The prices of the main cryptocurrencies fell in a choppy and correlated fashion overnight, and all of the major coins are significantly lower, trading near or under the post-crash lows. Bitcoin got close to the crucial $3500 level while Ethereum fell almost to $250 in early trading. BTC lost some of its relative strength amid the China mining ban rumors recently, but the coin remains well above the crash lows and although further correction is likely, we don’t expect durable new lows below $3000 during this cycle. A strong support zone is found near $3150, while resistance is now ahead at $3800.
BTC/USD, 4-Hour Chart Analysis
Dash is still in the best technical position among the majors, although it declined from yesterday’s highs amid the broad sell-off. Litecoin is one of the weakest currencies, and Monero is also well below the weekend lows, getting closer to the crash levels of Friday. While the correction will likely last through the weekend, most of the largest coins should hold above their lows as the long-term picture is reaching oversold territory. We expect volatile trading in the coming days, and the short-term charts remain crucial for traders. Let’s see the details.
ETH/USD, 4-Hour Chart Analysis
ETH held up above the $250 level during the overnight decline, and it showed relative strength today compared to BTC, as it didn’t hit a new low in early trading. The coin is also above the weekend lows, and although we still expect a dip below $250 before the end of the correction, the strength should be encouraging for bulls, and a durable new low in the currency is not likely. Below $250, more support is found at $235, while primary resistance is at $285.
LTC/USD, 4-Hour Chart Analysis
Litecoin dipped below $51 and the weekend lows during the current leg lower in the correction and it’s now headed towards the $44 support level, with the declining short-term trend clearly being dominant. We still don’t expect a new low below the crash levels at $35, and the coin should hold above the long-term base formation below $38. Above $51 strong resistance levels are at $56 and $64.
DASH/USD, 4-Hour Chart Analysis
Dash is still trading above the declining short-term trend despite the bearish pressures in the segment, and the coin is now far off from yesterday’s rally highs near $360. The all-time high just above $400 is also in sight, but a dip towards $300 is still likely before a sustained move higher, as the rest of the majors are still clearly in correction mode. That said, long-term investors should be buying the short-term dips, with further support found near $265.
XRP/USD, 4-Hour Chart Analysis
XRP also spiked below the weekend lows amid the decline, but the coin remains among the least volatile majors, still trading well above the long-term base formation near $0.15. The currency is below the declining trendline and the resistance zone near $0.18, and the long-term technical setup is unchanged. Support is found at $0.16 and $0.14 while resistance is still ahead around the $0.195 and $0.22 levels.
ETC/USD, 4-Hour Chart Analysis
Ethereum Classic continued to show weakness, trading very close to the crash lows today, and remaining inside the steep short-term downtrend. The coin faces strong overhead resistance up until $13.50 with support found near $9. Traders should still stay away from new positions, as long as the declining trend is intact.
XMR/USD, 4-Hour Chart Analysis
Monero is still relatively weak, dipping below the weekend lows, likely headed towards the $80 support level. The currency is still well above the prior all-time high, and the long-term picture remains encouraging. That said, traders should wait until a new short-term uptrend is established before entering new positions. Further support is found below $80 near $68, while primary resistance is now at $100.
NEO/USDT, 4-Hour Chart Analysis
NEO remains inside the declining trend, trading just above the $16.50 support level after the overnight decline. The coin is once again among the relatively weak currencies after a brief period of strength, and short-term traders are still advised to wait with opening new positions, although the current levels remain attractive from a long-term perspective. Strong support is still at $16.50 and $13 with key resistance at $22, $25, and $30.
IOTA/USD, 4-Hour Chart Analysis
The $0.45-$0.48 support zone still holds up in IOTA despite the current leg lower, and the coin is among the relatively stronger majors regarding the short-term picture. As we expect the broad correction to continue, a dip below primary support is possible, but long-term investors should be buying the short-term dips after the lengthy decline. Resistance is ahead at $0.65 and $0.75 while further support is found near $0.35.
Featured image from Shutterstock
Long-Term Cryptocurrency Analysis: Bitcoin Outshines Altcoins Again
The most valuable coin had another encouraging week, as it emerged from a brief but violent correction, just to reach new highs towards the end of the week, draining capital from altcoins. The total value of the market is stagnating near the all-time high, but BTC crossed the $100 billion mark as it surged past the $6000 price level, controlling 58% of the market.
With the long-term MACD clearly being overbought, and as the long-term target has been hit, investors should now be looking for exit points, even as the short-term uptrend is intact. The range projection target of the recent correction is found at $7000, but correction risks are already high, and only small positions should be kept in the current setup.
BTC/USD, Daily Chart Analysis
Most of the major altcoins are trading in narrow ranges this weekend after a slightly bearish week, as the optimism surrounding Ethereum’s major update faded and the second largest coin re-entered its previous range.
