Core retail sales in the US weakened the USD as the values were lower than the previous and lower than expected. Core retails sales from the UK will be announced tomorrow and the forecasts say that the British Pound might be in danger.
The Pound looks strong and is looking to break the resistance and climb higher, though there are resistances and patterns that signal a correction.
First and the foremost is the dynamic resistance (upper threshold of the ascending channel) on a 4H chart. The pair penetrated the resistance and was sent back yesterday. The pattern on the same 4H is “double top” which in general signals a bearish move.
In the bigger picture, we have witnessed the closing price of November 11 and November 18 bear a strong resistance, and highs of the aforesaid candles also are at Fibonacci 0.786 level. Only closing above that level will confirm the further bullish run.
By the time of writing this article GBP/USD quote on Overbit is 1.32340, which is above the dynamic support, though is below EMA20. The MACD line is already below the signal line, hence might be confirmation of a correction, though the best would be to wait for the pair to break the dynamic support.
If the breakout is confirmed, the pair will drop towards 1.31430 and below that to 1.30648. Continuation of the correction might be backed by strong US Jobless Claims data today and weak UK Retail Sales data tomorrow.
Japan has been showing a steady recovery from the pandemic today’s Trade Balance and Exports data testifies. Battered US Dollar Index also supports the downtrend of the USD/JPY. Yesterday’s US Retail Sales, import and export price indexes data announced were below the forecasted, more importantly Core Retails sales (MoM) was 1 bp lower than the previous month’s 1.2%.
On a daily USD/JPY we can witness a downtrend channel that the pair follows. One of the important metrics on this chart is that the MA100 acted as a resistance on November 11, when USD/JPY hit the upper edge of the channel.
MACD is about to cross the signal line which will be a confirmation of the bearish continuation, which in other hands could be supported by the weak US Data to be announced this week. The market will be paying close attention to the two major US data announcements – Initial Jobless claims, expected to be 2K lesser than in the previous month and Philly Manufacturing Index which is expected to be lower by 10.3 bp than the previous month’s 32.3.
Important levels to watch are $103.70, which is a static and dynamic support on a 4H chart, closing below this level will be a ground for another round of sell-offs down to $103.166.
On both Daily and 4H charts, Moving averages act as resistances and MACD indicates bearish continuation. Investors also are cautious regarding the current Biden – Trump situation. Covid-19 vaccine effectiveness news helped the US Dollar Index gain some strength, though weakened again when it was announced by Biden that it’s actual application will take some time. If there are no tangible signs of economic recovery in the US and the spirit of “uncertainty” remains, the US Dollar against its counterpart Japanese Yen might as well plummet further to near year’s minimums – $101.747.
So far the deposit contract address on a popular transaction scanner shows that only 50,401 Eth worth of $22,787,804.13, 3200 ETH of which belong to the Founder Vitalik Buterin are staked, that is more than 10x lower than the required 524,288ETH.
The delay in the Launch of the PoS due to the insufficient deposit may hit the Eth token value as such happened before when Ethereum was postponing major updates. There are several other reasons why Ethereum holders are not rushing to stake their tokens, first of which is the soar of Ethereum price during the past weeks, the other reason is the growing number of DeFi projects and according to the popular metrics 8.5M of Eth is locked in DeFi.
Investors and traders are still looking to make the best out of the trading of this token against the US Dollar as ETH/USD shows signs of new highs.
As seen on the chart, ETH/USD has formed a symmetrical triangle pattern. As a general rule, one should follow the price action of the pair and wait for a breakout from either threshold of the triangle. Since, the price currently is holding near the upper threshold, breakout could be confirmed anytime soon.
Ethereum’s price surge was not mainly supported by the Eth 2.0 transition, although it played a significant role, but was rather backed by the weakening US Dollar and uncertainties in the market followed by the US Presidential Elections. The election is still not over and the tension still remains, especially over Biden’s stimulus plans and Trump’s lawsuits, hence the price of Ethereum might as well continue to grow.
Although postponement of the chain release might as well have a negative impact on Ethereum. Key level to watch if the breakout from the ascending channel is confirmed is $477-$500, if the price breaks the lower threshold of the triangle, the price might as well drop to $431 and below that to $416.
Investors are watching closely towards the development of the situation in the US mainly watching Biden’s stimulus plan named “The Biden Emergency Action Plan to Save the Economy”. As the number of Covid-19 cases in the US surged over the past week, over 100 000 new cases and over 1 000 deaths, the pressure on the President-elect over the stimulus pack grows.
Both Gold and Silver retraced as weeks started and formed a similar pattern, which signals a possible further correction.
