above the 1.20 level in the USD pair) failed to push prices lower. Irma is expected to make landfall in Florida during the weekend, and although preparations are going well, the storm could have devastating effects, as meteorologists expect the worst hit to Florida since Andrew in 1992.

Gold, 4-Hour Chart Analysis

Cryptocurrencies

This week will go down in history as the week of the China-Flash-Crashes in the crypto segment, as today yet another new plan to curb speculation in the sector surfaced in the Asian country. The major coins all tumbled significantly after the news release, and although a large part of those losses is now reversed, it’s still hard to judge the damage that this new legislative wave will cause. What looks certain, is that volatility will be the name of the game for crypto traders, especially given the current long-term outlook of the segment. Before the flash-crash, Monero and Dash were showing strength, and should the market push back to the morning levels we expect the early trends to resume. All eyes are on NEO again, as the volatile token is probably the best gauge of the markets opinion on the Chinese developments.

ETH/USD, 4-Hour Chart Analysis

Technical Picture

The German DAX got very close to our primary target of 12,375 yesterday, and the index continues to act encouragingly for bulls in the face of the strong Euro. The benchmark is likely to hit 12,500 during the current move after breaking out from the dominant prior downtrend The MACD indicator still leaves room for short-term gains, with strong support between 12,150 and 12,250.

DAX, 4-Hour Chart Analysis

Key Economic Releases on Friday

Time, CET Country Release Actual Expected Previous
3:30 JAPAN Final GDP 0.6% 0.7% 1.0%
3:30 CHINA Trade Balance 287 bill 337 bill 321 bill
9:30 UK Manufacturing Production 0.5% 0.3% 0.0%
13:45 CANADA Employment Change 22,200 15,000 10,900
14:30 CANADA Unemployment Rate 6.2% 6.3% 6.3%

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Analysis

Bitcoin’s Record-Breaking Rally Continues as Prices Cross $8,100

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Bitcoin surged to new highs on Sunday, as the world’s largest crypto by market cap continued to generate bids following the cancellation of Segwit2x.

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BTC/USD Price Levels

The value of a single bitcoin reached a daily high of $8,110.59, its best level on record. At press time, BTC/USD was valued at around $8,002 for a gain of 4%.

With the gain, bitcoin’s market cap now exceeds $133 billion. That’s roughly $100 billion greater than Ethereum, the market’s second most valuable cryptocurrency.

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Bitcoin has added more than $1,100 over the past five sessions. It was down around $5,600 just one week ago.

Bitcoin Cash (BCH), a digital currency alternative that broke away from the original blockchain Aug. 1, was down 5.1% at $1,185. BTC and BCH locked horns earlier this month after the Segwit2x hard fork was abandoned.

$10,000 and Beyond?

Institutional clearing platform LedgerX has initiated its first long-term bitcoin futures option, which is set to expire Dec. 28, 2018. In setting up the option, LedgerX is assuming a price of $10,000 at the time of expiration. That’s a 25% premium on current levels.

Investors who buy the option are essentially saying they believe prices will exceed $10,000 by the time of expiration.

Bitcoin is being helped by growing institutional demand for the digital currency, as hedge funds, day traders and other mainstream investment outfits look to access this burgeoning asset class. CBOE and CME Group have each announced plans to integrate bitcoin into more conventional investment vehicles in the coming months.

The rush of institutional money into bitcoin is a sure sign that the digital asset class is becoming too big to ignore. The value of all cryptocurrencies in circulation has already exceeded $230 billion, with more than a dozen coins valued at $1 billion or more. Nine others have a market cap of $500 million or greater.

Coinbase Responds

The rise of institutional capital has also compelled Coinbase to introduce a custodial service targeted at account holders with more than $10 million in assets. This service targets hedge funds and other institutions that have remained largely on the sidelines of the crypto revolution.

In a recent blog post, Coinbase CEO Brian Armstrong announced that the new service will launch sometime next year.

“When we speak with these institutions, they tell us that the number one thing preventing them from getting started is the existence of a digital asset custodian that they can trust to store client funds securely,” Armstrong wrote.

In addition to maintaining the minimum $10 million asset requirement, institutions must pay a $100,000 setup fee to gain access tot he Custodial program. In response, institutional investors will receive assurance that their assets are secure.

The Coinbase Custody website lists broad support for bitcoin, Ethereum (ETH) and Litecoin (LTC), as well as ERC20 tokens. The ERC20 protocol has emerged as the favorite for startups launching initial coin offerings (ICOs), a controversial crowdfunding model that has already overtaken early stage venture capital.

