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Pre-Market: Powell Gives Hawkish Speech as Durable Goods Miss

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The new Fed Chair’s testimony was in the center of attention today pre-market, as the recent volatility and the rapid rise in rates drove attention to the central bank’s future policies even more than before. Mr. Powell ignored the volatility-driven turmoil of the past few weeks, and confirmed the gradual, data-driven rate hike schedule of the Fed.

Stocks barely budged after the much-awaited testimony and the much worse than expected durable goods orders report also failed to move the market substantially, although Treasuries edged slightly higher as the rise in yields paused. Equities continue to grind higher, burning shorts in the process, and the strength of the Dollar didn’t hurt the rally too much thus far.

Nasdaq, 4-Hour Chart Analysis

The Nasdaq is still spearheading the advance but the recovery in Apple also helped the Dow in gaining some relative strength. US stocks are still not joined by other risk assets in the bounce, with European and Asian markets remaining under pressure, and Chinese stocks notably performing weakly. The DAX index continues to struggle with the 12,500 level, despite the dip in the Euro, and that still confirms the strong divergences among the key global assets.

DAX 30 Index, 4-Hour Chart Analysis

Dollar Pushing Higher

EUR/USD, 4-Hour Chart Analysis

The USD is rallying against all of its major peers today, with the EUR/USD pair violating the 1.2250 support recently, the USD/JPY pair rising above 107 while the risk-on complex also losing ground. The two faced market is very clear on the short-term technical charts, as except US stocks, all risk assets are struggling to gain traction ever since the initial post-crash bounce.

Gold, 4-Hour Chart Analysis

Gold is also under pressure thanks to the rally in the Greenback, while oil is drifting slightly lower too, while holding on of its recent gains, as the Middle East tensions continue to support the price of the Black Gold. The main commodity-related currencies are still struggling, with both the Aussie and the Canadian Dollar trading only slightly above the lows set amid the stock market turmoil.

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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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4.6 stars on average, based on 277 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

Technical Update: Gold Continues Sliding, Falls Below Key Support

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On May 17, we discussed gold breaking below the lower boundary of its 4-month, 70-dollar trading range (trading range – $1,300 to $1,370 in Figure 1 and horizontal trendlines in Figure 2 – GLD shown).

Figure 1. Gold Daily Chart

Technical Developments

  • After the initial break below the horizontal trading range, gold found support at the trendline connecting the December 2016 & December 2017 lows (support – green trendline; retest – last green arrow).
  • Over the next couple of weeks, the commodity staged several attempts to move back within the horizontal range however it halted at two major resistances:
    1. Its 200 SMA (white line in Figure 2 and blue line in Figure 1).
    2. The support-turned-resistance horizontal trendlines (lower bright blue and purple trendlines in Figure 2).
  • On Friday (June 15), gold moved below the trendline that had served as support in May and June (green trendline).
  • This week, the commodity has continued to slide, so far, giving no indications that it will quickly recover and move above its broken support.

Figure 2. GLD Daily Chart

Implications

  • Gold’s sharp decline on June 15 confirmed the importance of the green trendline. The break below it is deemed significant, at least in the short-term.
  • Given the break below the 1.5-year support (green trendline) and the lack of major support levels in the $1,240 – $1,280 range, the target obtained from the trading range breakdown is likely to be met (target – $1,230 obtained by projecting the $70-dollar height of the pattern from the point of the breakdown).

Outlook

  • Short-term bearish as long as the commodity remains below the lower of the green trendline and its 200 SMA (currently at $1,308).
  • Neutral with a bullish bias if gold quickly moved back above the green trendline and subsequently above its 200 SMA.
  • Short- and long-term bullish above $1,380, as a break above 2016’s high will activate the previously discussed longer-term upward targets.

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 14 rated postsPublished author of technical research. In his work on price “gaps”, published in the 2018 International Federation of Technical Analysts’ Annual Journal, he developed a new technical tool for analyzing and trading the “gap” phenomenon – the “K-Divergence” (http://ifta.org/public/files/journal/d_ifta_journal_18). Besides obtaining a Master in Financial Technical Analysis, he has completed a BBA and an MBA from the Schulich School of Business in Toronto and has completed all exams for the CFA, CMT and CFTe designations. Currently, providing research to investment management and financial advisory firms. http://www.linkedin.com/in/konstantindimov




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Bitcoin Volatility Hits One-Year Low, According to Blue Line Futures Executive

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Although most traders are lamenting bitcoin’s 65% correction this year, the decline in prices has been accompanied by an equally large drop in volatility, according to Bill Baruch, President of Blue Line Futures. For long-term investors, this is a very good thing.

Bottoming Process Begins

Bitcoin’s precipitous drop from its December peak has drained the market of exuberance, allowing the bottoming process to finally begin, Baruch told CNBC in an interview on Monday.

