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Weekly Forecast: Cryptocurrencies Look for Direction After Turbulent Month

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A wave of selling pressure has swept the cryptocurrency markets this month, casting a shadow over April’s bullish reversal. Though cryptos have declined for three consecutive weeks, downside pressure appears to be slowly fading as investors await the latest developments on the regulatory and adoption fronts.

Among correlated assets such as stocks, bonds and commodities, attention will be paid to ongoing geopolitical developments, free trade negotiations and economic data.

Cryptocurrencies: The End of the Downtrend?

Proponents of the price manipulation theory believe we may be nearing the end of the crypto-market downtrend as large investors continue to dump their oversized holdings of bitcoin.

This view is corroborated by the fact that the last three downtrends – starting in December and continuing to this day – have been accompanied by higher lows and shallower recoveries. At the same time, trading volumes are thinning with each major correction. Case in point: cryptocurrency trade volumes fell on Sunday to their lowest in six weeks.

That said, bitcoin is currently eyeing support in the high $6,000 range after briefly falling below $7,300 on Sunday. Analysts such as Willy Woo believe that a further breakdown below $6,000 is possible before we see any major rebound. Much of that will depend on bitcoin’s ability to hold the critical $6,500 support level, which the market has failed to breach since early February.

The cryptocurrency market bottomed at $320 billion last Thursday. A stalled weekend recovery knocked prices back toward $326 billion from a high near $340 billion.

Usually, signs of institutional adoption – like the ones we’ve seen repeatedly over the past three weeks – are a boon to crypto assets. However, it appears as if wider institutional adoption has already been priced into the market (i.e., “buy the rumor, sell the fact”). This suggests traders are now looking for tangible evidence of a new product or service being launched before they rally behind bitcoin like they did in December.

In the author’s view, the actual launch of Goldman Sachs’ bitcoin operation could provide that spark.

Geopolitics in Focus

A meeting between U.S. President Donald Trump and North Korea’s Kim Jon-un is back on as talks resumed in the wake of last week’s diplomatic breakdown.

The planned summit, which is scheduled to take place in Singapore next month, was salvaged after South Korean leader Moon Jae-in held an unannounced meeting with his northern counterpart on Saturday. According to Moon, the North Korean leader has “again made clear his commitment to a complete denuclearization of the Korean peninsula.”

Stock markets are likely to respond favorably to the developments, as easing geopolitical tensions tend to boost risk-on assets. Investors should pay attention to futures trading in the coming hours for an indication of how the market will perform.

Economic Calendar

In terms of economic data and other key developments, below is a rundown of everything you need to know for the next five days.

Monday

U.S. stock markets are closed for Memorial Day.

No major data releases are expected.

Tuesday

The Dallas Federal Reserve Bank will release its monthly manufacturing business index, while S&P/Case-Shiller will report on U.S. house prices.

Meanwhile, New Zealand’s central bank will release its Financial Stability Report.

Wednesday

A deluge of economic data will make its way through the financial markets Wednesday, beginning in Europe with German retail sales, unemployment and consumer inflation. Europe’s largest economy likely saw a pickup in annual inflation for May, with analysts forecasting year-over-year growth of 1.9%.

Meanwhile, the European Commission’s statistical agency will report on a series of economic and business sentiment indicators.

Shifting gears to North America, the U.S. Commerce Department will release revised first-quarter GDP data. The ADP Research Institute will also release its monthly report on private-sector employment.

In terms of monetary policy, the Bank of Canada will deliver a verdict on interest rates early Wednesday. Canada’s benchmark interest rate is forecast to hold steady at 1.25%.

Thursday

Reports on Eurozone consumer prices and unemployment will headline European trading on Thursday. The consumer price index (CPI) for the 19-member euro area likely rose 1.6% annually in May compared with 1.2% the previous month.

In the U.S., the Department of Commerce will issue its monthly report on personal income and outlays. The data set also includes core personal consumption expenditures (PCE), the Federal Reserve’s preferred measure of inflation. The core PCE rate likely strengthened to an annual rate of 2% for April from 1.9%.

North of the border, the Canadian government will release first-quarter GDP figures.

Friday

U.S. nonfarm payrolls will headline Friday’s session, with the May report expected to show the creation of 185,000 jobs. Unemployment is projected to hold steady at 3.9% and average hourly earnings likely picked up to 2.7% annually from 2.6%.

Separately, the Institute for Supply Management (ISM) will report on U.S. manufacturing PMI. The May reading is expected to print 57.7 on the PMI scale. Anything above 50 signifies expansion.

