Euro Hits 2-Year High as Market Calls Draghi’s Bluff

Friday Market Recap

Asset Current Value Daily Change
S&P 500 2470 -0.01%
DAX 12334 -0.89%
WTI Crude Oil 46.49 -0.92%
GOLD 1249.00 0.24%
Bitcoin 2751 11.81%
EUR/USD 1.1638 0.05%

The most important trend in financial markets continued yesterday and today in early trading as the Euro hit yet another new high compared to the US Dollar, rising to levels not seen since 2015. The common currency dipped briefly after the ECB’s monetary meeting, but later surged back and extended its rally above 1.16, delivering another blow to European equities. The DAX and the Euro Stoxx 50 both declined substantially from their short-term highs from Thursday. US markets are on the other side of the trade, as all major indices remained strong and hit more new all-time highs.

The DAX pushed lower by the Euro rally, 4-Hour Chart Analysis

Currency markets are dominated by the weakness of the USD, as the Yen and the Great British Pound also gained ground on the Greenback, with the broader Dollar index also falling to a 12-month low. Commodities are also active, with oil retreating after a multi day rally, while Gold benefiting from the weakness of the Dollar and getting close to $1250. Industrial commodities are also higher, helped by the gains in China, and the decline in US yields. We expect a calm US session after the busy week, as trading volumes are already declining and volatility is back near all-time lows in stocks.

The Dollar Index still in a crucial downtrend, 4-Hour Chart Analysis

Cryptocurrencies

The crypto market possibly hit short-term top after the news that miners locked in the BIP 91 protocol upgrade and Bitcoin jumped above $2750 this morning. The other relatively strong major, Dash, also surged higher and spiked above $200 after two weeks before dipping back below the key level. Ethereum failed to join the party, as it still consolidates its epic rebound off the $135 level that it hit on Sunday. NEM, Monero, and Litecoin were also among the stronger currencies, while ETC and Ripple remained weaker. Small cap coins outperformed ETH since yesterday, led by the likes of Stratis, Bitshares, and Antshares. The weekend might bring a less volatile consolidation after the huge moves, despite the hurdles that are still present before August 1, the big day for BTC.

Bitcoin, 4-Hour Chart Analysis

Technical Picture

The NASDAQ breached its all-time high after last week’s break-out from the “flash-crash” correction pattern, and it’s now consolidating near the new high. The short-term picture is overbought suggesting more corrective action in the coming days, but the long-term trend is clearly bullish, and as long as the Dollar remains under pressure, US equities should continue to experience strong tailwind. Primary support is found at 5800, while the 6000 level is ahead as a possible resistance.

NASDAQ 100 Futures, 4-Hour Chart Analysis

Key Economic Releases on Friday

Time, CET Country Release Actual Expected Previous
10:30 UK Public Sector Borrowing 6.3 bill 4.3 bill 6.4 bill
14:30 CANADA CPI Index -0.1% -0.1% 0.1%
14:30 CANADA Core Retail Sales -0.1% 0.0% 1.5%

Key Economic Releases on Monday

Time, CET Country Release Expected Previous
2:30 JAPAN Manufacturig PMI 52.4
9:30 GERMANY Manufacturig PMI 59.6
9:30 GERMANY Services PMI 54.0
10:00 EUROZONE Manufacturig PMI 57.4
10:00 EUROZONE Services PMI 55.4
14:30 CANADA Wholesale Sales 1.0%
16:00 US Existing Home Sales 5.62 mill

Featured image from Shutterstock

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.