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Analysis

Treasury Yields Up, Stocks Slightly Lower After Fed Rate Hike

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The crucial part of the busy week in financial markets started today in late trading, as the aftermath of the Federal Reserve’s rate decision saw the usual elevated trading activity. The central bank raised its benchmark rate by 0.25% (to a 1.75-2% range) as expected, and gave a slightly more hawkish than expected guidance causing some turbulence across the board. The bank hinted on two more rate hikes this year while the consensus was closer to only one more tightening step before the announcement.

US 2-Year Treasury Yield, 4-Hour Chart Analysis

Short-dated Treasury yields surged to higher in the US, with the longer end of the yield curve also shifting higher briefly, but as the dust settled, long-term rates pulled back. This further flattening of the yield curve reiterates fears that the Fed’s tightening cycle could push global growth lower, and the reflected in a slight dip in equities, and volatility in the recently weak emerging markets currencies.

S&P 500 Futures, Daily Chart Analysis

The renewed US-Chinese trade war fears also weighed on sentiment, but the leading global indices, the NASDAQ and the Russell 2000 are still just a hair off their all-time highs. The strong divergences are still present though, with the S&P 500 and the Dow still several percents off even their January highs, and the European and most of the Asian benchmarks being in even worse shape.

Dollar Drifts Lower as ECB Enters Spotlight

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair was in the center of attention around the Fed’s announcement, with the ECB’s meeting scheduled for tomorrow, but despite a brief selloff, the Euro finished the day in the green, back near the 1.18 level.

The market expects a hawkish turn by the ECB too, with several analysts awaiting the announcement of the end of the bank’s quantitative easing program, which could lead to a surge in the common currency.

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

While the USD pulled back against its largest peers today, despite the rate hike and the higher than expected US PPI (Producer Price Index), emerging market currencies remained under pressure. The Turkish Lira is now lower than the levels before the second rate hike of the Turkish Central bank, and it’s also close to erasing the gains since the first, emergency rate hike.

The Argentinean and Brazilian currencies are also near their lows, despite the IMF bailout and central banks interventions, so risks remain elevated in interest rate sensitive assets, especially after the hawkish Fed release.

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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 379 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

Selloff Resumes as Italian Budget Crisis Deepens

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It was another ugly day for risk assets globally, with equities getting hit particularly hard and although the major US indices managed to hold on above last week’s lows, the charts are now looking wounded even on Wall Street.

There were plenty of negative catalysts dragging lower stocks during the session, with especially the ugly Italy-European Union budget debate causing turmoil in Italian government bonds, equities, and to a lesser extent, the Euro.

Nasdaq 100 Futures, 4-Hour Chart Analysis

The new bear market lows in the main Chinese indices also weighed heavily on sentiment throughout the day, while the post-Fed-minutes rise in US Treasury Yields also added to the worries. Wall Street opened lower, and after a brief rally attempt sellers took control of the market, and the rout didn’t stop until the closing bell with the Nasdaq leading the way lower yet again.

The tech benchmark shed a bit more than 2% on the day, and stocks finished with deep losses across the board, despite the better-than-expected quarterly report of Philip Morris (PM) and the beat in the Philly Fed Index.

Russell 2000, 4-Hour Chart Analysis

The short-term trend in the US is undoubtedly bearish, and although all benchmarks, including the Russell 2000, are holding up above their recent multi-month lows, we would still treat any rally as a selling opportunity in stocks.

Tomorrow we could see fireworks again, and the Asian session could already be very active, since several key Chinese economic releases are coming out, such as the quarterly GDP, Retail Sales, and Industrial Production.

2-Year US Yield, 4-Hour Chart Analysis

Treasuries had a very hectic session, as yields, especially on the short end of the curve got close to their recent highs in early trading before pulling back due to the intensifying Italy-related worries towards the end of the US session.

Given the recent hawkish tilt in the Fed’s rhetoric, strong flattening of the yield curve could be ahead, should the equity selloff deepen, as we don’t see new highs on long-dated yields in that case, but a quick change in the tightening schedule of the US central seems less likely now.

Dollar Confirms Swing Low amid Risk-Off Flows

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair dipped below the 1.15 level again, and although the momentum of the move is weak, the Dollar Index also confirmed the swing low that we pointed out yesterday. The reserve currency could be ready to test its August highs, even as the most vulnerable emerging market currencies are still relatively strong.

Given the expansive fiscal policy of the Trump administration, it’s no surprise that the Dollar is not surging higher, even as the troubles in the Eurozone are way deeper. Still, the Greenback entered another leg higher in its uptrend, and besides the safe-haven Yen, no major currency is in a bullish technical position compared to the USD even form a short-term perspective.

That said, forex markets could see very hectic conditions in the coming busy months, with the US midterm elections, the possible Chinese crisis, the ongoing quantitative tightening, and of course Donald Trump all capable of causing wild swings in the major pairs.

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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 379 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

Pre-Market Analysis And Chartbook: Stocks Turn Lower as Treasury Yields Eye Multi-Year Highs Again

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Thursday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,791 -0.91%
DAX 30 11,664 -0.43%
WTI Crude Oil 69.16 -1.30%
GOLD 1,227 0.16%
Bitcoin 6,438 0.01%
EUR/USD 1.1486 -0.11%

Equities are broadly lower after the opening bell on Wall Street, with the selloff in China and the rise in US Treasury yields setting the tone for the day so far. The risk-off shift that dragged even the mighty US stock market lower last week continues to dominate trading globally, and while volatility is well below its recent peak, bulls are on the defensive with regards to the majority of risk assets.

