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Analysis

Pre-Market: Turkish Lira Cracks, Sparking Global Selloff

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Stocks and other risk assets are under pressure today before the US open, with the focus being on emerging market currencies, especially the Turkish Lira. We have been following the slide of the Lira in recent weeks and months and in the last couple of days, the process accelerated, with the technical break-out above the $5 level in the USD/TRY triggering a full-blown currency crisis.

USD/TRY, Daily Chart Analysis

Currently, an emergency rate hike seems inevitable, with the currency being down by more 35% year-to-date, and 20% just this month. While a rate hike won’t solve the underlying problems, and capital controls are likely to be introduced at this point, calming the market would be essential. The US Dollar is on the rise not just against emerging market currencies, as the Dollar index just broke out to a new 13-month high and the EUR/USD violated its June low, trading with a 1.14 handle for the first time in a year.

DXY (Dollar Index), 4-Hour Chart Analysis

The rising yield/strong Dollar/global divergences environment continues to dominate the major financial markets as expected, and despite the summer-like volumes, especially currency markets are on the move. Equities have been little changed since last week, with the stark difference between the US and the other parts of the world still being apparent. While the main US indices have been flirting with their all-time highs, most of Europe is stuck in declining trends, China is in a bear market, while the other main Asian markets are also lagging behind.

DAX, Daily Chart Analysis

Today, the key benchmarks are falling in a concerted fashion, but while in the US, technicals are suggesting a simple correction, elsewhere, the patterns resemble larger scale tops. While we don’t know how these divergences will finally be resolved, we remain defensive towards risk assets.

Commodities Stable Despite Dollar Strength

Copper, 4-Hour Chart Analysis

Chinese markets have been relatively quiet amid the broader emerging market rout, and copper, which has been closely correlated with the country’s assets, is also holding up above the strong long-term support zone that we have been monitoring near the $2.70 level. The other major commodities are stable, especially given the Dollar’s break-out, with crude oil trading slightly higher, while gold sporting a small loss amid the risk-off shift.

NZD/USD, Daily Chart Analysis

The main China- and commodity-linked currencies, on the other hand, are among the weakest global assets, with the Australian Dollar trading at the lowest level since early 2017, and the New Zealand Dollar hitting a more than two-year low yesterday.

All in all, as the markets are approaching the worst part of the year from a seasonality perspective, the signs of a deeper risk-off shift are already present, with the Fed’s tightening cycle likely being the main catalyst behind the restructuring.

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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4.6 stars on average, based on 314 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

Crypto Update: Ethereum Plunges Below $300 as Bitcoin Fails at $6500

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Despite a weak bounce during the weekend, the cryptocurrency segment continues to trade under heavy selling pressure, with the top altcoins till underperforming Bitcoin. Ethereum is the most obvious laggard, and it fell below the $300 level today, hitting yet another 9-month low and extending the structural bear market with another swing low.

Almost all of the majors are below or near their recent lows, but Bitcoin continues to show relative strength, and a few of the recently weak coins, notably Monero and Litecoin, are trading slightly above their swing lows. The other most important bearish currency, Ripple is also trading at new lows, and with that in mind, we remain defensive on the coins, as despite the deeply oversold momentum readings, there is still no sign of a developing leadership in the segment.

ETH/USD, 4-Hour Chart Analysis

All eyes are still on Ethereum, as the second largest coin is pushed lower relentlessly ever since its break-down below the $400 level last week. The coin continued to lead the way lower so far today, and with the break below the $300 level, the market cap of Ethereum is now just $30 billion, while the total value of the market is close to $200 billion again. The coin is now just above the $275-$280 support zone and it remains on sell signals on both time-frames, with resistance ahead at $335 and $360.

BTC/USD, 4-Hour Chart Analysis

With still no signs of even a short-term bottom in altcoins, Bitcoin is still the only hope for crypto bulls, as the coin continues to clearly hold above the crucial $5850 level. BTC is also trading above the weekend lows, even though it failed at the $6500 level during the bounce and it is now back below the $6275 support.

While the short-term downtrend is still intact and the sell signal is in place, today’s strength could be a start of a trend change, should the coin maintain its resilience. Further resistance is still ahead at $6750 and $7000, while initial support is at $6000, with the next major support zone below $5850 found between $5000 and $5100.

Sellers Still in Control but First Signs of Exhaustion Appear

LTC/USD, 4-Hour Chart Analysis

Although the bearish trend in altcoins is still very strong, and most of the relatively weak majors are also confirming today’s break-down, Litecoin is slightly outperforming the likes of Dash, NEO, and IOTA. While the current relative stability is still no reason to buy the coin, and the short-term sell signal remains intact, further signs of strength would be positive for the whole segment.