Silver has reached an important resistance level today, November 09, at $26.01 and couldn’t get enough momentum to breakout from this major barrier.
The upper threshold of the descending channel halted the further uptrend of Silver. MACD also signals the upcoming correction as the MACD is heading downwards to cross the signal line. As per this correction there are two important support levels to watch, $25.35 and $24.64, $24.50.
The correction of XAG / USD would be confirmed if the dynamic support of the ascending channel on a 15M chart of the pair is penetrated. As stated by Elliott’s Wave Theory, each impulse wave should consist of a 5-wave pattern, hence there should be one more leg up before we witness $25.35 and $24.64.
By the time of writing this article, XAG/USD on Overbit is traded at $25.61 per ounce and has touched the dynamic support of the ascending channel. Closing below this support will lead to a further short-term downtrend to support levels indicated above. As per mid and long-term perspective Silver looks bullish and closing above $26.00 will lead to further surges towards $27.17 and $30.
The US Dollar is near support level at 92.140 and there are many factors which might push the DXY further downwards, such as Trump’s lawsuits and Biden’s Emergency Aid, and tomorrow’s JOLTs Job Openings data as per September, the number expected to be announced is 903K lower than the previous month, and if lower number is announced, the US Dollar Index might drop further which will on other hand pump the prices of Silver and Gold.
Early this morning Bitcoin put the first step towards an engulfing bullish move after testing the lower threshold of an ascending channel and received a pretty well support from EMA50.
Bitcoin is healthier when whales withdraw their funds from exchanges. In the past 14 hours almost 17 329 BTC were withdrawn from Huobi, 5 of them were 2 000 BTC tranches, 33 419 BTC were withdrawn from Binance, making a total of $237 336 745 worth of Bitcoin withdrawn.
The first cryptocurrency is most likely to continue the uptrend and even break records highs this year. According to the structure of the price action on the chart and patterns BTC/USD follows, the price in the nearest term will test $13 845, the next resistances and key levels to watch would be $14 091 and long-awaited by many investors $14 385 – $14 400.
MACD on an hourly chart already crossed the signal line and is heading upwards, whereas on a 4H chart above it is still lagging a bit, hence the cross may happen anytime soon. Bitcoin on an hourly chart is above MA200 which was a great support level and is above MA100 which acted as a resistance previously, hence there is little doubt left that Bitcoin is bearish.
However, this is a market and anything could happen, I truly do not think that Bitcoin will break below the ascending channels dynamic support and close below and if such happens, then the nearest support we could count on would be $12 959 – $12 870 levels.
Despite the growing numbers, AUD was not able to overtake the US Dollar and continued the down slide this week and the pair yesterday only lost 0.92% against the USD. As the Election day gets closer, the volatility rises in the market, giving an edge to the US Dollar in spite of continuous losses of the US Indices and somewhat weak Core Durable Goods and CB Consumer Confidence.
The market awaits two key data to be published today from the US – GDP (QoQ) as per 3rd Quarter which is expected to reveal a significant 31.0% growth compared to the previous 31.4% loss and the Initial Jobless Claims to reveal 775K which is lesser than the previous months’ 787K by 1.52%.
By the time of writing this article the AUDUSD on Overbit is traded at 0.70490 which is slightly above the dynamic support. The 4H chart of the pair has formed a triangle pattern and one more leg up is required to complete the 5-wave ABCDE correction.
A breakout from this triangle could trigger another round of impulse waves. The Daily chart on other hand signals the bearish continuation. The RSI divergence on a daily chart demonstrates the power of bears, whereas all bullish attempts are put to a stop lower than the previous.
Since the bullish impulse wave of March 19, AUDUSD has formed triangle patterns two more times, though they were not of a greater cycle as this last one, all two were then followed by another impulse wave, let’s see if this triangle also triggers an impulse of a greater Elliott Wave cycle.
Follow the economic updates and earnings of the US companies, as these are playing a great role on the US Dollar Index. Beware of volatility and trade with caution during the economic data announcements.
GBP showed significant strength on Friday amid new Brexit negotiation hopes. The deal has faced another dilemma – the fish. UK wants the EU vessels to stay out of the UK waters after the Brexit, while the EU would like to keep access to the UK waters to their vessels after the Brexit under the Common Fisheries Policy. UK officials claim that France and the Netherlands use super-trawlers to empty the UK waters and the PM Boris Johnson vowed to do everything to protect the UK fisheries.
