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Analysis

A Week to be Remembered as Euro Jumps and Cryptocurrencies Dive Deep

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Weekly Recap

Asset Current Value Weekly Change
S&P 500 2428 0.15%
DAX 12815 0.11%
WTI Crude Oil 46.33 -4.15%
GOLD 1242.00 -1.10%
Bitcoin 2495 -3.21%
EUR/USD 1.1417 1.86%

Central Bank Bonanza

The beautiful town of Sintra in Portugal was the center of the financial world for a week, as the most powerful players of the global economic field (well, that is even scarier than it sounds) gathered there to discuss monetary policies. The European Central Bank and “Super” Mario Draghi were in the forefront of the event, as the bank tried to “double-speak” the market, hinting at monetary tightening, while keeping the Euro’s reaction to a minimum.

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EUR/USD, 1-hour Chart Analysis

Well, that didn’t quite work out, as you can see on the chart of the common currency above, but given the track record of the ECB in being “behind the curve” and having to change his policies very quickly, we expect a lot of flip-flopping from them in the coming years as well. For now, the market reacted in line with a tightening move; Euro up, stocks down, gold under pressure. The exception is the strong bounce in oil which was caused by the quiet Middle East situation and the effect of the higher yields on the US shale industry. The sustainability of these trends is questionable, especially gold’s bearish one, but we can definitely imagine a stronger move in the Euro as well as a deeper correction in stocks.

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NASDAQ and DAX Looking Weak while Banks Turn Higher

Looking at the major stock markets, the NASDAQ is once again the weakest link, as it has been since the flash-crash two weeks ago, and that usually spells trouble for the broader market as well. Banks, especially US mega-banks, have reacted to the jump in yields in a bullish fashion, and the financial sector is testing its bull market highs near the $25 level as measured by the XLF ETF.

XLF (US Financial Sector ETF), 4-Hour Chart Analysis

The DAX and the major European stock indices were under pressure as the Euros rally pushed them lower, although the prior technical position of the segment was already quite bearish, as we noted last week. The German benchmark is now testing the support zone that we have been monitoring, and odds are good for an even deeper correction, even if the Euro’s jump won’t be long-lived.

DAX Index, 4-Hour Chart Analysis

Cryptocurrencies

The crypto-segment remained in a correction all week long following Monday’s scary mini-crash, which was arguably led by Ethereum. The long-term picture looks more and more neutral for the major coins, and it wouldn’t be a surprise if Monday’s lows were the final lows for the correction. The majority of the major and smaller coins are falling once again this weekend, but volatility is lower and correlations are not that strong anymore between the currencies, and Bitcoin is holding notably above the $2450 level, acting much stronger than during the past two weeks.

Bitcoin, 4-Hour Chart Analysis

Economic Numbers

The main economic indicators were mixed this week, with notable strength in Europe and a two-faced set of releases from the US. The forward-looking indicators were mostly bearish in the US, especially the Durable Goods Orders report, while the Pending Home sales number cooled down expectations regarding the housing market once again. The better than expected GDP print was accompanied by a price index downgrade, muting the effects of the positive surprise. The German IFO Business Climate Index, the Retail Sales report, and the Eurozone CPI all fueled the Euro’s rally, although the momentum of the move stalled on Friday.

Key Economic Releases of the Week

Day Country Release Actual Expected Previous
Monday GERMANY IFO business Climate 115.1 114.7 114.6
Monday US Core Durable Goods Orders 0.1% 0.4% -0.5%
Tuesday UK BOE Financial Report
Tuesday US CB Consumer Confidence 115.9 116.1 117.9
Wednesday EUROZONE M3 Money Supply 5.0% 5.0% 4.9%
Wednesday US Goods Trade Balance -65.9 bill -66.2 bill -67.1 bill
Wednesday US Pending Home Sales -0.8% 0.9% -1.3%
Wednesday US Crude Oil Inventories 0.1 mill -2.1 mill -2.5 mill
Thursday GERMANY Prelim CPI 0.2% -0.2% 4.9%
Thursday US Final GDP 1.2% 1.2% -67.1 bill
Thursday US Initial Jobless Claims 240,000 241,000 -1.3%
Friday CHINA Manufacturing PMI 51.7 51.0 51.2
Friday CHINA Services PMI 54.9 54.5
Friday GERMANY Retail Sales 0.5% 0.3% -0.2%
Friday UK Current Account -16.9 bill -16.5 bill -12.1 bill
Friday UK Final GDP 0.2% 0.2% 0.2%
Friday EUROZONE Flash CPI 1.3% 1.3% 1.4%
Friday CANADA GDP 0.2% 0.2% 0.5%
Friday US Personal Spending 0.1% 0.1% 0.4%
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1 Comment

1 Comment

  1. embersburnbrightly

    July 1, 2017 at 4:36 pm

    Recent market moves have the ultimate effect of the mega banks getting even richer, all of this around a summit of key economic players in the banking industry. At a certain point, one has to wonder if that was the ultimate intended effect, with strategically-placed “fat fingers” involved around flash crashes in difference sectors. I am no conspiracy theorist, but it sure seems quite the coincidence how the all the timing of this all comes together this way. There are certainly those who benefit from the market behaving this way, and those who would have the influence to make the market behave that way. No, I’m sure it’s just happenstance how many “fat fingers” have pushed the wrong button on keyboards over the past week or two. They only have our best interest at heart, those with those pesky fat fingers.

