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Weekly Analysis: Dollar Drops and Volumes Decline in Summer Trading

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Weekly Analysis: Dollar Drops and Volumes Decline in Summer Trading

Introduction

This article was posted on Saturday, 15:10, UTC.

Weekly Recap

Asset Current Value Weekly Change
S&P 500 2432 0.25%
DAX 12723 -0.51%
WTI Crude Oil 43.17 -3.75%
GOLD 1258.00 0.18%
Bitcoin 2705 6.23%
EUR/USD 1.1192 0.46%

Escalation

Two geopolitical events caused the biggest waves this week, in an otherwise calm summer period. The world can always count on Donald Trump that he will say, tweet, or sign something that will make people rethink the future of the planet. This time it was a tweet and North Korea, and China a little bit, when the President concluded that China couldn’t fix the Korea problem. We don’t know what exactly Trump means by fixing the problem, but we will most likely have a better idea soon.

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WTI Crude Oil, 4-hour Chart Analysis

While the POTUS always starts with a huge claim, then dials his tone down, no such thing is expected from Saudi Arabia and its allies who sent a 10-day ultimatum to Qatar on Friday. The requirements that are hard to imagine to be met in such short notice openly demand cutting ties with Iran and Turkey, if anyone had any doubts who or what is behind the “Qatar-crisis”. Although political escalation usually comes with an almost instant gold-oil long trade, the oil part looks to be failing this time, as the OPEC supply cut is in jeopardy, and the Black Gold is trading near 10-month lows.

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Summertime

The strongest trend of the week for stock, and all financial markets was definitely the decline in volumes. The post-Fed burst in the Dollar lost its steam, and the Greenback headed lower towards the end of the week, as the reality of the slowing economy and the falling long-term yields kicked in. Gold should be among the strongest assets in this environment, and sure enough, the precious metal staged an encouraging bounce in the low-volatility period.

The major stock benchmarks were mostly flat, with underperformance in Europe and a convincing-looking bounce in the NASDAQ. Fiat currencies were calm before the potentially important central bank summit next week, while industrial commodities and emerging markets were relatively bullish, especially copper that rallied together with the surprisingly stable Chinese market. The Dollar will likely drive the trends next week as well, although we feel that something interesting will happen in Portugal where Draghi, Yellen, and Kuroda will all be making an appearance.

Dollar Index, 4-Hour Chart Analysis

Cryptocurrencies

The crypto-segment followed the global trends in the low-volatility low-volume paradigm shift, and that is no small feat from the coins following last week’s strong breakdown. The major cryptocurrencies traded flat throughout the week, with Litecoin strongly holding on to its lofty gains, Bitcoin recovering above $2700, and Ethereum surviving a small scare and continuing its consolidation.

Ripple looks to be preparing for a move after a long correction, although the first break-out attempt failed on the night of the Trump-tweet. Ethereum Classic and Dash are still showing strength, but the whole segment seems to be in need for more frustrating sideways action, before a major move, although small cap coins are starting show some signs of life.

Litecoin, 4-Hour Chart Analysis

Economic Numbers

It was a very calm week concerning economic numbers, and the recent negative trend s weren’t that dominant, especially in the US where the housing market actually showed a bit of strength, albeit after several months of disappointments. The European PMIs showed weakness on the other hand, and that coupled with the Euro’s rally pushed local equities lower, despite the progress being made on the Brexit talks. The next week will be much busier on the economic front, and that could shake up the summer conditions, in the markets.

Technical Corner

DAX, 4-hour Chart Analysis

The DAX still looks to be forming a long-term top, despite being inside the long-standing advancing trend channel. The German index still trades around the 12,750 level in a broadening pattern which are, in general, bearish ones. That said, given the low volume environment, more range trading might follow, as the US markets still show strength. A break below 12,650 would likely trigger a move towards 12,500, while the test of the 13,000 level is still in the cards.

Key Economic Releases of the Week

Day Country Release Actual Expected Previous
Monday JAPAN PPI Index 2.10% 2.20% 2.10%
Monday US Federal Budget Balance -88.4 bill 182.4 bill 182.4 bill
Tuesday AUSTRALIA Monetary Meeting Minutes
Tuesday AUSTRALIA HPI 2.2% 2.2% 4.1%
Tuesday UK BOE Gov Carney Speaks
Tuesday CANADA Wholesale Sales 1.0% 0.5% 0.9%
Tuesday US Current Account -117 bill -124 bill -112 bill
Wednesday UK Public Sector Credit 6.0 bill 7.3 bill 9.6 bill
Wednesday US Existing Home Sales 5.62 mill 5.54 mill 5.57 mill
Wednesday US Crude Oil Inventories -2.5 mill -1.2mill -1.7 mill
Thursday CANADA Core Retail Sales 1.5% 0.6% -0.2%
Thursday US Initial Jobless Claims 241,000 241,000 237,000
Friday EUROZONE Manufacturing PMI 57.3 59.1 59.5
Friday EUROZONE Services PMI 54.7 55.4 55.4
Friday CANADA CPI Index 0.1% 0.2% 0.4%
Friday US New Home Sales 610,000 569,000 569,000
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Mate Cser

Mate Cser

Trader 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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