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Market Overview

US Dollar Unhinged

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Hi Everybody,

One of the trickiest questions I’ve ever been asked by a journalist was: Aren’t cryptocurrencies just an easy way for rogue governments to skirt international sanctions?

I was stumped. Certainly, we can all see the value in a currency that operates independently of governments and banks, but does that mean that adherence to globally recognized standards is history?

For the ICO market, we’ve seen that many of the more obvious scams were called out rather quickly by the community. Unfortunately, some may have fallen foul of these scams, not nearly as much money has been lost as it has in other types of scams.

After some consideration, the above argument bears similarities to that around free speech. Should we allow people to voice harmful opinions? The classic answer to that is “yes.” For fear of repressing the oppressed, we should allow all to speak and let the validity of their arguments carry, or drown.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Higher Yields
  • Italian Exposure
  • Unhinged Crypto

Please note: All data, figures & graphs are valid as of May 17th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Bond Yields are tracking higher today, which does seem to be weighing down on the stock market at the moment.

Here’s a snapshot of the 10 year yield…

…and here are the stock markets over the last two weeks….

As you can see, the rally is having a difficult time climbing higher in the face of higher borrowing costs. Of course, the bond moves in the US are rather small compared to what’s happening in Italy right now.

The Italian 10-year has gone from 1.71 to 2.11 in the last month. For cryptotraders this may not seem like much but for the bond market that currently houses much of the world’s investments, this is a massive movement.

Within Italy itself, the situation is potentially explosive. Here we can see overall exposure that various banks have to Italian bonds. Notice the overwhelming presence of triple digit numbers here?

The silver lining here is that the fear of contagion is now far less than it was a few years back as it seems that most of the debt is confined to domestic banks.

Many thanks to one of our Italian traders on eToro for tagging me in this post

We’ve also recently highlighted the Turkish Lira, so here’s a current look at that. As you can see, it’s still falling sharply.

(Reminder: Inverted graph)

Crypto Unhinged

Though the possibility of the US Dollar losing its status as the global reserve currency is extremely low, over the course of history these types of things have happened before.

In the crypto market however, anomalies are far more commonplace. Stable coins are designed to allow people to transact using cryptocurrencies while reducing the risk that lies in the extreme volatility prevalent in this particular market.

Sometimes, things don’t exactly go according to plan though. Even though the TrueUSD coin seems to be more decentralized and transparent than previous versions of this concept, market forces can sometimes be stronger than economic theories.

In this case, the coin was introduced to a new platform, one of the largest in the industry, rather suddenly. This surge in volume caused the price to spike by 35% in the span of three hours, and it took the market an additional 10 hours to bring it back it’s intended level and even out.

The moral of the story is that though we can’t ever tell the future, we can make decisions on our investments to take advantage of both short term and long term shifts in valuation.

If your risk is all in one place than you’re either going to have a very good or a very bad time, probably both depending on the day. However, the more you diversify your portfolio into many different types of investments, the more you reduce your risk and in the end, you’ll likely be able to sleep a lot better at night.

As always, please continue sending me your excellent questions and comments. Let’s have an amazing day!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Best regards,
Mati Greenspan
Senior Market Analyst

eToro: @MatiGreenspan | Twitter: @MatiGreenspan | LinkedIn: MatiGreenspan | Facebook:MatiGreenspan

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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4.7 stars on average, based on 122 rated postsSenior Market Analyst at Etoro.com.




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Market Overview

Market Update: U.S. Stocks Fall on Trade, Emerging Market Tensions; Cryptocurrencies Recovers $20 Billion

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Stocks and commodities faced brisk selloffs Wednesday, as lingering risks on the trade and emerging-market fronts dampened investors’ appetite for riskier assets. Meanwhile, cryptocurrencies staged a large relief rally led by bitcoin and Ethereum.

