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Forex Update: Dismal Chinese Data Causes Turmoil in Markets

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Forex Market Snapshot

Asset Current Value Daily Change
EUR/USD 1.1302 -0.47%
GBP/USD 1.2571 -0.68%
USD/JPY 113.35 -0.21%
AUD/USD 0.7179 -0.66%
GOLD 1,243 -0.20%
WTI Crude Oil 51.16 -3.18%
BTC/USD 3,180 -2.54%

We continue to have an unusually active December in traditional financial markets, as the recent bearish shift, the continued Brexit woes and the slowing global economy add up to a very nervous trading environment. Volatility is especially high in stock markets compared to seasonal averages but currencies are also having very active days, with the Dollar clearly being in focus.

Today we had negative headlines in China with both industrial production and retail sales missing the consensus estimates by a mile, and the history of manufactured economic releases from the country makes that even scarier.

It’s no surprise that the Chinese stock market is leading the way lower globally, while the Chinese Yuan is also among the weakest currencies globally, even amid the improving trade-related sentiment. Risk-on currencies got it hard today, and the Dollar is defying its bearish seasonality, trading very close to its recent lows, confirming the broad risk-off shift.

Technical Analysis

GBP/USD, 4-Hour Chart Analysis

The Great British Pound continues to trade with pronounced relative weakness, and as Prime Minister Theresa May was sent home empty-handed from Brussels, with the leaders of the EU refusing to renegotiate the draft Brexit plan, the currency’s position just got even shakier.

From a technical standpoint, the Cable confirmed the key breakdown with a failed pullback in the past couple of days, and with no major support found above the generational lows near 1.20, long-term odds now favor a test of that zone, and bulls shouldn’t enter positions below the key 1.27 level.

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair dipped below the 1.13 level after yesterday’s the dovish growth and inflation forecast by the European Central Bank and today’s strong US Retail Sales report. The US economy continues to perform relatively well compared to its global peers, and although we think that the slowdown will eventually reach the US, the fiscal stimulus and the labor momentum could keep the engines going for a while.

That only adds to the buying pressure which is pushing the USD higher, and the troubles in the European financial system are also mounting, which could lead to another leg lower in the common currency next year. The main technical levels to watch are still the 1.12 support and the 1.1440 resistance, and with the broader downtrend clearly being intact in the most traded currency pair.

AUD/USD, 4-Hour Chart Analysis

The AUD/USD pair fell below the bearish wedge pattern on the negative Chinese news as we expected, and it’s now testing the 0.7165 support zone. A move towards the 0.70 level is likely in the coming weeks, should the pair violate the support zone, and the short-term trend change is close to being confirmed, while the broader downtrend is clearly intact, with strong resistance ahead near 0.7250 and 0.74.

WTI Crude Oil, 4-Hour Chart Analysis

Another rally attempt faded away today in crude oil, and the crucial commodity continues to trade in a bearish consolidation range following the series of dead-cat-bounces. The top of the range is found near the $54.25 per barrel price level, while strong support is found in the $49.50-$50 per barrel range.

Given the deeply oversold long-term momentum readings, bulls can open speculative long positions near the bottom of the range, despite the clearly intact long-term downtrend, while bears should wait for a larger scale bounce to reenter the market.

Key Economic Events on Monday

ChartBook

Forex

USD/JPY, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

EUR/JPY, 4-Hour Chart Analysis

AUD/JPY, 4-Hour Chart Analysis

GBP/JPY, 4-Hour Chart Analysis

USD/CHF, 4-Hour Chart Analysis

USD/CNH, 4-Hour Chart Analysis

Commodities

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

Featured image from 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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4.7 stars on average, based on 443 rated postsTrader 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.




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Altcoins

XRP Price Analysis: XRP/USD Behavior is Demonstrating Strong Downside Vulnerabilities

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  • Ripple’s XRP was trading up with modest gains in the latter part of Wednesday, just some 0.60%.
  • XRP/USD continues to move within a narrowing range-block formation. The price is subject to a breakout, with risks pointing to the downside.