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Analysis

Cryptocurrency Analysis: Ripple Continues Rampage as Litecoin and Ethereum Enter Correction

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Ripple remained in the center of attention in the segment after breaking out to a new all-time high yesterday, and the coin almost doubled in value, climbing above the $0.80 level. The currency concluded a 6-month long consolidation pattern with the move after being the only major on a long-term buy signal in our trend model.

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XRP gave a short-term sell signal today, while turning neutral regarding the long-term setup. Investors now shouldn’t add to their positions, although further gains are still possible, and reducing holdings somewhat is a good idea here. Major support is still found at the prior high near $0.4250 and in the $0.30-$0.32 range.

XRP/USDT, 4-Hour Chart Analysis

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While Bitcoin stagnated, and Bitcoin Cash jumped, Ethereum, Litecoin, Dash, and IOTA has been drifting slightly lower, although the recent gains are still mostly intact, and the basic setup in the segment is unchanged.

Litecoin fell below the $300 level after yesterday’s consolidation, and the coin faced strong selling pressure in the latter half of the session. The currency remains extremely stretched regarding the long-term momentum indicators, and although the short-term uptrend is still intact, a deeper correction is likely in the coming weeks, with key support levels found at $125 and $100, and weaker levels at $260 and $170.

LTC/USD, 4-Hour Chart Analysis

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Analysis

Daily Analysis: Dollar Falls, Gold Jumps after Yellen’s Final Move

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Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2668 -0.02%
DAX 13125 -0.45%
WTI Crude Oil 56.65 -0.68%
GOLD 1258.00 1.35%
Bitcoin 16,100 -6.32%
EUR/USD 1.1842 0.73%

The Federal Reserve hiked interest rates as expected today, and although the central bank’s monetary statement was slightly more hawkish than expected, the market’s reaction didn’t reflect the much-anticipated move. The worse than expected Core CPI reading that underlined the low-inflation narrative weighed on the recently strong Greenback, while stocks were unchanged after decision and bonds gained ground as yields retreated.

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EUR/USD, 4-Hour Chart Analysis

The major indices are hovering near their all-time highs with the DOW leading the way higher, hitting a new record for the second day in a row. While volatility Is expected to remain low as we approach the end of the year, market internals and valuation levels are still concerning from a long-term perspective, and stocks outside the US are also negatively diverging. The action in crude oil could be slightly more interesting as the commodity is starting to act in a slightly bearish manner after a grinding multi-month rally.

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WTI Crude Oil, 4-Hour Chart Analysis

The Brexit process is still in the center of attention in Europe, although volatility took a nosedive on the old continent as well, and it’s unlikely that the Christmas period will be much different, given the predictable drop in volumes and trading activity. The date of the next election in the financially and politically troubled Italy has been set to March 4th next year, and the early date caused some turmoil in the countries assets, which dragged the Euro Stoxx 50 lower today, together with the DAX and the other major indices.

Cryptocurrencies

As the total market cap of the crypto-market crossed the incredible $500 billion mark, Ripple, NEO, and Ethereum made headlines with lofty gains in the face of the severely overbought readings elsewhere in the segment. While XRP and NEO are still not overbought from an investment perspective, Ethereum reached our final target for its break-out and triggered a long-term sell signal.

ETH/USD, 4-Hour Chart Analysis

The previously surging IOTA continued its correction, Litecoin consolidated in a relatively narrow range, while Dash, ETC, and Monero scored marginal new highs before turning lower together with BTC. The most valuable coin that has lost some of its momentum “mojo” in recent days fell back below last week’s highs, and that could mark a failed break-out and a start of the deeper correction that seems more and more likely.

BTC/USD, 4-Hour Chart Analysis

Key Economic Releases on Wednesday

Time, CET Country Release Actual Expected Previous
11:30 UK Average Earnings 2.5% 2.5% 2.3%
11:30 UK Claimant Count Change 5,900 3,300 6,500
11:30 UK Unemployment Rate 4.3% 4.2% 4.35
15:30 US Core CPI 0.1% 0.2% 0.2%
15:30 US Crude Oil Inventories -5.1 mill -3.6 mill -5.6 mill
21:00 US Fed Rate Decision 1.5% 1.5% 1.25%
21:00 US FOMC Statement

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Analysis

Technical Analysis: Volatility on the Rise Again, as Ripple and Ethereum Hit Targets

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Ripple has been the star of today’s session in the cryptocurrency segment, as the only major coin on a long-term buy signal in our trend model continued yesterday’s break-out, and surged to a new all-time high. The currency cleared the $0.425 level that marked the top in May, and after the more than 6-month long consolidation phase, it promptly neared the $0.50 level.

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While the short-term momentum indicators are now stretched, the coin is still in an encouraging long-term setup, although the best period to buy already passed. The coin could be dragged lower in the case of the expected broad correction in the segment, but we expect XRP to outperform in the coming period, with support levels found at the prior high and below that in the range between $0.30-$0.32.

XRP/USDT, 4-Hour Chart Analysis

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Ethereum has been the other top coin on the rise, as the second largest digital currency surged past the final range projection target of the break-out two weeks ago at $685 in the aftermath of the launch of the BTC futures on Monday. The ETH token is now also on a sell signal on all time-frames, and we advise investors and investors to wait for the next major correction to establish new positions. Support levels are now found at $575, $500, $480, and $400.

ETH/USD, 4-Hour Chart Analysis

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