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U.S. Dollar Erases Losses as Risk Aversion Fades; Economic Data in Focus

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The U.S dollar reversed heavy losses on Tuesday, as risk appetite returned to the financial markets following another bout of North Korea jitters. Despite the modest gain, the greenback is in a firm downtrend that extends all the way back to the start of 2017.

DXY Stems Declines

The U.S. dollar index (DXY) was down around half a percent Tuesday before making a sharp U-turn later in the session. The DXY basket closed at 92.33, gaining 0.1% in the process. Modest gains continued early on Wednesday, with the index climbing another 0.1%.

It has been a disastrous week for the U.S. currency. Between Thursday and Friday, the greenback fell more than 1% to reach its lowest level since January 2015.

A weaker yen provided much of the catalyst for Tuesday’s sharp drop. The Japanese currency was down again Wednesday morning local time despite better than expected retail sales data.

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Receipts at Japanese retail stores rose 1.1% in July and 1.9% annually, the Ministry of Economy, Trade and Industry reported. That was the ninth consecutive monthly gain.

As the following chart illustrates, the DXY has declined around 9.7% since the start of the year.

Outlook Remains Weak

The performance of the greenback is intricately tied to the outlook on the U.S. economy and financial system. If that’s the case, then the currency could be in store for a rough couple of months.

A triad of mega banks that includes HSBC, Citigroup and Morgan Stanley have warned that the end of the bull market is near. The banks say investors won’t be able to ignore valuation fundamentals and economic data for much longer, especially as these variables point to a downturn in the business cycle.

Even the Federal Reserve has maintained a cautious outlook on the economy – one that diverges from President Trump’s expectations.

Gold Maintains Bullish Bias

Gold’s safe haven status shined at the start of the week, with prices closing above $1,300.00 for the first time this year. Bullion eased off recent highs on Tuesday, but remained well supported near Monday’s settlement price.

December gold futures, the most actively traded futures contract, was last seen trading at around $1,318.00 a troy ounce.

Silver also benefited from the haven rally, rising to nearly three-month highs on the Comex division of the New York Mercantile Exchange. The grey metal last traded at around $17.51 a troy ounce.

Gold’s premium over silver has declined in recent sessions to 75.37 ounces. That’s how many ounces of silver are needed to buy one ounce of gold. The ratio peaked above 78.5 back in July.

Source: Goldprice.org

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 455 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

Brent Crude Might Be at Risk

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At the beginning of this week, the Oil prices are still under pressure. By the middle of Monday, Brent is trading at 73.36 USD, but it was much lower during the Asian trading session.

Attention of market players is focused on the OPEC meeting, which is scheduled to take place in Vienna on June 22nd and 23rd. The Austrian meeting has been under scrutiny for some time now: earlier, investors were worried by discussions about possible increase of the daily output by 1 million barrels, but now they are concerned by intention of three countries, namely Venezuela, Iraq, and Iran, to block such decision.

In fact, 1 million barrels per day is about 80% of the oil supply excess, which the OPEC+ has been fighting over the last 18 months. If the countries make decision to increase the daily output, the oil market will be quickly back to the numbers it was against for a long time. The oil supply will rise, but the demand won’t be able to grow at the same pace. As a result, the oil prices will have to fall again.

Still, there is one interesting detail. The OPEC+ can’t increase the daily output by a split decision. However, Saudi Arabia and Russia need this decision, that’s why one may assume that these countries will try to find the way to increase the daily output by sidestepping other members of the organization.

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From the technical point of view, Brent is trading downwards. In the H4 chart, one can see two descending channels: the major channel, which is quite wide, and the internal one, which is narrower. Speaking of the first channel, one can see that the price was reaching new lows step by step, without touching the support line, which shows the downtrend weakness. The internal channel is looking more stable and if the price rebounds from its support line, the instrument may resume growing towards the resistance level at 76.00. However, if the price breaks the support line at 72.00, Brent may fall to reach the psychologically-crucial support level at 70.00.

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 3 rated postsHaving majored in both Social Psychology and Economics, Dmitry went on to continue his education in post graduate. He then worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped him to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. Dmitry is a pro in the financial field who authors articles for various international media. He also holds the position of Chief Analyst at RoboForex.




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Altcoins

Crypto Critics: Fractured Facts

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I have another confession.  As a long time investor, I believed in the theory of efficient markets. This basically means that every participant in the market has immediate and complete access to all information facts like price, earnings and other data.  

I made the mistake in applying this theory to cryptocurrencies. Lately, this has been a mistake.  Yes it is true that anyone with the time and interest can go about gathering all the facts. But are all facts telling the truth or are they really fractured facts?  Either way they are dictating investor thinking and that is a key to this market.

According to reports on MarketWatch, crypto prices slumped on the release of a 24 page report from the Bank of International Settlements. BIS stated that cryptocurrencies suffered from “a range of shortcomings that would prevent cryptocurrencies from ever fulfilling the lofty expectations that prompted an explosion of interest — and investment — in the would-be asset class”.

The BIS is no small town organization. They serve as a central bank for other banks and they have been doing this since 1930.  When the BIS talks, people take things they say very seriously.

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The doomsday article released Sunday paints an accurate picture of the state of cryptocurrencies today. But what about tomorrow?  Most everyone is familiar with the issues of speed, security and energy consumption, not to mention regulation. But for the BIS to conclude that none of this problems will ever be solved is down right nieve.  It is the equivalent of declaring in 2001 that the Internet was doomed because 90% of users were connect on dial up modems.