Recent Price Behavior

Ripple’s XRP is seen holding very modest gains of 0.6% in the latter part of Thursday’s session. Price action remains limited, given the narrow trading range, in which it is moving in. There is a lack of commitment from both sellers and buyers, and as a result a range-block formation can be eyed. XRP/USD has been within the confinements of this for the past seven sessions now. Currently, there aren’t any technical suggestions of the bulls recovering and picking up the mid-December momentum again.

Given the above-detailed price behaviour, risks point to the downside. One of the key reasons for this is XRP/USD moved into consolidation mode after a recent hard fall on 10th January. Prior to the drop, the price was trading sideways, which was seen from 19th December, apart from the freak spike to $0.46 on 24th December. A technical breakout was then observed, as mentioned on 10th January, where XRP/USD dropped a huge 20%. Keeping in mind the described recent journey for the price, similar movements are currently playing out.

Range-block

XRP/USD 4-hour chart.

A breakout is imminent, given that price action is getting tighter. It is worth noting the key levels around this range-block. In terms of the lower support, this should be noted at the $0.3200 mark, the recent low area of 13-14th January. The upper part of this technical formation is eyed at $0.3450, the high from 11th and 14th January.

If the bears manage to force a breach of the above-described, then XRP/USD will quickly be forced to give up the psychological $0.3000 mark. A large area of demand is seen tracking from $0.3000-$0.2500. This has proven to find strong buyers on several occasions – December 2017, August and September 2018.

Furthermore, to see XRP/USD fly the way it has in the past will require a serious amount of upside momentum. Given all of this sideways trading and consolidating, the price is building new areas for itself to have to break down. In terms of upside resistance, this should be noted running from $0.3500 up to $0.4000. Lastly, the price as mentioned earlier, was ranging here between 19th December to 10th January.

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 110 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Analysis

Price Prediction: Bull Trap Pattern Complete in EUR/USD, New Lows Likely Ahead

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Still Diverging Economies, Converging Monetary Policies

While the long-term trend is still negative in the EUR/USD, the most traded forex pair had a very active start to the year, and it seemed that after a long period of weakness, will finally experience a meaningful counter-trend rally against the Greenback. The European common currency moved above key resistance in the wake of the dovish shift by the Federal Reserve, despite the disastrous industrial production reports and the dismal PMIs from the Eurozone.

The weakening US economic numbers also helped the rally attempt, but despite the move above 1.15, the currency failed to extend the move and it plunged back below resistance, to the previously dominant trading range, completing a bull-trap pattern which will likely lead to the continuation of the long-term trend, with all eyes on the previous low near 1.1215.

Long-Term Chart Analysis

EUR/USD, Daily Chart Analysis

Looking at the daily chart, the trend is clearly bearish in the pair, and even though the steeper of the two main declining trendlines have been briefly violated during the recent rally, which made a stronger counter-trend rally a possibility, the broader trendline is in no danger. The oversold MACD readings that developed in the pair have been cleared back in December, and now the indicator is bearish for the first time since early November.

There is considerable support in the 1.1275-1.13 zone, but given the lack of follow-through after the break-out attempt, and the competed bull trap pattern, odds clearly favor a new swing lower in the ongoing long-term downtrend. Targets for the move are found near 1.1135 and in the 1.0850-1.0950 zone.

Short-Term Chart Analysis

EUR/USD, 4-Hour Chart Analysis

The pair is slightly oversold from a short-term perspective, and a move back to 1.1440 is in the cards here. That said, given the proximity of the 1.15 level and the risk/reward ratio of a long-term trade, traders could enter right away, ignoring the short-term setup. A dip below the lower boundary of the broader consolidation pattern would further confirm the continuation of the long-term trend, but should the global risk rally continue, a period of range trading could still be ahead before a test of the lows near 1.1215.