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.

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Cryptocurrencies

Is Ethereum Ready to Play Catch Up With Bitcoin?

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In mid-June of this year, the difference between the market capitalization of bitcoin and Ethereum had narrowed down to less than $8 billion. This had many market participants excited. They expected Ethereum to dethrone bitcoin as the leader, a move popularly termed as flippening.

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Key observations

  1. Ethereum has hugely underperformed bitcoin
  2. The chart pattern suggests that Ethereum is likely to play catch up in the next few months
  3. Stay on the long side of Ethereum to benefit from the bullish setup

However, fast forward five months and the difference in the market capitalization of the top two cryptocurrencies has increased to about $96 billion. This shows that while bitcoin has raced ahead in the past few months, Ethereum has hugely lagged behind.

However, is the underperformance about to end?

The chart pattern shows that Ethereum is likely to embark on a rally of its own that can carry it to $645 to $670 levels in the next few months. Let’s see how we arrived at these levels.

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Ethereum opened trading at $8.16 on January 1, 2017. It started its rally in March and by June 12, it reached a high of $420, an astronomical rally of about 5047%. Thereafter, it entered a period of consolidation, digesting the gains.

On the charts, Ethereum has formed a large symmetrical triangle, which usually acts as a continuation pattern. The breakout is generally in the direction of the long-term trend, or the trend that was prevailing before the pattern formed. In this case, the sharp move from January to June confirms that the cryptocurrency was in an uptrend before forming the triangle.

However, this is not a fool proof trade because sometimes the symmetrical triangle acts as a reversal pattern. Therefore, the best way to play this trade is to wait for a breakout of the triangle before initiating any trade.

Where can we take an entry?

Currently, the resistance line of the triangle is at about $378 levels, a level close to today’s intraday highs. The bears are likely to strongly defend this level. However, if the bulls breakout of $378 and manage to close above the resistance line, the trade on the long side will set up.

Different traders use different methods to confirm whether the breakout is valid or not. Some wait until price moves 3% above the breakout level, others wait for three consecutive closes above the resistance level.

However, we have observed that the best breakouts never look back, hence, waiting for three days may lead to a missed opportunity. Therefore, we can wait for a closing above the resistance line of the triangle and initiate the long positions on the following day.

The breakout can face resistance at $400 and $420. However, we expect the virtual currency to scale both these resistances and rally towards its pattern target zone of $645 to $670.

Notwithstanding, even the most reliable patterns can fail. Therefore, our stop loss will be kept at $340. We don’t want to hang on to the trade if it falls back into the triangle. We shall raise our stops to breakeven as soon as Ethereum breaks out to new lifetime highs. From thereon, we shall trail the stops higher to protect our paper profits.

Note

The chart pattern suggests a resumption of the long-term uptrend in Ethereum. However, this will not get confirmed until the cryptocurrency breaks out and sustains above $380. Therefore, please initiate positions only on a breakout and close above the triangle. Entering presumptive trades may result in losses.

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Analysis

Long-Term Cryptocurrency Analysis: Bitcoin Flirts with $8000 as Altcoin Bull Persists

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Bitcoin’s swift recovery was the main topic of the week, as the most valuable coin not just regained its steep losses, but hit a marginal new high towards the end of the period. The entire segment is experiencing capital inflows as the total value of the coins climbed above $230 billion for the first time ever after finally leaving the vicinity of the $200 billion mark.

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BTC breached the $8000 level before turning slightly lower on Friday, but despite the severely overbought daily chart, it is still trading near its all-time highs. As the long-term picture still suggests a deeper correction, investors should wait with opening new positions and traders should also control position sizes here. Key support levels are found at $7700, $7000, and $6700, while the recent key break-out level at $5000 still hasn’t been re-tested.

BTC/USD, Daily Chart Analysis

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Dash is still the most bullish altcoin from a technical standpoint, despite this week’s short-term correction, as the coin is trading above its prior all-time high, and this weekend, it looks ready to test the break-out high near $500. Support levels are still found at $400, $360, and $330, and as the long-term picture is approaching overbought territory, investors should only hold on to their positions here.

DASH/USD, Daily Chart Analysis

The other major altcoins are also mostly in bullish setups, with some of them already in the latter stages of this cycle, like Monero and IOTA, but elsewhere in the segment, there are still opportunities for both traders and investors. Let’s see the detailed long-term view.

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