The upcoming week will be a great test for both currencies not only by virtue of the EU summit in Brussels but as remarkable data will be published for both sides of the deal: the UK – Unemployment change, for EU – ZEW Current Conditions and ZEW Economic Sentiment. If the UK leaders are able to convince the EU leaders to accept the deal without postponing it again, the Euro may weaken and continue to fall, if it’s postponed then the GBP will fall against major currencies on weak employment data.
Asides the unemployment data, the upcoming ‘hotspot’ restrictions in the UK, which might eliminate small and medium businesses and result in a labor layoff, could back the downfall of the Pound.
The EUR/GBP pair continued the downtrend after the test of a high at 0.92924 on September 11, remarkable the day UK announced the new trade-deal with Japan.
Two patterns to watch on pair’s 4H-chart are “Bullish flag” and “Triangle”. Euro remained above a crucial support and resistance level and halted the fall at 0.90680, if the pair remains above that level amid UK and EU data, it might as well continue upwards to test the dynamic resistance (upper edge of a triangle once again) at 0.91200. Below this level will result in the pair to test the following static support at 0.90490 if that support is broken then the pair will drop deeper towards 0.90100 to test the static and dynamic resistance, where the “Flag pattern” will be confirmed and the pair will most likely bounce back and continue bullish
Yet MACD is signaling the trend reversal I highly advise to trade with caution as the upcoming week will be highly volatile for both currencies.
The argued $1.6 or $2.2 trillion remains in the budget which bolsters the US Dollar Index and results in a 2.20% gain of Nasdaq and 2.24% gain of Dow Jones.
Strong US Dollar gained against major pairs and safe-haven assets like Gold, resulting in a 1.96% loss of value of the Gold. As I’ve said during my previous articles, Gold will continue the uptrend, though there are strong resistances which it should overtake before showing strength for another jump.
One of the major resistances is at $1917 which called a halt to an uptrend continuation of the precious metal and led to a price drop. Another resistance is at $1906, which also supported the downtrend move.
Gold was able to recover the same after Mr. Powell’s speech where he outlined in the FOMC economic projections that the outlook remains ‘uncertain’ and depends on the spread of the virus. While writing of this article XAU/USD on Overbit is traded at $1987, below the MA100 on a 4H chart, though it does signal the bearish short-term move, MACD indicator signals the opposite.
Yet another time $1906 could be a strong resistance and might push the price towards $1874 and below that to $1855. If the dynamic resistance (the lower edge of the tringle) withholds, bulls will try to push the price above the $1917 resistance.
Euro and the British pound are in danger against the US Dollar as the forecasts for the economic data for the next week are unpromising. Britain would like to impose harder restrictions, whereas public places such as restaurants, bars and pubs would be asked to close before 6PM. Average earnings index is expected to drop to another 0.3%, and an employment change data as per August to show a sizeable -125K. For Euro the market will be watching the German ZEW and CPI (MoM) data next week.
There are two patterns to watch on the GBP/USD pair, both being the same formation yet signaling the different price actions – Head and Shoulders and an Inverted Head and Shoulders.
The short-term outlook of the pair projects the retest of the MA100 at 1.28670 and a possible drop towards a major static resistance and a mid-September low at 1.28820.
The long-term projection of the British pound looks more positive, the 1.28820 drop could trigger a trend-reversal and the Pound would form an Inverted Head and Shoulders pattern and climb towards 1.29900 and 1.30600 levels.
Euro is below the MA100 and the MACD signals the downtrend continuation, though is still above the dynamic resistance. Weak data from Germany and EU may result in a drop of the Euro against the US Dollar down to 1.17060 and 1.16780.
Central Banks of the largest economies already announced that further stimulus will be required to keep the economy stable and adhere the positive inflation rates.
US is ready to pump into the economy with the new Heroes Act, a $2.2 trillion stimulus pack. While House Speaker Pelosi and Treasury Secretary Mnuchin continue to negotiate, Covid-19-infected president Trump has asked to sign the Act and provide stimulus to the economy, tweeting on his Twitter: “OUR GREAT USA WANTS & NEEDS STIMULUS. WORK TOGETHER AND GET IT DONE. Thank you!” The urgency of signing the bill is not only flanked by the contagion of the President but the Presidential election which is less than a month away.
Trump is still behind the democrat opponent Joe Biden, and if Biden is elected, the economy might face further difficulties as Biden’s tax plans will most likely to stifle business as the US presidential nominee is planning to increase the business tax.
Biden-proposed business tax changes:
Increases the corporate income tax rate from 21 percent to 28 percent.
Creates a minimum tax on corporations with book profits of $100 million or higher. The minimum tax is structured as an alternative minimum tax—corporations will pay the greater of their regular corporate income tax or the 15 percent minimum tax while still allowing for net operating loss (NOL) and foreign tax credits.