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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4.7 stars on average, based on 741 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Market Overview

Stocks Power Ahead as China Pledges to Eliminate U.S. Trade Deficit; Cryptocurrencies Stabilize

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U.S. stocks surged on Friday, extending their winning streak to four days after China proposed new measures to help Washington eliminate its burgeoning trade deficit. Cryptocurrencies hovered near break-even for the week, as a lack of trading catalysts kept investors non-committal.

Stocks Extend Rally

All of Wall Street’s major indexes booked solid gains to close at their highest in well over a month. The Dow Jones Industrial Average jumped 336.25 points, or 1.4%, to 24,706.35. The index was led by gains Hone Depot Inc. (HD), Caterpillar Inc. (CAT) and UnitedHealth Group Inc. (UNH).

The much broader S&P 500 Index rose 1.3% to 2,670.71. Ten of 11 primary sectors finished higher, led by energy, industrials and materials stocks.

The technology-focused Nasdaq Composite Index rose 1% to finish at 7,157.23.
Stocks have gained more than 6% since the year began, as traders looked to offset some of last quarter’s brutal declines.

End of the Trade War?

China is serious about ending the trade war with the United States. Sources close to the negotiations confirmed on Friday that Beijing has offered the United States a six-year increase in U.S. imports valued at more than $1 trillion. This would allow Washington to fully eliminate its annual trade deficit with China, currently valued at $323 billion, by 2024. CCN has more: Bye Bye Trade War? China Plans $1 Trillion Buying Spree to Reduce US Trade Deficit.

As Hacked reported Thursday, U.S. lawmakers are strongly considering lifting tariffs on Chinese imports in a renewed push to broker a new trade deal with Beijing. The Trump administration had previously pledged to raise tariffs on $200 billion worth of Chinese goods before Presidents Trump and Xi Jinping agreed to a temporary truce in December. The truce allowed both sides to negotiate a new trade deal over the next 90 days.

Crypto Prices Subdued

Crypto prices maintained their stability on Friday, as contradictory signals kept market activity to a minimum. This comes despite a noticeable pickup in trade volume over the past seven days.

The cryptocurrency market capitalization hovered below $122 billion, where it was virtually unchanged compared to seven days ago. The market bottomed near $116 billion last Sunday before quickly rebounding near $125 billion on Monday. Throughout the week, trade volumes have hovered in the $16-17 billion range. As Hacked recently reported, bitcoin has seen a sharp rise in circulation over the past 30 days.

Read Hacked.com’s Weekly Recap: Crypto Volatility Declines as Bitcoin Shows Renewed Stability; U.S.-China Trade War Could Soon End.

By late afternoon, most major assets were trading lower over the 24-hour cycle. Bitcoin was trading at $3,650, where it was tracking a 24-hour loss of 0.5%. XRP and Ethereum each fell more than 1.5%. Bitcoin cash and EOS booked losses of more than 2% each.

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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4.7 stars on average, based on 741 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Analysis

3 Things You Need to Know About the Market Today: Trade Rally, Pound Pullback, Tesla Worries

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1, Trade Optimism Drives Rally in Stocks, Oil

Shanghai Composite, 4-Hour Chart Analysis

The US government is mulling to lift or ease some of the trade tariffs on Chinese goods, at least according to the reports that surfaced yesterday, and although the rumors were promptly denied by the Treasury, risk assets have been pushing higher ever since. Global stocks are trading at 1-month highs, with understandably, the major US indices and China leading the way higher. We expect further gestures by the two sides in the coming weeks, as the talks progress, but a final agreement could still be months away.

The most affected commodities, such as copper and oil are also up today, and but as we noted this weekend, the oversold rally in risk assets is stretched now. Also, even as the weaker global benchmarks, such as the Shanghai Composite have joined the party, the clear economic slowdown and the bearish technicals make the current environment hostile for bulls

2, Pound Retreats After Hitting 2-Month High Above 1.30

GBP/USD, 4-Hour Chart Analysis

Besides the Trade War saga, the likely delay of the Brexit deadline has been making waves all week long, and Pound bulls seem to like the idea of a possible “soft” deal with the European Union. The currency hit its highest level against the Dollar since mid-November, topping the 1.30 level, while British stocks are also trading near their 2019 highs.

Prime Minister Theresa May pledged to include the opposition parties following Wednesday’s no-confidence vote, but for now, even starting the talks is challenging, even though the government labeled the first talks “constructive”. In any case, with the chances of a no-deal Brexit being low right now, the Pound could enjoy further gains, especially as long as the global risk rally lasts.