Litecoin, Dash, and Monero are still looking encouraging despite the lengthy correction, while the recently, while the relatively weak Ethereum Classic IOTA continue to show worrying signs. As the Bitcoin long trade is getting stretched, let’s see the how the daily charts of the altcoins are shaping up.
Will Crude Oil Reach $68 a Barrel in 2018?
Crude oil prices are likely to climb close to $68 per barrel mark in 2018. We believe that oil supply will be hit due to a few geopolitical issues if they play out as we expect. Additionally, though high crude prices will be a strong incentive for the shale oil drillers to pump more, their increase is unlikely to tilt the deficit into oversupply.
- The OPEC production cut is tilting the crude oil markets to a balance
- Rise in the shale oil production is unlikely to equal the increase in demand in 2018
- The geopolitical issues can tilt the markets into a deficit
- If crude oil breaks out of $55 per barrel, a move to $68 is likely
What are the current market conditions?
OPEC oil production cuts
The November 2016 production cut by OPEC and its allies is helping the market stabilize. The US crude stockpiles have been decreasing over the past few months, which indicates that the OPEC cuts are having their desired effect, albeit slowly.
The stockpiles in the Organisation for Economic Co-operation and Development (OECD) nations is down to just under 3 billion barrels, which is roughly 171 million barrels above the 5-year average. The OPEC wants to bring the inventory levels below the 5-year average.
Reports suggest that the OPEC and its allies will extend the deal, which is set to expire in March 2018 by another 9-months. However, the oil cartel is unlikely to deepen the cuts. In the September quarter, it had produced 32.9 million barrels per day (bpd), as against 33.4 million bpd production in November 2016, prior to the production cut agreement.
In the fourth quarter of this year, the OPEC production is expected to further decline to 32.7 million bpd.
US shale oil production
The main threat to any recovery in crude oil prices is the ever-increasing production of the US shale oil drillers. US crude oil production, which averaged about 9.2 million bpd in the first quarter of this year has increased to 9.56 million bpd by the third-quarter.
The US Energy Information Administration (EIA) expects the average US crude oil production to increase to 9.9 million bpd in 2018, compared to 9.2 million bpd in 2017. That is an addition of 700,000 bpd of supply.
On the other hand, Investment bank Tudor, Pickering, Holt & Co (TPH) expects US crude oil production to reach 10.2 million barrels in 2018.
So, on an average, crude oil production by the shale oil drillers is expected to increase by 700,000 bpd to 1 million bpd.
Demand increase in 2018
The global economy is growing at a decent pace, which is expected to increase the demand for crude oil. The US EIA expects the global demand to increase by 1.6 million bpd in 2018.
Therefore, with everything else being equal, this will lead to a faster reduction in crude oil inventory and an improvement in sentiment, but not a large increase in price.
So, why do we expect crude oil prices to increase next year?
What are the events that have changed in the recent past that warrant a change in our view?
For the past two years, oil prices have not responded to geopolitical tensions because of the supply glut.
However, next year, when the markets are in a balance, any geopolitical event that can have an effect on the supply side will tilt the market to a deficit, resulting in a rally in oil prices. What are these events?
The Iran sanctions
President Donald Trump has been a critic of the deal between the US and Iran, which led to lifting of sanctions on the Islamic nation. The deal is called the Joint Comprehensive Plan of Action (JCPOA). As a result of this deal, Iran was able to resume its exports, which have skyrocketed from about 1 million bpd in 2013 to about 2.3 million bpd in September 2017.
President Trump decertified the deal on October 13 but has still not quit the deal. He wants the deal to be renegotiated, however, the remaining countries who were party to the deal and Iran are unwilling to do so.
This creates a tension between the US and Iran. Chances are that President Trump will withdraw from the deal sometime next year to fulfill his pre-election promise of ripping the deal apart.
What are the repercussions if the US quits the deal?
Presently, the EU nations are not in favor of scrapping the deal with Iran. If the US unilaterally withdraws from the deal, Iran’s exports are unlikely to have an immediate effect, until the EU decides to support it. After all, EU has been the major consumer of Iranian oil since sanctions were lifted.
However, Iran’s fields are aging. They need fresh investments to keep the oil flowing at the current rate. If the US quits the deal, it is unlikely that major oil companies, that have operations in the US will enter Iran. This can limit the capital flows to the Islamic nation’s oil sector.
As an immediate effect, the US sanctions will “put at risk a few hundred thousand barrels of Iranian exports,” Goldman Sachs wrote in a research note. However, these are only estimates and the real impact will be known only after the US withdraws from the deal. Due to the uncertainty, the markets are likely to boost prices higher, until it gets a clear picture of the effects.
Geopolitical tensions in the gulf can lead to a severe shortage of oil
The northern Iraq region – Kurdistan – is a semi-autonomous region, which recently declared Independence from Iraq. This has led to a conflict between the two. While the Iraqi forces have declared their victory in the important oil-rich region of Kirkuk, the victory is not final because the Kurdish army did not put up a fight initially to defend the oil-rich region.