Doubles the tax rate on Global Intangible Low Tax Income (GILTI) earned by foreign subsidiaries of US firms from 10.5 percent to 21 percent.
In addition to doubling the tax rate assessed on GILTI, Biden proposes to assess GILTI on a country-by-country basis and eliminate GILTI’s exemption for deemed returns under 10 percent of qualified business asset investment (QBAI).
Establishes a Manufacturing Communities Tax Credit to reduce the tax liability of businesses that experience workforce layoffs or a major government institution closure
Expands the New Markets Tax Credit and makes it permanent.
Offers tax credits to small business for adopting workplace retirement savings plans.
Expands several renewable-energy-related tax credits, including tax credits for carbon capture, use, and storage as well as credits for residential energy efficiency, and a restoration of the Energy Investment Tax Credit (ITC) and the Electric Vehicle Tax Credit. The Biden plan would also end tax subsidies for fossil fuels.
Increasing the tax charges might hit hard on returns of the Nasdaq-listed corporations, which in other hands may proceed with labor layoffs and wage cuts to maintain the positive return. Hence, post-election drop in the US Indices is very possible.
US Indices are probably going to show positive signs today amid Trump recovery hopes, though mid-term shows that the indices are about to show deeper correction.
Nasdaq-100 on a daily chart might continue the drop towards 10800 to test the dynamic resistance and a neckline of the Head and Shoulders pattern, and proceed towards 10100 if below the neckline.
Even if the US indices drop, the US Dollar index might continue the uptrend as increased CIT will pump money back to the treasury, though investors will closely monitor the core US data and if the FOMC plan on economic recovery continues to proceed as planned under Biden. Undoubtedly, during the pre-election and election days the market will be highly volatile and the Dollar Index might as well test the resistance at 95 or drop to 92.80 if breaks the 93.60 support.
The closer gets the election, the more pressure is on the commodities market. Gold investors are looking for any signal from the USA to proceed with their next move. Further Covid-19 prevention measures and stimulus bills might nudge the Gold’s surge. Yet XAU / USD is still locked in a downtrend channel and in order to continue the uptrend, Gold should breakout from the downtrend channel with a strong impulse.
Currently Gold is traded at $1899, Gold quote on Overbit, retraced on October 2 after testing of the MA100 and a resistance of September 22 at $1917 and was able to keep above the mid-line of the Pitchfork – an important support and resistance zone, bringing new hopes of the further surge.
If XAU / USD remains above the mid-line and is able to break the $1906 resistance, it will proceed towards $1928 to test the dynamic resistance (upper edge of the channel) and the MA200. Closing above $1928 and $1930 might bring another stimulus for investors to pump the price higher to $1950 and $1966.
On September 16, on Fed Minutes, Chairman Jerome Powell made it clear that success in the fight against coronavirus will be the determining factor recovery of the US and World economy. The announced figures in the FOMC materials on the economic forecasts of the FRB presidents and members of the FOMC were more positive than in July, the dollar after the release of the data began to gain rapidly, despite the drop in American indices.
The Federal Reserve has taken what Mr. Powell called “drastic” steps in response, including cutting interest rates to near-zero and buying about $ 2 trillion in US government debt. The bank also said last month that it was loosening its approach to managing inflation, targeting higher price increases to try to spur growth and maintain employment.
The chart of the active Covid-19 cases in the United States at the moment looks like this:
New daily cases of Covid-19 infections in the United States
From the charts above it is clear that so far the United States has managed to keep the number of infected at the level of 2.5 million, which makes it possible to clearly assess the recovery, taking into account the priorities of the Fed – keeping inflation at 2% and reducing unemployment, the total number of infected at a certain level, despite the daytime infections.
Further growth of the US dollar against other currencies was also served by the announcements of the central bank. The Bank of England in the minutes of the meeting reported that the interest rate would remain at a historically low level of 0.1%, adding that the outlook for the economy remains “unusually uncertain”. Adding fuel to the fire Prime Minister Boris Johnson stated at the beginning of the week, and yesterday, September 22, announced the introduction of additional restrictions, which were considered by public as a return of lockdowns and negatively affected the GBP.
Europe has been reporting for a month about the introduction of additional restrictive ones because of fears of a second wave, so Hungary became the first country in the bloc. Great Britain, in turn, is listing more European states to the list of “restricted countries to travel”, while the issue of trade relations with the EU after Brexit remains unresolved.
Thus, the FTSE100 Index fell 4.21% from September 16 to September 21, with the largest losses falling on the shares of the owners of airlines, hotels, restaurants and pubs traded on the London Stock Exchange.