Stocks Decline

Wall Street’s major indexes finished well off session lows on Wednesday. The Dow Jones Industrial Average closed down 137.51 points, or 0.5%, at 25,162.41. The broader S&P 500 Index declined 0.8% to 2,818.37. Both averages were down more than 1% earlier in the day. Meanwhile, the technology-driven Nasdaq Composite Index fell 1.2% to 7,774.12.

Losses were spread out across seven major sectors, with energy shares falling 3.4% as a whole. Materials, tech companies and discretionary shares also fell more than 1%.

The CBOE VIX, also known as the fear index, rose by as much as 27% to reach 16.86. VIX settled at 15.05, gaining 13.1%.

Oil Prices Sink to Two-Month Lows

Crude plunged to more than two-month lows Wednesday after U.S. government data showed a large, unexpected jump in weekly inventories.

The U.S. Energy Information Administration (EIA) reported a stockpile rise of 6.8 million barrels for the week ended Aug. 10, confounding estimates for a 2.5 million-barrel drop. The jump was associated with a sharp rise in crude imports and a fall in exports. The world’s largest economy imported 1 million barrels per day, data showed.

U.S. West Texas Intermediate (WTI) futures reached a session low of $64.51 a barrel, which would have marked the lowest settlement on the New York Mercantile Exchange since April. At last check, WTI was down $2.08, or 3.1%, to trade at $64.96 a barrel. ICE’s Brent contract declined $1.70, or 2.4%, to $70.76 a barrel.

Cryptocurrencies Rebound

Digital assets recovered tens of billions in lost market cap Wednesday, with bitcoin and Ethereum emerging as the biggest gainers. Bargain hunters scooped up ether at 14-month lows after following a 35% rout over seven days. At press time, the ether price had gained nearly 13% to $294.

After a successful defense of $6,000, bitcoin rose 6.5% to $6,495. The largest cryptocurrency by market cap controls just over 53% of the total market. That figure approached 55% on Tuesday.

The total cryptocurrency market was worth $209.5 billion Wednesday, up more than $20 billion from Tuesday’s low. Total trade volumes averaged around $14 billion.

Despite the gain, analysts have warned that the price outlook for cryptos remains negative amid the recent cash-out of ICOs.

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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4.6 stars on average, based on 548 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: Selling Resumes as Dollar Extends Rally

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Global stocks are sharply lower today after the US open, as a bearish Asian session was followed by a lackluster European showing, and the major US indices also opened lower, erasing yesterday’s gains. Emerging markets are still to be blamed for the current selloff, even as the underlying cause is still the global tightening cycle and the Dollar’s rally.

S&P 500, 4-Hour Chart Analysis

The Chinese stock market and the Yuan led the way lower today, with the Shanghai Composite getting close to hitting new bear market lows, and with the currency hitting fresh 13-month lows. European stocks also continued their relatively weak streak, with the DAX trading at the lowest level since the end of June. The undoubtedly leading US benchmarks are all down by more than 1% today, but they are still close to their all-time highs, even as the divergences are just getting deeper and deeper.

Shanghai Composite, 4-Hour Chart Analysis

The Turkish Lira is still in the center of attention, as the battered currency added to yesterday’s gains after the Turkish central bank intervened in the interbank markets. The bank made it harder to short the Lira, which in effect also make it harder to hedge against the decline of the currency, so basically the country started on the road of capital controls.

USD/TRY, Daily Chart Analysis

While preventing a run on the currency is a legitimate goal, by not changing its confrontative stance and not taking steps to clam the market, the risk of a massive capital flight is still very high. The broad rally in the Dollar is just making matters worse for the country, and contagion is far from being dodged by global markets at this point.

With several European markets being closed the large pre-market moves are not a surprise, even as the key economic indicators leaned bullish before the bell. The most awaited US retail sales report was a sizeable beat in both the headline, and the more reliable core figure, although the previous numbers were revised lower. The Empire State Index was also well above the consensus estimate, but US industrial Production missed, similarly to yesterday’s Chinese and European indicators in the segment.