Baruch explained that bitcoin’s volatility has declined to the lowest level in over a year, which means the bottoming process has begun. In his view, a price-bottom is not a specific point but a process that could take several weeks or months to materialize.

As Hacked reported last month, bitcoin’s corrections have grown less intense over time. Each decline has exhibited a higher bottom and was caused by lower trading volume, which means that the selloff was concentrated in fewer hands.

The latest correction may have partially deviated from that general trend, but only in terms of price and not volume. Bitcoin prices last week reached their lowest since early February. The observation noted above would have led us to believe that bitcoin’s recent reversal would stop short of the April bottom around $6,500 (based on Barchart data).

Nevertheless, Baruch maintains that the multiple selloffs have “wiped out most, if not all, of the over-enthusiasm” in the market. That same over-enthusiasm produced a general fear of missing out (FOMO) that led to the speculative run-up in prices we saw in December.

Looking long-term, Baruch maintains there is significant upside for the digital currency, singling out $10,000 per coin as the price to watch.

Bitcoin Showcases Greater Stability

Bitcoin has in recent months demonstrated extended periods of muted moves, which is a significant departure from normally trading activity defined by wild price swings. In early May, bitcoin was seen trading in its narrowest band in about six months. For about a week, BTC/USD hovered within a $500 range, showcasing a rare feat of stability for the largest cryptocurrency by market cap. At the time, bitcoin was trading between $8,600 and $9,200.

The cryptocurrency has declined sharply since, reflecting a broad market reversal that virtually wiped out April’s recovery. Crypto assets as a whole added $145 billion in April but have since lost $120 billion.

Price action over the past week also showcases how the cryptocurrency has seen its volatility drop compared with the historic norm. Data from CoinMarketCap shows a trading range of $500 for bitcoin compared with last Tuesday. For much of that period, prices hovered between $6,400 and $6,700.

That being said, bitcoin and the broader crypto universe continue to retain a level of volatility rarely seen in the financial market of 2018. Several factors continue to underpin these volatile moves, including low (and declining) liquidity, bad press and competing views about bitcoin’s underlying value.

Researchers at the University of Texas recently tried to show that the bulk of bitcoin’s volatility, and gains over the past year, can be attributed to price manipulation involving the dollar-backed Tether (USDT) and Bitfinex exchange. However, as Hacked’s James Waggoner showed Monday, Bitfinex would have needed to spend $1 million to push up bitcoin’s price level by four reference points claimed in the University of Texas report.

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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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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4.6 stars on average, based on 458 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

Pre-Market: Stocks Extend Losses on Next Round of US Tariffs

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The main European and Asian indices and US stock futures are all significantly lower just before the Wall Street session, as Donald Trump announced that the administration will seek to extend the trade tariffs targeted at China. The extension would affect another $200 billion of products, and it would be a major escalation of the, so far relatively limited trade skirmish.

Shanghai Composite, 4-Hour Chart Analysis

Asian markets are underperforming as Chinese equities have been smashed below key support in the wake of the announcement, but the previously outperforming US indices are also close to breaking their short-term uptrends. That said, the Nasdaq continues to be relatively strong, and the Russell 2000 is the best performing global benchmarks, as small-cap stocks are benefiting from the trade tariffs.

S&P 500, 4-Hour Chart Analysis

The housing market has been in focus with regards to economic releases, and while housing starts beat the consensus estimate, the more forward looking building permits unexpectedly declined in May. As the Fed is expected to continue with rate hikes, at least until the end of the year, further cooiling of the housing market is likely as mortgage rates are steadily rising.

Dollar and Yen Shine

Dollar Index (DXY), 4-Hour Chart Analysis

Forex markets are reflecting the risk off shift as well, with the US Dollar and especially the Japanese Yen performing well, and the Euro, the Aussie, and the Canadian Dollar lagging behind. Emerging Market currencies are still under heavy selling pressure, as trade war fears sparked flight to safety flows.

USD/TRY (Turkish Lira), 4-Hour Chart Analysis

While European markets are only hitting one-month lows, the Turkish Lira and the Brazilian Real are trading near all-time and multi-year lows respectively, as the Dollar’s strength continues to hut the fragile currencies.

Treasury yields are lower, but as safe haven flows are still concentrated on the longer end of the curve, short-term yield pressures haven’t eased much while the flattening of the yield curve continues in earnest.

Gold Futures, 4-Hour Chart Analysis

Commodities are in the red across the board, as the risk-off trade spread to the segment, with gold outperforming somewhat. The precious metal is still well below the $1300 level after last Friday’s steep drop, and it briefly spiked below the $1275 level as well. We still expect gold to resume it’s uptrend so the current levels could be good for accumulating investment positions in the metal. Crude oil is also lower, as volatile trading continued as expected, with the WTI contract trading near the $65 per barrel level before the OPEC meeting.

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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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4.6 stars on average, based on 277 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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