Rotten Research

The BIS report is not the first fracturing of facts presented by well regarded organizations that is scaring investors. Remember back in May? We were treated to the research headline: Bitcoin Futures Caused The Crypto Market Crash according to Federal Papers.

Both the Federal Reserve Bank of San Francisco and a Stanford University professor released a report concluding the launch of bitcoin futures last December contributed to the ensuing price collapse. Pretty far fetched stuff, and here is why.

Bitcoin futures trading began on December 10. BarChart.com shows the CME traded a measly 932 contracts while the CBOE handled 3,887.  Of that total some 2,828 contracts were still “Open Contracts” on December 29th leaving just 1991 coins to do all the harm. During that final week of December over 1.4 million coins were traded. The findings were simply flawed.

Much like the BIS, when the Federal Reserve speaks, people believe they have done their homework carefully.  Throw in Stanford and that adds further weight to this conclusion.

And Then There Are Those Other Facts

And then there was the revelation last week that, much of bitcoin’s 2017 boom was market manipulation, research says.  In a huge 66 page report it was claimed that at least half of the 2017 rise in bitcoin prices was due to coordinated price manipulation using tether.

The author, University of Texas at Austin finance professor John Griffin, argues that Tether was used to buy bitcoin at key moments when it was declining, which helped “stabilize and manipulate” the cryptocurrency price. BTW: this is the job of the specialist on the floor of the New York Stock Exchange.

Professor Griffin appears to have done an excellent job correlating events without much consideration for the economics involved.  According to Bloomberg’s Aaron Brown, for Professor Griffin to be correct in his assertion that tether pushed up bitcoin prices four basis points per 100 bitcoin, Bitfinex would have needed to spend a boatload to inflate the cryptocurrency.  With Bitcoin at $10,000, for example, that means Bitfinex spends $1 million to push the price up to $10,004.

When you look at things from this perspective, Griffin’s findings look pretty absurd.

Look Closely At The Facts

These days with crypto psychology the worst since Mt. Gox in 2014, it seems like a good time for investors to capitalize on the fractured facts.  Technical analysis shows that cryptocurrencies bitcoin, Ethereum, Ripple and others are hovering around key support levels. It would not be shocking at anytime to find some academic study linking crypto to the common cold.  By the way, it is a fact that last years dramatic crypto price spike came right at the start of the flu season.

A far more relevant fact was last week’s announcement by the Securities and Exchange Commission that neither bitcoin or Ethereum were securities. Perhaps equally important is the conclusion that when ICO do not convey an equity ownership position, they too are considered in the same non-security category as bitcoin and Etherrun.  This is a fact.

What we do know is that crypto prices are as low as they have been since well before the spike last December.  Just as the markets recovered from Mt. Gox, the mindset of investors will recover and that is the key.

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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4.4 stars on average, based on 81 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Analysis

Europe Drags Stocks Lower while Trade War Fears Return

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The risk-off shift of Friday continued today throughout the major financial markets, with the German political standoff on migration weighing on investors sentiment as well, besides the emerging market troubles, and the trade skirmish between the US and China. All of the major US indices opened the week lower, with Europe clearly underperforming and Asian equities also being under pressure.

As Chinese announced retaliatory tariffs are after last week’s US steps the week could bring upon another round of measures by the Trump administration and with that, the escalation of the trade tensions is very much a possibility again.

S&P 500 Futures, 4-Hour Chart Analysis

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Despite today’s losses, the leading indices, especially the Nasdaq and the small-cap Russell 2000, are still just a tad below their all-time highs, while the relatively weak benchmarks are 5-10% below their yearly highs. The balanced S&P 500 is also shy of its all-time, but the short-term uptrend remains intact, and incredibly enough, the benchmark still didn’t leave the range of the early-February crash which unfolded in just 3 days.

Euros Stoxx 50, 4-Hour Chart Analysis

The divergence between the leaders and the rest of the global market, continues to point to the fragility of the rally, and as emerging market currencies are sill clearly in trouble, we don’t expect a broad march to new highs in the coming weeks and we remain defensive towards global risk assets.

Commodities Smacked Lower amid Risk-Off Shift

DXY (Dollar Index), 4-Hour Chart Analysis

Currencies settled down after their crazy central bank loaded week, with the Dollar pulling back slightly off its highs against the Euro and the Yen, while holding its ground compared to the other majors. The Dollar index broke out of the consolidation pattern as we expected and it is now challenging the multi-month highs set in May.

USD/CAD, 4-Hour Chart Analysis

The Dollar is now trading at a 12-month high against the Canadian Dollar, as the pair left behind the 1.30 level as we expected, while the Aussie is also close to hitting levels not seen since last summer, as Friday’s drop in commodities put pressure on the already weak AUD.

WTI Crude Oil, 4-Hour Chart Analysis

Commodity traders are licking their wounds after Friday’s rout, although crude oil staged an impressive rebound off the two-month low hit in early trading below $64 per barrel with regards to the WTI contract.

That said, the short-term trend is clearly negative, and     new lows are likely in the coming days, although the much-awaited OPEC meeting later on this week could cause wild swings in the key commodity, with speculation already being rampant about the possible output change by the cartel.

Featured iamage 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 276 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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