Key Events Ahead for the Pair

Tomorrow we will have the US Industrial Production and Prelim Michigan Consumer Sentiment coming out. Next week, Tuesday will likely see all the US indicators which have been delayed because of the government shutdown, such as Retail Sales, Housing Starts, Existing and New Home Sales, and the Trade Balance. The Eurozone Manufacturing and Services PMIs will be out on Thursday, while all eyes will be on the ECB’s rate decision and the following press conference, and on Friday the Durable Goods report could cause a sizable move in the pair.

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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4.7 stars on average, based on 443 rated postsTrader 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.




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Analysis

Longest Bear Market in Crypto History?

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In just 30 days, cryptocurrencies will have entered their longest bear market in history, according to Ran NeuNer, host of CNBC’s Cryptotrader show. The frenzied selloff since early 2018 has delivered a beat down to retail traders, hedge funds and long-term crypto holders. However, for one small corner of the market, business is thriving.

Bear Market Drags On

As of Thursday, the cryptocurrency bear market of 2018-19 has reached 391 days. By this time next month, the bear market would have stretched beyond the 420 days seen in 2014-15. Officially, it will be the longest bear market in crypto’s short history. (To refresh your memory, a bear market is defined as a drop of 20% or more from a recent high).

Of course, frantic selloffs are nothing new for cryptocurrencies. Since 2011, bitcoin has experienced at least five epic meltdowns, with losses ranging from 37% to 84%. Each time, the market has come back stronger than ever, culminating in the 2017 bull run that drove bitcoin toward $20,000.

At the height of the bull market in early 2018, cryptocurrencies were valued at a whopping $840 billion. Less than 12 months later, the market bottomed at just over $100 billion. The bearish trend is expected to resume until at least mid-2019, according to a combination of technical analysis, market sentiment and history of monthly momentum. There are, of course, other reasons to expect the bears to maintain control. These include regulatory uncertainty, hesitation on the part of institutional investors to participate and the fallout from the long-winded ICO boom.

Read why 2019 is bitcoin’s year of accumulation.

Interestingly enough, bitcoin has managed to set higher lows in six of the last seven years. In other words, bitcoin’s price bottom is incrementally higher almost every year stretching back to 2012.

Creditors Capitalize

As the bear market stretches on, crypto traders and startups are turning to creditors to fund their shortfall. As Bloomberg recently reported, crypto creditors are finding strong demand from traders who don’t want to sell their coins at depressed prices as well as from big investors looking to short virtual currencies.

Much like hedge funds, most crypto lenders began their operations in 2017 during the market boom. Hedge funds have struggled since the market downturn took effect while lenders have seen their business thrive.

As Olga Kharif notes, the crypto bust is putting lenders on both sides of the equation: “Helping believers pay their bills while awaiting a rebound, and also enabling bets by people who think the drop has further to go.”

As crypto ventures continue cutting staff, companies like BlockFi have grown their revenues and customers tenfold in just six months. Aave, which owns ETHLend, recently opened an office in London and will soon expand in the United States. A company by the name of Salt Lending already employs 80 people. (Keep your eye on Salt, as the U.S. Securities and Exchange Commission (SEC) is probing the company’s initial coin offering.)

The Future

Predicting crypto bottom is notoriously difficult, and many analysts have been burned trying to come up with logical answers to a market that is still in its infancy. In the next 12 months, the evolution of the crypto industry will be dictated by several factors, including the SEC’s regulatory oversight of the market, its ruling on a hotly debated bitcoin ETF and appetite for physical bitcoin futures among institutional investors.

Related: As Race for Bitcoin ETF Heats Up, SEC Identifies Cryptocurrency as a Top Priority in 2019

The ICO model that dominated 2017-18 is also undergoing a massive shift toward security tokenization and even initial exchange offerings. While it’s still too early to gauge the impact of these new funding models, it’s clear that the ICO market is on its last leg. Case in point: token projects raised $1.5 billion in January 2018. By December, that figure had fallen to just $59 million.

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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4.7 stars on average, based on 740 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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