3, Tesla Disappoints With Guidance, Cuts Workforce by 7%

Tesla (TSLA), 4-Hour Chart Analysis

While it held up very well during the recent tumroil in the stock market, Elon Musk’s crown jewel, Tesla (TSLA) has been down by as much as 8% today in pre-market trading after warning investors that the electric car maker will likely turn a smaller-than-expected profit in the coming quarter. Tesla is struggling to ramp up the production of the Model 3, while also facing difficulties to hit its cost goal with regards to its “mass” product.

With the traditional car makers slowly but surely closing in on the company, and given the looming cash flow issues, the coming quarters will crucial for the Musk. The company just avoided bankruptcy in its early days, and some bears think that the fierce competition and the production issues could lead to a crisis yet again. The company’s workforce skyrocketed in recent years, and today CEO Musk also announced that it will lay off 7%, approximately 3000 workers, to cut costs after the expansion. He stated that,

“We unfortunately have no choice but to reduce full-time employee headcount by approximately 7%, we grew by 30% last year, which is more than we can support, and retain only the most critical temps and contractors (…)”

While today, earnings reports will be few and far between, Netflix (NFLX) will also be in focus after reporting yesterday in after-hours trading, and for now, the streaming giant is also trading lower despite the broad overnight rally in stocks.

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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4.7 stars on average, based on 443 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

Make it or Break it

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Hi Everyone,

In the United States at the moment, there are nearly 39 million people on food stamps. We already know that government workers are not getting paid during the shutdown but what now seems unclear is how the shutdown affects the poor.

For those of you who are not familiar with food stamps, this is the US government’s welfare program that provides food to poor people by giving them coupons that they can take to the store.

The thing is, the system is quite complex and varies for different states and different retailers. A few stores have already been forced to stop accepting food stamps due to the shutdown and some states have given their citizens an advanced payment.

For now, it seems that only a small number of people have actually been affected but with some analysts predicting that the shutdown could last for several more months, the future seems incredibly uncertain and information is hard to come by. So it’s worth keeping an eye on this development as it could potentially affect several areas of the US economy and the broader market.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Shutdown: Day 28 | Days to Brexit: 70
  • 10 Year Challenge
  • Russia’s Real Crypto Plans

Please note: All data, figures & graphs are valid as of January 18th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

The markets were relieved yesterday by the news that…

This is a good indication that US-China trade talks are going well and seeing any sort of concessions from the White House, or even the indication that there may be concessions, is cause for celebration among investors.

The positive sentiment has carried through the Asian session and well into European trading.

Risk On

With the rise in stocks, we’re seeing some of the hallmarks that show investors are looking to take on more risk today.

Gold has managed to pull back from the $1,300 resistance level and oil is testing new highs, despite an IEA report that expects over-production to continue.

Perhaps the biggest indication of risk on sentiment today is coming from the USDJPY, which has now stepped over the 109 level as traders sell the Yen for the Greenback.

Next weekend is likely to start with a bang!

Just a few hours after markets open and before most western investors have opened their eyes, China will report some critical GDP growth data. As the China slowdown has become a prevalent theme in the markets recently this single data point can be a make it or break it moment.

Russia’s Real Crypto Plans

Last week, in one of our daily market updates (titled: Digital Reserves), we discussed a rumor that was circulating in the crypto community that the Central Bank of Russia may be planning to add bitcoin to its national reserves.

Well, it turns out Elina Sidorenko, the chairperson for the government committee for overseeing cryptocurrencies, has now clarified that while Russia might want to do this, it could be another 30 years before this becomes a reality.

As we correctly noted in the daily update at the time, the major setback here is that there is currently no legal framework for doing this. However, from what I understand, the idea of setting up a national CryptoRuble is being discussed among government officials and could very well happen within the next couple of years.

In any case, we do know that the government of Russia is watching the crypto space quite closely. Dimitry Medvedev was quoted just yesterday as saying that the bear market doesn’t spell the end of crypto.

Spoken like a true crypto advocate!!

Have an amazing weekend.

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

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

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

eToro is a multi-asset platform which offers both investing in stocks and cryptocurrencies, as well as trading CFD assets.

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

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 LinkedInMatiGreenspan |Facebook:MatiGreen

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 143 rated postsSenior Market Analyst at Etoro.com.




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Hacked.com and its team members have pledged to reject any form of advertisement or sponsorships from 3rd parties. We will always be neutral and we strive towards a fully unbiased view on all topics. Whenever an author has a conflicting interest, that should be clearly stated in the post itself with a disclaimer. If you suspect that one of our team members are biased, please notify me immediately at jonas.borchgrevink(at)hacked.com.

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