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Weekly Analysis: All Eyes on the FED as Cryptocurrencies Shoot for the Moon

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Asset Current Value Weekly Change
S&P 500 2380 1.30%
DAX 12470 2.11%
WTI Crude Oil 49.19 -1.45%
GOLD 1269.50 -1.71%
Bitcoin 1332 9.34%
EUR/USD 1.0898 1.63%

 

 5 Things to Watch Next Week

  1. Will the FED shock the market?

The consensus among investors is that the FED won’t hike its benchmark rate next week, and the recent weakness in economic numbers makes that even more likely. That said, the central bank was upbeat in recent months, and a surprise rate hike is not out of the question. Stocks and gold could take a hit in the event of a hike, but a cautious monetary statement could propel a new swing higher in the Shiny Metal, and the major indices while pushing the Dollar even lower.

  1. Will Cryptocurrencies keep rising?

The cryptocurrency market remained active this weekend after the week that brought huge moves for almost every major currency. As the mainstream investment world increasingly turns its attention to this segment, volatility is expected to remain elevated, as the stellar returns might continue to attract additional capital. It will be interesting to see if the currencies can hold onto their gains next week or even surge higher.

  1. The strength of the Nasdaq or the weakness of the S&P 500 will dominate?

The relative strength of the US technology index was even more apparent this week, as the benchmark jumped to new all-time highs while the S&P 500 and the Dow remained below their respective maximums. These types of divergences usually don’t last too long, so or the broader market will join the party or bulls will be in for a painful hangover after the post-election euphoria.

  1. Another round of crucial earnings coming up

So far first quarter earnings in the US were much better than expected, and what’s more, stocks reacted well to the positive surprises. Next week Apple, Facebook, Alibaba, Mastercard, and dozens of other companies will release their numbers possibly having a major impact on the market. Although corporate earnings are at a very high level historically, until the global economy keeps growing (thanks in part to the unprecedented central bank measures) there could still be room for growth.

  1. Job’s Friday after the FED

This month’s US employment numbers could be even more crucial for investors than usual, as they will be released just after the Fed’s interest rate decision and monetary statement. As traders expect the central bank to reflect on the slowing growth in the country, another weak report could cause major turmoil before the weekend, especially if the FED turns more cautious. Initial jobless claims have been showing some worrying signs lately, and that might translate to a negative surprise in the coming report.

In Focus: Cryptocurrencies

 

Weekly performance comparison of the major cryptocurrencies, Hourly Chart

The chart above shows just how strong this week was for the cryptocurrency market, as only Bitcoin advanced by slightly less than 10% since last Sunday, while all the other coins all posted double-digit gains. Ethereum Classic and Ripple rose by more than 80% and 55%, but Ethereum, NEM and Dash are also up significantly. With almost all currencies at or near their long-term highs, traders can choose from several strong trends in the segment. The structure of the market shift continuously, as Bitcoin’s weight is progressively decreasing, despite the new all-time highs in BTC. We are expecting another busy week for the segment, with Dash and Monero edging towards their long-term highs as well this weekend, possibly preparing to follow the explosive break-outs of the other majors.

Currency Weekly Volume Monthly Volume Market Cap
Bitcoin 2,118 9,037 21,514
Ethereum 858 2,787 6,247
Ripple 247 1,072 2,018
Litecoin 336 2,574 814
Dash 99 497 681
Ethereum Classic 230 425 492
NEM 55 100 436
Monero 50 197 331

 

Key Economic Releases of the Week

Day Country Release Expected Previous
Monday UK Treasury Sec Mnuchin Speaks
Monday GERMANY Personal Spending -0.10% 0.20%
Monday US ISM Manufacturing PMI 56.6 57.2
Tuesday CHINA Manufacturing PMI 51.4 51.2
Tuesday AUSTRALIA Base Interest Rate 1.50% 1.50%
Tuesday UK Manufacturing PMI 54 54.2
Wednesday UK Construction PMI 52.1 52.2
Wednesday EUROZONE Prelim GDP 0.50% 0.40%
Wednesday US Crude Oil Inventories -3.6 million
Wednesday US ADP Employment Report 178,000 263,000
Wednesday US FOMC Statement
Wednesday US Base Interest Rate 1.00% 1.00%
Thursday AUSTRALIA Trade Balance 3.3 bill 3.57 bill
Thursday UK Service PMI 54.6 55.0
Thursday CANADA Trade Balance 0.3 bill -1 bill
Thursday US Initial Jobless Claims (weekly) 246,000 257,000
Thursday US Trade Balance -44.9 bill -43.6 bill
Thursday EUROZONE ECB President Draghi Speaks
Friday CANADA Employment Change 20,000 19,400
Friday CANADA Unemployment Rate 6.70% 6.70%
Friday US Employment Change 194,000 98,000
Friday US Unemployment Rate 4.60% 4.50%
Friday US Hourly Earnings 0.30% 0.20%
Friday US FED Chair Yellen Speaks
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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Analysis