The FTSE was able to recover today and continue yesterday’s gains on the UK Manufacturing and Services Index (PMI) publishing fund.
Despite the growth of the FTSE100 index of the London Stock Exchange, the British pound remains weak against the US dollar. Most likely bearish trend, against the background of the introduction of restrictions and closing borders. As of this writing, GBP/USD on Overbit is trading just below the 0.618 Fibonacci retracement of the previous support level at 1.27130, the decline is likely to continue to the 1.26570 support level, where a slight recovery is expected for the pound, and a possible further fall to the 1.25200 mark towards the Fibonacci 0.786 level.
Since the successful projection of the economic recovery and the success in the fight against coronavirus are accompanied, Europe is about to take strict measures to hold the virus spread as states are suffering from Wave 2. Peak values for infected COVID19 were recorded in August in Albania, Bulgaria, Czech Republic, Montenegro. France, Holland, Spain and Poland recorded peaks in those infected per day. EU Central Bank President Christine Lagarde also noted that economic recovery remains unclear and uneven, and additional stimulus will be required to support the economy.
German DAX as main indices of the EU’s economic projection fell sharply yesterday after new high numbers of infected reported, though was able to recover today after the publication of Manufacturing Indexes (PMI) of the EU, Germany, France and Spain. expected PMI data from the US to be released later today.
The euro against the US dollar, at the time of this writing, is trading above an important support level at 1.17120, at 1.17165. Most likely EUR / USD will test 1.17630, where dynamic and static resistance is set, as well as EMA20, and continue to fall.
The chart shows an interesting pattern, discovered by crypto traders back in 2018, called the “Bart Simpson” pattern, due to the similarity of the price movement with a hair-style of the character. In fact, this pattern shows the fatigue of the bulls, despite the drop in the quote currency. It should be noted that the President of the EU Central Bank herself has repeatedly said that one should closely monitor the rapid growth of the Euro, because in the context of economic recovery and the resumption of business and tourism, the expensive Euro may negatively affect the inertia of economic recovery.
Though it was stated clear during the previous meetings and the Jackson Hole conference that the Federal Reserve is not willing to cut rates, current economic state and outlooks announced by Mr. Jerome Powell will play a significant role in the valuation of the US Dollar.
The safe-haven precious metal is eager to break the dynamic resistance and continue the uptrend. At the time of writing of this article Gold price on Overbit is $1964 and is above the 200MA on a 4H chart, investors might look into the breakout from the descending channel to push the price further towards $1990 – $2000.
On an hourly chart of XAUUSD, there is a formation of another pattern which signals a short-term bearish continuation, hence there is a probability that during the FED meetings, Gold may show a false breakout and get back into the descending channel.
If that is the case, then we should expect a test of a static and dynamic resistances at $1974 – $1975. If Gold’s uptrend is rejected by resistance aforesaid, then it should retrace towards $1960 and stay above this level to gain momentum, else bears will push the price down to $1939 – $1940.
Gold will remain volatile and is still transversally related to the US economy, US Presidential Elections is one of the key elements for Gold investors.
The European Union is puzzled by such a proposal – trade under the WTO rules involves the restoration of full-fledged borders, which will lead to huge transport delays at the border.
Pound against USD is below the dynamic support of June 30 and a static support of 1.31700, hence GBP probably is going to continue the downtrend until 1.3100 – 1.3000, where an important support level and Fibonacci 0.382 are in position.
The same pattern is seen on another major pair traded against GBP – Japanese Yen. At the time of writing this article, the GBPJPY quote on Overbit is 139.576 which is below an important resistance of 139.860 – 139.900 and is below the dynamic support of June 30, hence the drop may continue down to 138.536 – minor support and Fibonacci 0.382 level and to a major support of 138.156
EURGBP on the opposite is gaining, the pair is currently traded above the down-trend channel and looks like it will continue the bullish run to test resistances at 0.90585 – 0.91253. If the tensions between EU and GB continue on trade regulations and none of the sides accept the trade conditions between the two, the Pound may continue the downtrend further.
EURTRY remains bullish as new closes are higher than the previous ones. One should wait for a structured confirmation of the triangle pattern or a breakout from the triangles upper edge. If the breakout is confirmed EURTRY will continue an uptrend towards 9.10 – 9.20.
Gold remains bearish in short-term and bullish in long-term. Precious metal lost value this week as positive US economic data were announced. Correction might as well continue further towards $1915 and below that towards $1892.