Dollar Break-Out Continues

EUR/USD, 4-Hour Chart Analysis

The US Dollar’s surge is arguably the most important trend globally, and the reserve currency confirmed its break-out to new 13-month highs today, as the EUR/USD pair hit 1.13, the GBP/USD pair trading with a 1.26 handle for the first time in a year, and with commodities suffering heavy losses again.

Copper Futures, 4-Hour Chart Analysis

We have been following copper’s struggle to stay above the key support zone near $2.7, and today’s Asian weakness sealed the faith of the commodity for a while as Dr. Copper hit a new 14-month low itself, signaling that more trouble is ahead for China and the commodity-complex.

Gold is also at levels not seen since early 2017, and crude oil gave up its recent bounce falling to an 8-week low, getting close to $65 per barrel with regards to the WTI contract.

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 318 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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Market Overview

Turkish Coffee Hangover

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Hi Everyone,

Hope you’re having a fine day. Thanks again to everyone sending me their thoughts, opinions and articles. It’s really amazing.

One thing that several people have asked me to comment on already is this story. So here goes.

Indeed, this is an exciting step towards the integration of blockchain technology into traditional finance. It’s nice to see such a reputable institution such as the World Bank using a private Ethereum network to monitor their new bond. However, we’re really just scratching the surface with this one.

In the realm of programmable money, the practical applications of this new tech are limited only to our imagination. So, to use it to manage bonds is nice but it somehow feels like we’re not living up to the full potential with this one.

As one pundit put it… this is almost like when the world celebrated the internet’s groundbreaking ability allowing people to order DVD’s from the comfort of their living room.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Turkish Coffee Hangover
  • Dollar is Strong
  • Crypto Support

Please note: All data, figures & graphs are valid as of August 15th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

The excessive energy that the financial markets received from the “emerging markets currency sell-off” seems to have faded by now. Indeed, the entire debacle felt kind of like a strange rush of exuberance similar to the experience of drinking some very strong coffee. What we’re left with is contained fatigue.

Volatility has now returned to normal and the Lira seems to be in retracement. This despite the fact that neither Trump nor Erdogan seem ready to give any ground. In fact, the Turkish president announced a boycott of American technology yesterday and specifically targeted the iPhone, advocating Samsung instead.

AAPL was notably unaffected.

One thing that might be worth watching is the EEM Emerging Markets ETF that lost significant ground over the last few days and is now testing the lows.

Looking at the stocks today, things do seem to be in the red again. Let’s see how things progress. Precious metals are also down so be careful out there.

Take a look at Copper for example, which is down more than 1000 pips in the last 48 hours.

Dollar is King

As we discussed in yesterday’s update, all these progressions seem to be a direct reaction to the strength in the US Dollar.

A tightening labor market mixed with creeping inflation is causing the Federal Reserve to take aggressive action.

The Dollar’s strength against other major currencies can be seen quite clearly since the start of the month.

As well, the Dollar Index seems to have experienced some sort of breakout in the last few days.

Crypto Support

The crypto market is rebounding today after yesterday’s sizable sell-off. This relief rally has many alternative investors breathing easier, as we have green across the board.

The range we’ve been watching on bitcoin has been holding rather well. Since the beginning of the year, we’ve seen buyers stepping in about halfway through the $5K handle (yellow line), which is approximately what analysts estimate is the cost to mine bitcoin.

On the upper side, resistance is being maintained by the 200-day moving average (blue line). While the stable range should be seen as a positive sign, a breakout in either direction is always a possibility.

Let’s have an awesome day ahead!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Best regards,
Mati Greenspan
Senior Market Analyst

Connect with me on….

eToro: @MatiGreenspan | Twitter: @MatiGreenspan | LinkedIn: MatiGreenspan | Facebook:MatiGreenspan

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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4.7 stars on average, based on 122 rated postsSenior Market Analyst at Etoro.com.




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