Forex Update: Euro and Pound Under Pressure Amid Brexit Chaos

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Forex Market Snapshot

Asset Current Value Daily Change
EUR/USD 1.1318 -0.32%
GBP/USD 1.2515 -0.35%
USD/JPY 113.27 -0.04%
AUD/USD 0.7200 0.14%
GOLD 1,247 -0.23%
WTI Crude Oil 51.63 1.43%
BTC/USD 3,336 -2.10%

The forex market has been very active today with Europe being in the epicenter of the moves. The Euro and the Great British Pound are both trading with a bearish bias, despite an early rally. The initial move higher in the main risk-on currencies was triggered by the Chinese proposal of reducing car tariffs on vehicle’s made in the US, which gave back hope that the US-Chinese talks could be back on track despite the recent arrest of Huawei’s CFO. The brief bounce in Europe was also fueled by the better-than-expected German ZEW Sentiment data, even as the indicator still points to a slowdown.

While the risk rally faded in late European trading, the US Dollar got higher across the board following the better-than-expected Producer Price Index (PPI) report. Analysts expected a flat headline number due to the sharp decline in the price of oil while the more reliable core measure was expected rise modestly. The higher-than-expected producer inflation caused a rise in rate-hike odds and in turn, a bounce in the Dollar.

Technical Analysis

EUR/USD, 4-Hour Chart Analysis

The Euro, which is among the weakest majors from a technical standpoint due to the Brexit troubles the Italian budget debate and the slowing global economy, is back near the 1.13 level, still in a clear long-term downtrend.

The short-term trading range is intact in the pair, and for now, the prior low near 1.12 is not in danger, but despite the very favorable seasonality for the common currency, it failed to maintain its bounce above the key 1.1440 level, pointing to strong selling pressure and likely new lows in January.

GBP/USD, 4-Hour Chart Analysis

The Pound crashed below the 1.27 level following the delay of the key Brexit vote that was supposed to take place today, and the weakest major currency hit new 20-month lows against the US Dollar as we expected.

The pair is still well above its 2016 low near 1.20, but there are no major support zones that could stop the decline, should the political uncertainty persist. Both the short- and long-term trends remain bearish in GBP/USD, and only a quick recovery above 1.27 would help bulls here.

EUR/GBP, 4-Hour Chart Analysis

The EUR/GBP pair broke out above the 0.90 level and the long-standing trading range that has been dominant for almost a year, besides a failed break-out attempt in August. Given the Pound’s overall weakness a move towards the 2017 highs near 0.93 is possible in the coming months and a move above that could open up the way to the historic 0.95 level, and the 0.9750 level which was hit briefly during the panic in 2008.

Gold Futures, 4-Hour Chart Analysis

Gold pulled back below the $1250 level after hitting its highest level since July, and although the precious metal is close to confirming a new uptrend, a failed break-out formation is still in the cards. That said, the long-term outlook is still positive for the safe-haven asset, and should the pull back in US yields continue, gold could be in for a bull run even against the relatively strong US Dollar. The next major resistance zone is found near $1300 while support is at $1215 and $1080.

Key Economic Events Tomorrow

ChartBook

Forex

USD/JPY, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

EUR/JPY, 4-Hour Chart Analysis

AUD/JPY, 4-Hour Chart Analysis

GBP/JPY, 4-Hour Chart Analysis

USD/CHF, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

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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Altcoins

Stellar Price Analysis: XLM/USD on the Road to Losing the $0.10 Mark; Coinbase Can’t Save XLM for Now

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  • XLM bears are pressing hard for a drop below the big $0.10 mark, as markets remains down across the board.
  • There could be room for another 8% price drop if support is broken, looking via the XLM/BTC chart view.

Stellar’s XLM is subject to giving up the big $0.10 level. Across the board there have been a several key psychological price breaks. Cryptocurrencies are being forced to give way, due to strength of the current bear market. When prices drop below these closely looked at levels, it only seems to spark further worry and panic. A fresh wave of selling pressure is then invited. Over the past five weeks, XLM/USD has fallen a chunky 63%, from the $0.29 territory, down to a recent low of $0.1010.

Consolidation Mode – Bears Rubbing Paws Together

XLM/USD daily chart

Over the past four sessions, there has been some stabilization following the deep push on 6th December, where XLM/USD fell to $0.1010. The price is moving within consolidation mode, something that is seen across the market. Technically, this only spells more danger – a calm before the storm potentially for cryptocurrencies. This type of behavior has been seen over and over again during this aggressively stubborn downward trend.