However, both the Kurdish peshmerga and the Iraqi army have been trained by the US. Therefore, if the conflict is not resolved quickly, through a dialogue, it can turn bloody and lead to disruption of about 600,000 bpd of oil supply.
“Oil prices could spike a lot higher on this development because this time is different, after years of war in the region. The battle, finally, is for the oil, and no other reason. In other words, here we go,” John Kilduff, partner at energy-focused investment manager Again Capital, told CNBC.
Unless a permanent solution is reached, we expect these issues to linger on and again crop up in 2018, propping prices higher.
What does the chart forecast?
The WTI crude has been broadly trading in a range of $42 and $55. Oil has taken support close to the $42 levels four times in the past year and a half. Therefore, this is a strong support level and can be used as a stop loss for our positions.
On the upside, the zone between $50 and $55 has been a strong resistance. Oil has struggled to breakout of this zone. However, if any geopolitical event triggers a breakout above $55, a rally to $68 levels is likely, which is the minimum target objective of a breakout from the range.
How can we benefit, if crude rallies according to our expectations?
The best way to benefit from the rise in crude oil is to trade the oil futures, but due to their volatility, it is not advisable to hold it for the long-term.
The oil-based ETFs can offer an opportunity to take a position in oil. Individual energy stocks are also another means of benefitting from a rally in crude oil.
We shall soon identify the best oil-based ETF and stocks that can offer good returns in 2018.
Risk to our analysis
Our analysis is based on the assumption that the existing geopolitical issues are unlikely to be sorted out within the next year. However, a good dialogue can easily put an end to these, thereby invalidating any risk-premium to crude oil.
Also, consistent high prices above $50 can increase the US shale oil production, much higher than the currently anticipated levels. This will prevent the markets from balancing out.
Due to infighting among its members, the OPEC and its allies can opt out of the production cut deal, which will boost supply and can lead to a crash in crude oil prices.
Featured image courtesy of Shutterstock.
Daily Analysis: Stocks Shoot for the Moon as Senate Passes Budget
Friday Market Recap
|Asset||Current Value||Daily Change|
|WTI Crude Oil||51.60||0.25%|
Financial markets got very active today thanks to the US Senate’s decision to pass the 2018 budget, paving the way for the tax reform plan that’s been welcomed by investors in recent weeks. The Dollar, equities, and Treasury yields all got substantially higher with the Dow and the S&P 500 scoring yet another all-time high. The NASDAQ and the Russell 2000 failed to follow the former benchmarks to record highs, but the short-term rally is still definitely intact, despite the overbought readings and the overvaluation issues.
Dow 30, Daily Chart Analysis
Forex markets were also very active as the Dollar cruised higher against all of its major counterparts, with the exception of the Great British Pound that rebounded strongly after the optimistic words of Angela Merkel regarding the Brexit process. The New Zealand Dollar continued yesterday’s negative trend, while the Canadian Dollar was also hit hard amid the early decline in the price of oil and the negative economic surprises from the country.
Gold is down yet again, as it failed to reclaim the $1300 level amid the improved global sentiment that also weighed on the Japanese Yen as well. The Yen’s weakness helped the Nikkei to another two-decade high, as the USD/JPY pair surged to 113.50 for the first time since July.
USD/JPY, 4-Hour Chart Analysis
Bitcoin’s new all-time high made headlines in the segment today, as the most valuable coin surged past $6000 for the first time ever, even as the currency traded as low as $5100 just a few days ago. BTC also reached $100 billion in market cap, and the coin accounts for more than 57% of the total value of the crypto segment.
The other majors are virtually unchanged despite Bitcoin’s rise, with only IOTA losing significant ground and Ripple trading in a volatile fashion after its crazy week. Litecoin and Monero also performed relatively well, while Ethereum got stuck below the $315 line yet again, and NEO finally settled down, although it continues to trade below the crucial $30 level.
BTC/USD, 4-Hour Chart Analysis
Key Economic Releases on Friday
|14:30||CANADA||Core Retail Sales||-0.7%||0.3%||0.2%|
|16:00||US||Existing Home Sales||5.39 mill||5.32 mill||5.35 mill|
Key Economic Releases on Monday
Featured image from Shutterstock
- We Have to Talk About Bitcoin Again October 21, 2017
- iComply ICO Adds Blockchain Thought Leader “ThePiachu” to Its Management Team October 21, 2017
- Trade Recommendation: Qtum October 21, 2017
- Long-Term Cryptocurrency Analysis: Bitcoin Outshines Altcoins Again October 21, 2017
- Trade Recommendation: Waves October 21, 2017
- Week In Review: Stocks Take-Off Along with Bitcoin and the Dollar October 21, 2017
- Bitcoin Hits $100 Billion as Record Rally Continues October 21, 2017
- Will Crude Oil Reach $68 a Barrel in 2018? October 21, 2017
- ICO Update: Polkadot October 20, 2017
- Daily Analysis: Stocks Shoot for the Moon as Senate Passes Budget October 20, 2017
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