EURUSD retraced on September 1 after setting up a new year-to-date high at 1.2010. Bears pushed the price down after the test of a dynamic resistance, rather weak Eurozone economic data and a stronger US data. Support levels to watch are 1.18100, which is a short-term dynamic support and 1.1750 which is a lower edge of an expanding diagonal.
Ethereum is about to undergo a significant update – Ethereum 2.0 Serenity. Phase 0 of the Serenity update is scheduled for 1:30 PM EDT on September 10, 2020. The Phase 0 transition implies a remarkable change in mechanism of the blockchain, Ethereum will no longer support PoW mechanism and will switch to PoS. Ethereum blockchain will further apply shard chains, which is expected to take place in Phase 1, one year after the launch of Phase 0, where main chain – Beacon Chain will be launched.
To launch the initial block of Beacon Chain, the number of deposits in the network must be more than 524 218ETH, the total number of validators must exceed 16 384. It should be noted that until the above figures are reached, no share reward will be made.
The current PoW mechanism restrains the scalability of the network, the block which is capable of storing a limited amount of data, new block cannot be mined until the previous block is complete. Another key takeaway is very related to mining, since miners use resources like electric power, they are bound to external factors, such us global and local economic state, hence the transaction fee may ignorantly increase if there is a high demand.
Speaking of the transaction fee, Ethereum transaction fee already reached all-time highs at 0.032361 ETH, which is tantamount to $15.
In Proof-of-Stake mechanism, miners will be replaced by validators, each validator is obliged to stake 32ETH into the official deposit contract of the Ethereum Foundation. The validator then will need to download the Ethereum 2.0 software and validate blocks, to keep the high commission for each validation, the validator is advised to remain on-line for as long as possible.
Serenity will also improve one of the main scalability problems of Ethereum – transaction speed. Implementation of shard chains – smaller blockchains which operate simultaneously will increase the transaction speed, as the transaction will no longer be bound to the completion of a block in the blockchain, thus transaction fee will also be decreased.
The high demand of Ethereum required to launch the Beacon Chain, and the transition to PoS is driving investors into investing in Ethereum.
According to the weekly chart, the price might as well reach $730 and $800 if the current resistance of $488 is overtaken.
The show-stopper here could be delays on the launch and not reaching the 524 218 ETH amount to launch the Beacon Chain. There were no reports on postponement of the launch on Phase 0 until now.
As Ethereum is the second coin by market capitalization, it surely does follow the global market sentiment, recent correction is similar to the correction of Bitcoin and Gold against the USD.
Ethereum is currently testing the dynamic support of August 30, and might drop to $444 if bulls to do not push the price back to uptrend. There is an important support and resistance level at $444, which we might consider as decisive for short-term, if the ETHUSD closes below the $444, it might as well drop towards $418.20.
Monday, September 1, US Dollar index was losing against major pairs, until US Manufacturing PMI and ISM Manufacturing data were released and the announced data were positive beyond the forecasted.
FOMC Member Mrs. Brainard in her speech yesterday outlined key changes in the economy. FED rate cut expected by some investors in September is most-likely out of the question, as inflation targets are currently beyond expectations. For that being said the FED will apply FAIT strategy to anchor 2 percent inflation expectations.
US Dollar Index is down by 10.91% since the year’s high of 102.99 experienced this March. The decline was followed by rate cuts and drastically growing number of Covid-19 cases in the US, however there are several charts that show that the DXY is about to recover from a decline.
DXY Monthly Chart
Dollar index reached the dynamic support, thogh is still below the important support and resistance zone. If the Index remains below 92.63 and breaks the dynamic support it may continue the decline to 89.97 – 90.
A closer look at the formation on a weekly chart.
Descending diagonal on a 4H chart signals the further decline towards 91.60 – 91 after testing of the upper edge of the diagonal at 92.90 – 93.
FOMC in the new strategy changes outlined unemployment data as one of the key patterns in stabilizing the economy and reaching goals. Hence, unemployment in the US recovered in August, and the expected release of today’s ADP Non-farm unemployment could play a significant role in the further trend definition of the US Dollar Index.
US Dollar against major pairs
The German manufacturing PMI as per August released yesterday was 52.2 which below the expected 53, although gained 2.2 points from the previous month’s 51.0. There was a significant recovery in Unemployment in August in Germany, announcing -9K, which is 8K above the July’s -17K, whereas a preliminary release of CPI (YoY) was at -0.2%, both released yesterday, September 1. Today’s release of data from Germany and Spain triggered a decline on EURUSD.
EURUSD may continue the decline towards 1.1800 – 1.1790 to test the dynamic support and the MA200.
The British pound against the US Dollar may also decline further amid strong US data.
