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Weekly Analysis: Dollar Drops and Volumes Decline in Summer Trading

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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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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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