What if $0.10 is Breached?

As noted on numerous occasions, this move is uncharted territory already, falling from the heights seen at the start of the year. Market participants are already fueled with a serious amount of FUD, so such technical breaks will only cause more damage. This isn’t due to anything fundamental relating to the Stellar foundation, as their developments continue to remain very much sound and strong. One must gauge how further this can fall, via XLM/BTC chart view.

Technical Review – XLM/BTC

XLM/BTC daily chart

XLM/BTC continues to flirt with a critical area of support, and a failure to hold will be catastrophic. This zone held in the most recent fall on 7th December; despite the long lower wick below, the price still managed to close above. XLM/BTC has not been and closed below 0.000035 territory since September 19th. Should a breach occur, which if the current pace of momentum maintains its course could very well happen, another 8% drop may follow.

Lastly, it is worth keeping an eye out of the potential formation of a head and shoulder pattern. The left shoulder and head have been crafted via XLM/BTC daily chart. There is certainly a possibility that the bulls come back to life, forcing a bounce at the above-mentioned support. A right shoulder could then move towards heights back within the $0.00004000-4500 range. This is where the next major of supply can be observed.

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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4.5 stars on average, based on 79 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Analysis

Crypto Update: New Lows in Sight Again as Slide Continues

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The cryptocurrency segment continues to be under heavy selling pressure following the weekend rally attempt, and although all of the majors are still above last week’s lows, the strong short-term downtrend remains dominant. The long-term picture is overwhelmingly bearish as well, and there are coins showing meaningful relative strength, so sellers are clearly still clearly in control of the market, and the lack of leadership is still apparent.

With that in mind, traders and investors shouldn’t enter positions even in the slightly stronger coins, and odds still favor the continuation of the bear market, with new lows likely in the coming days. That said, a successful test or a failed breakdown could trigger a larger scale correction, with the broader picture still being deeply oversold and with investor sentiment still being very negative. For now, there is no sign of an imminent rally, with all eyes on the $3000 in Bitcoin.

BTC/USD, 4-Hour Chart Analysis

Bitcoin has been drifting lower ever since touching the $3600 level during the weekend, and the now the most valuable coin is close to its prior bear market low, pushing the total value of the market back below $110 billion. Today’s selloff took the coin below $3400, and a test of the next long-term support zone near $3000 is now likely in the coming days.

At least a move above $3600 would be needed for a meaningful improvement in the coin’s technical setup, but for now, sellers remain in control on both time-frames and our trend model is on clear sell signals both short- and long-term, with further strong resistance ahead in the $4000-$4050 zone.

ETH/USD, 4-Hour Chart Analysis

Ethereum is also close to last week’s bear market low and the coin is clearly stuck in a steep short-term downtrend with no sign of relative strength or bullish momentum since the failed weekend rally. The coin is also trading below the strong $95-$100 support/resistance zone, and with support just being found between $73 and $75, a new low is likely in the coming days.

Traders and investors should still stay away from entering new positions here, with further strong resistance zones ahead near $120 and $130.

Litecoin and Ripple on the Verge of Breaking Down

XRP/USDT, 4-Hour Chart Analysis

The major altcoins are all in week technical setups, and even Ripple, which is in a slightly better long-term position, is looking bearish from a short-term perspective. The second largest coin is trading below the $0.30 level, and a test of the next zone near $0.28 seems imminent.

The prior bear market low near $0.26 could also be in danger in the coming period, and traders and investors shouldn’t enter positions here, with resistance levels above $0.30 ahead at $0.32, $0.3550, and $0.3750.

Litecoin/USD, 4-Hour Chart Analysis

Litecoin is very close to breaking down below the $23 support zone today, and the coin is showing relative weakness compared to the other major, as it was the case ever since last week’s bearish shift. Our trend model remains on sell signals on both time-frames, and a new low seem very likely in the coming days, so traders shouldn’t enter new positions here despite the deeply oversold long-term momentum readings. The next major support zone is found between $20 mad $20.50 with strong resistance ahead near $26 and between $30 and $30.50.

Stellar/USDT, 4-Hour Chart Analysis

Since the key breakdown in Stellar, the coin remained relatively weak, and the strong selling pressure is still apparent in its market. The recent rally attempt failed to recapture even the $0.125 resistance, and now a dip below $0.11 and a test of the $0.10 level seems likely in the coming weeks. Further strong resistance is ahead just below $0.14 and traders and investors should still not enter new positions here.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

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 413 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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