The Head and Shoulders pattern on an hourly chart signals the continuation of a decline towards 1.33120, whereas Pound might find a support at 1.33200 at the dynamic support of August 20. If the Pound breaks the dynamic support, bears might push the price further 1.32900, and below that towards 1.32700 at Fibonacci 0.5.
Safe-haven commodity remains bullish above 1955.
Gold, a safe-haven asset may continue bullish runs if remains above a significant support at $1955. However strong US data may decline the price further. There once again a high risk of another Head and Shoulders formation and the precious metal may drop to $1930 – $1925.
According to the Elliott Wave principle, long-term Gold sentiment remains bullish and the price of the precious metal may reach year’s high in mid-term, US-China trade war and escalation of the conflict may further support the uptrend of the safe-haven, despite the US economics’ recovery.
US data announced this week showed a significant recovery in building permits and housing, building permits (MoM) for July surged to 18.8% compared to the previous 3.5%, Housing Starts data revealed 22.6% which is 5.1% higher than the previous month, existing-home sales data were as well positive reported beyond expectations.
Despite the negative Jobless claims and Philadelphia Fed Manufacturing PMI reported on August 20, Manufacturing PMI and Services PMI demonstrated a significant improvement, which led major US Indices to surge whereas S&P500 and Nasdaq100 reached the all-time high.
US stocks continue hitting records, Tesla surged by 24.19% breaking the significant $2000 per share value, and is now worth more than $382 billion surpassing Walmart by nearly $10B. Nasdaq’s top company by market cap – Apple gained 8.23% hitting the $2127B in capitalization. Tesla and Apple remain the top popular shares last week based on Robinhood data.
S&P500 closed above the all-time high, some might think that there is a possible double top pattern, economic recovery of the US indicates that the index may continue the run towards $3500.
Nasdaq owes its gains not only to Tesla and Apple, but there are also other tech companies that surged last week and during the pandemic, such as NVIDIA, AMD, Qualcomm, Microchip Tech, Texas Instruments.
An hourly chart demonstrates that the correction is most likely will happen as the price touched the dynamic resistance and the fifth wave of an ending diagonal is about to complete at 11600. Ending diagonal is a trend reversal pattern, which usually demonstrates exhaustion of bulls, note the evening star doji, though the closing is above the previous close, it still shows uncertainty and exhaustion.
How is it related to cryptocurrencies and Bitcoin?
Bitcoin and Ethereum price actions are considered as cryptocurrency market movers. Since Bitcoin is nowadays considered as the digital Gold and Ethereum as a digital Silver, their price action now is correlated to US data which effect Gold. Gold was ever since used as a safe-haven to hedge funds during the uncertain times and inflation, so is Bitcoin now.
An hourly chart of Bitcoin indicates that the price could decline further to towards $11200 – $11160 to complete the Head and Shoulders pattern, another pattern to watch is an ending diagonal which is yet to be completed as well. Bitcoin remains below the major resistance level of $11700 an in order to show another bull run it must break the dynamic resistance (ending diagonals upper edge) and close above the 11700, however testing 11200 might bring another stimulus for bulls.
Ethereum plummeted to $380 after reaching the year’s maximum at $446.67, loosing 9.7% this week only. Digital Silver price is following a similar ending diagonal pattern, and if the upper dynamic resistance and a static resistance of 397 is not overpassed, ETH might continue the drop towards a major support at $380, and if that support is broken, towards $370 – 369.
Unlike Bitcoin, Gold lost only 0.20% in price for the week. A significant drop was on Wednesday August 19 ahead of US data announcements, where the precious metal lost 3.67% after gaining 2.97% on Monday and Tuesday.
Head and shoulders pattern is identified on an hourly chart of Gold and the price might continue the drop down to $1881.60 – 1880, where if the support laid on those level withheld the price might retrace towards 2014 and if above towards 2046, where the bearish pattern will be completed.
Since Gold and Silver prices demonstrate similarities in their price action, the same Head and Shoulders is visible on an hourly chart of XAGUSD. The price is below the dynamic support of August 12 which might signal to a further decline down to $25.30.
The price continues the short-term downtrend move inside a descending channel, which in other had forms another controversial to the H&S pattern of Bullish Flag.
If bulls are able to push the price above the dynamic support and if the dynamic resistance is overtaken at $27, the bullish run might proceed towards $28 – 28.50.
Key takeaways for the upcoming week would be announcements from Eurozone, Great Britain, China and the US.