XRP/USDT, 4-Hour Chart Analysis

Ripple’s technical situation is still dire, as the coin failed to hold up above $0.30, with no signs of a bottom despite the strong support in the $0.30-$0.32 zone, and the deeply oversold momentum readings. Also today, XRP plunged below its previous low, and it’s now trading just above $0.28. The next major support zone is found near $0.26, and for the sell signals on both time-frames are intact.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

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 314 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

Crypto Update: Tron/Ethereum Ready for Bottom Pickers

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TRON/Ethereum (TRX/ETH) caught fire and the attention of crypto enthusiasts earlier this year. The pair opened 2018 with a bang as it took out resistance of 0.000065 and ignited a parabolic run that saw TRX/ETH move as high as 0.00032 on January 5. In less than a week, the market grew by almost 400%!

As expected, the surge was met with profit-taking. Since then, TRX/ETH has been consolidating. However, it appears that the eight-month consolidation is coming to an end. In this article, we reveal why TRX/ETH looks ready for both, bottom picking and breakout trading.  

Tron/ Ethereum Ripe for Bottom Picking

In technical analysis, resistance turn into support levels when breached. In the case of TRX/ETH, the pair has taken out 0.000065 twice this year. The first one was on January 1 and the second was on March 20. Based on this alone, we can expect demand to increase when the pair touches this level.

Daily chart of TRX/ETH

On top of that, we can also see the pair’s long-term support converging at 0.000065. This confirms the idea that 0.000065 is an area where demand exceeds supply.

If the converging trend lines are not enough to convince you that a bounce is at play, take a quick look at the technical indicators. We can see bullish divergences on the RSI and Stochastics. This tells us that TRX/ETH is gaining bullish momentum even though the price is still falling.

Ready for Breakout Trading

From a long-term perspective, TRX/ETH is trading inside a large symmetrical triangle. This pattern is visible in both the daily and weekly charts.

Symmetrical triangle pattern

With a strong case for a rally once the market touches 0.000065 we can expect TRX/ETH to break out of the symmetrical triangle formation. That should signal the end of the consolidation period and kickstart a strong bull run.  

Projected Move

If TRX/ETH breaks out of the symmetrical triangle pattern, then we can expect the pair to skyrocket.

The top end of the current symmetrical triangle is the market’s strongest resistance. It’s so strong that it has kept TRX/ETH bearish for over eight months. If bulls take that out, they’ll be set to come close to the all-time high of 0.00032.

Megaphone pattern

That’s because the only real resistance left is the one that’s trending upwards. As you can see on the chart, the pair is also trading inside a large bullish broadening wedge or megaphone pattern. The top end of this pattern can get TRX/ETH real close to 0.00032.

Bottom Line

TRX/ETH has been bearish for the last eight months. Nevertheless, that period seems to be almost over as the pair looks ready to welcome the return of bottom pickers and breakout traders.

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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3.6 stars on average, based on 222 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Analysis

Pre-Market: Turkish Crisis Escalates

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Emerging market assets are under heavy pressure yet again, with the Turkish Lira being in the epicenter of the troubles. The USD/TRY pair blasted higher after a chaotic Friday session, with the Turkish currency hitting significant all-time lows against the Dollar and the Euro alike. With the USD/TRY hitting 7, the Lira is down by 40% just this month, and in only one year, the Dollar more than doubled in Lira terms.

USD/TRY, Daily Chart Analysis

Emerging market currencies are definitely feeling the contagion effects, with the Argentinean Peso the Brazilian Real, and the Russian Ruble all being down big time in the last few days. So far, the Turkish leadership failed to calm the market, rather they fueled the fire with the aggressive rhetoric, and the seeming ignorance of the basic macroeconomic rules. Coupled with the political tensions between the US and Turkey, the background for the currency crisis is bleak.

Also, given the self-fulfilling properties of the Turkish situation (as the falling Lira deepens the fundamental problems, causing a vicious cycle of trust), a quick change is needed to prevent a complete currency meltdown. As investors are well aware of the prior emerging market crisis, which usually led to wide-spread capital flight out of the most vulnerable countries, the current environment has the potential to turn into a deeper correction across markets and asset classes.

Nasdaq 100 Futures, Daily Chart Analysis

The relative strength of the US indices continues to impress, as after the pre-market weakness, the major benchmarks opened mixed and flat, still being just slightly off their all-time highs, despite Friday’s clear risk-off shift. That said, as the other key markets are much weaker compared to their Wall Street peers, and a deep emerging market crisis could further curb global growth, and coupled with the monetary tightening cycle, developed markets won’t remain safe forever.

Dollar Edges Lower Against Majors After Strong Rally

DXY, 4-Hour Chart Analysis

While emerging market currencies are volatile and mostly bearish today, the Dollar is actually slightly lower compared to the Euro, the Pound, and the Yen, and it is notable off its overnight highs. The lack of broad contagion is positive news for bulls, and Chinese markets held up well today after being weak for months.

Gold, 4-Hour Chart Analysis

On another risk-positive note, gold is not showing signs of financial distress, as the precious metal is actually lower today, testing its 15-month lows near $1200. Commodities are mostly flat elsewhere and the recently vulnerable commodity-related currencies are also stable, thanks to the weakness in the Dollar. Copper is still closely following Chinese assets, holding up above its long-term support zone near $2.70, while WTI crude is trading near the $67 per barrel level consolidating after last week’s volatile price action.

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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4.6 stars on average, based on 314 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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