Shanghai Composite Index CFD, 4-Hour Chart Analysis

The Shanghai Composite hit yet another 4-year low today, amid rumors on forced liquidations following the hawkish surprise of yesterday’s Fed meeting minutes. The Chinese index confirmed its bear market again, and as the trade war rhetoric of the Trump administration will likely heat up before the midterms in November, selling pressure could remain strong.

FTSE 100 Index CFD, 4-Hour Chart Analysis

With the likelihood of a no-deal Brexit increasing, nervous trading continues on the related assets, with especially British equities feeling pain lately. The FTSE 100 has been lagging even the relatively weak European markets, and although the benchmark is trading above its spring lows, thanks mostly to the long-term weakness in the Pound, short-term technicals are very weak, and a breakdown below to a new almost 2-year low looks imminent.

Economic numbers have been mixed today, with British Retail Sales missing the consensus estimate by a mile, while the US Philly Fed Manufacturing Index came in slightly better than expected. The negative surprise added to the pressure on British stocks, although forex markets are little changed and the Pound remained relatively stable.

US Stocks Lower Again amid Choppy Consolidation

S&P 500 Futures, 4-Hour Chart Analysis

The major US indices opened lower and extended their losses in the first hour of trading, with the S&P 500 still trading in a clear short-term downtrend following last week’s plunge. Treasury Yields, particularly on the short-end of the curve are aback near their multi-year highs after yesterday’s Fed surprise, and that weighs heavily on investors sentiment.

Philip Morris (PM) is up by more than 3% following its earnings report, as the company continued the quarter’s trend of positive surprises, but the broader market is still largely ignoring the bullish news, as US investors are focusing more on the mounting funding risks and the strengthening international headwinds.

Copper Futures, 4-Hour Chart Analysis

While currencies are relatively calm today, commodities are having an active session, and crude oil and copper are both headed lower amid the fresh risk-off shift, while old is flat thanks to safe-haven flows. WTI crude hit another one-month low today after yesterday’s breakdown, falling below $69 per barrel and copper is also in a precarious technical position.

The volatility compression pattern looks to be ending in the industrial metal, as we expected, given the weakness in China, it’s no surprise that the commodity moved below its short-term range. A drop below the strong support near $2.70 could mean that copper resumed the broad downtrend, and that would be a bearish sign concerning the global economy.

ChartBook

Major Stock Indices

Nasdaq 100 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

EUR/USD, 4-Hour Chart Analysis

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 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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4.6 stars on average, based on 379 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

Monero Price Analysis: XMR/USD is Stable and Gunning for Potential Gains on “Bulletproofs” Technology Update Day

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  • Monero developers have released an updated version to their protocol, implementing “Bulletproofs”.
  • XRM/USD is within a range block, with price behavior suggesting of a potential imminent breakout higher.

Monero Becoming First Crypto Over Billion-Dollar Market Cap Implementing “Bulletproofs”

Developers at the Monero foundation, have released an updated version to the protocol. This will be live from 18th and 19th October. They are becoming the first network to try out “bulletproofs”. The goal of this technology is to significantly decrease the weight of confidential transactions. From today, 18th October, the privacy-focused cryptocurrency will be testing this.

The move from Monero will make them the first crypto with over a billion-dollar market cap, to try out the “bulletproofs” technology. Over the past year, the foundation has been working on cutting the size of its confidential transactions, by at least 80 percent.  A full overview of the upgrade was posted in a blog post by Monero.

The purpose of bulletproofs are to facilitate confidential transactions. Senders and recipients addresses will remain visible, but the amounts being sent is concealed. The technology also aims to reduce transaction times and fees.

Sarang Noether, a spokesperson for Monero and a key part of the bulletproof integration, was recently speaking on the upgrade. He noted that “Bulletproofs will be replacing the “zero-knowledge range proofs”, of which their confidential transactions are reliant on. The cryptocurrency will activate the technology during its next system-wide upgrade, or hard fork. An upgrade that will require nodes to adopt a new software. Furthermore, Sarang added, “hard forks are sometimes colored as a risky process. However, this upgrade is part of Monero’s bi-annual cycle to introduce new features.”

Technical Review – 4-hour Chart

XMR/USD 4-hour chart

XRM/USD for the past going on three sessions now has been trading within a tight range-block. This trading behavior coming after the aggressive movements seen just some days before. On 11th October the price had spiked over 10% lower. To then enter a tight range, which saw a huge breakout, jumping around 20% high. Over half of this spike to the upside was reversed, moving into the three-session range as mentioned above.

Looking to the upside, eyes will be on another range-breakout. Bulls will be wanting to retest the breached supporting trend line. An attempt was made during the rally seen on 15th October, however strong resistance was observed. In terms of support, this can be eyed at the lower part of the current range, around $107.50. If the bears pile enough pressure, it vcould see a fast move back to $100, then further south below demand area from $86-76.

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 32 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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