Important announcements to watch:
Tuesday, August 25, 2020
German GDP (YoY) as per Second quarter data is expected to be -11.7%, 9.8% lower than the previous -1.9%
German GDP (QoQ) as per Second quarter data is expected to be -10.1%, 7.9% lower than the previous -2.2
US CB Consumer Confidence (August) is expected to be 93, 0.4 points higher than the previous 92.6
US New Home Sales (July) is expected to be 786K, 10K higher than the previous 776K
Wednesday, August 26, 2020
US Core Durable Orders is expected to be 2.1%, 1.5% lower than the previous 3.6%
Thursday, August 27, 2020
US GDP (QoQ) as per 2nd Quarter is expected to be -32.6%, 0.3% higher than the previous -32.9%
US Initial Jobless Claims is expected to be 1,000K, 106K lower than the previous 1,106K
US Pending Home Sales (MoM) as per July is expected to be 4.5%, 12.1% points higher than the previous 16.6%
Asides from the data to be announced, there are other important events to trace.
Republican National Convention, which will be held on Monday, in which delegates will determine the nominees for the upcoming presidential elections. Markets will be watching this event closely as during the current campaign Democrats are having an edge over republicans.
Another major event would be an annual Jackson Hole conference this Thursday, August 27, where FED Chairman Jerome Powell will speak about current economic situation, inflation targets and possibly share preliminary focus on interest rate change.
The economic state and inflation in the US once again are an important constituent of the Global economy and global markets, all these events will be decisive for the mid-term price movements for the US Indices, commodities and cryptocurrencies.
As the tensions rise between US and China and Euro stocks are not showing signs of recovery, Gold is once again referred to as a safe haven to those who hedge their funds. With that being said, Bitcoin known as the digital Gold gained 2.71% and continues the climb towards 13K.
Despite technological gains in the US, Nasdaq +1.00%, SPX +0.27% today, US Dollar index is losing against other currencies, as the US Commerce Department delivered further restrictions on Huawei. As tensions between the two: US and China rise, so rises the VIX index and Gold price will rise accordingly.
From the technical point of view, Gold is now testing a dynamic resistance of August 12 and is about to break out as the impulse wave looks strong and there are other patterns that confirm the breakout and strength of the impulse. The climb might continue towards $2028 and $2064 if US and China officials do not kick off the negotiation process and show some development in regulating the “Trade War”.
Other indices you should be following to trace the development of Gold price is EUROSTOXX 50, Euronext 100 and DAX, as a major opposing currency to the US Dollar is currently Euro and if Europe shows well-grounded signs of recovery, then major investors would definitely bet on Euro.
As the article is being published, Euro is testing the resistance at $1.1910. EU Finance Ministers meeting, which will be held soon, will surely create some volatility until the US housing data is released. From the technical point of view, EURUSD should show another drop towards $1.1700 to complete the rectangle pattern.
The last impulse wave on an hourly chart is not strong but what it shows us here is that Euro investors have gained enough power to bring the Euro as close to the resistance as possible and surely, we will see some massive green or red candles. RSI indicates that Euro is overbought, so it should correct from this point slightly, though above the resistance and if the resistance is tested as support, definitely the climb will continue towards $1.2000 – 1.2040.
Bitcoin is above $12K, which led the crypto investors in the euphoria of high gains push the price towards $12500. Since Bitcoin is lately is correlated to Gold and is referred to as a digital safe-haven, the price gained amid Gold surge.
Bitcoin will most likely start the correction here if the dynamic resistance of August 6 is not broken. The bullish flag pattern fills hearts of crypto investors with confidence of seeing $13K, however investors might look into selling BTC to regain power for another jump, the best level for this would be $12100 and $12000.
The bullish flag on 15-minute chart provides a clear sign of another uptrend move towards $12500, though BTC must breakout from the dynamic resistance (the upper edge of the flag).
Last week we witnessed another shocking gain for Ethereum, where the alt gained 11.09%, though this week Ethereum lost only 1% in price, technicals say that the decline might continue towards $415-407. Both $415 and $407 are major supports and should give Ethereum a kick to show another jump. The price action of August 16 demonstrates exhaustion of bulls, the wave is not impulsive, hence correction should be expected. Though if Ethereum closes above $433 and breaks $440, bulls may support the uptrend and the alt amy continue the run towards the resistances ahead.
Keep an eye on the news, trace Economic data and US-China development, there are other fundamentals you definitely should check such as VIX, Fear and Greed, and other market sentiment data. Tomorrow is the CPI announcement day, so stay tuned and trace the data released by the UK, Canada, Eurozone, for commodities investors follow the Crude Oil Inventories which will be published tomorrow in the US as well as FOMC Meeting Minutes.