Ethereum, Litecoin, and Ripple’s XRP – Daily Tech Analysis – April 16th, 2021

Ethereum

Ethereum rose by 3.49% on Thursday. Following on from a 5.76% gain on Wednesday, Ethereum ended the day at $2,517.03.

A mixed start to the day saw Ethereum fall to an early morning intraday low $2,401.25 before making a move.

Steering clear of the first major support level at $2,328, Ethereum rallied to a final hour intraday high and a new swing hi $2,546.82.

Ethereum broke through the first major resistance level at $2,492 before easing back.

Coming within range of the second major resistance level at $2,551, Ethereum slipped back to end the day at $2,517 levels.

At the time of writing, Ethereum was up by 0.21% to $2,522.26. A bullish start to the day saw Ethereum rise from an early morning low $2,517.03 to a high $2,527.12.

Ethereum left the major support and resistance levels untested early on.

ETHUSD 160421 Hourly Chart

For the day ahead

Ethereum would need to avoid a fall through the pivot level at $2,488 to support a run at the first major resistance level at $2,576.

Support from the broader market would be needed, however, for Ethereum to break out from Thursday’s new swing hi $2,546.82.

Barring an extended crypto rally, the first major resistance level and resistance at $2,600 would likely cap any upside.

In the event of a breakout, Ethereum could test resistance at $2,700 before any pullback. The second major resistance level sits at $2,634.

Failure to avoid a fall through the $2,488 pivot would bring the first major support level at $2,430 into play.

Barring an extended sell-off, however, Ethereum should steer clear of sub-$2,200 levels. The second major support level at $2,343 should limit the downside.

Looking at the Technical Indicators

First Major Support Level: $2,430

Pivot Level: $2,488

First Major Resistance Level: $2,576

23.6% FIB Retracement Level: $1,975

38.2% FIB Retracement Level: $1,605

62% FIB Retracement Level: $1,023

Litecoin

Litecoin rose by 2.67% on Thursday. Following on from a 4.14% gain on Wednesday, Litecoin ended the day at $286.18.

A mixed start to the day saw Litecoin rise to an early morning high $282.80 before hitting reverse.

Falling short of the major resistance levels, Litecoin fell to a late morning intraday low $266.01.

Steering clear of the first major support level at $262, Litecoin rallied to a final hour intraday high and a new swing hi $291.25.

Litecoin broke through the first major resistance level at $289 before falling back to end the day at $286 levels.

At the time of writing, Litecoin was up by 0.17% to $286.68. A bullish start to the day saw Litecoin rise from an early morning low $286.18 to a high $288.39.

Litecoin left the major support and resistance levels untested early on.

LTCUSD 160421 Hourly Chart

For the day ahead

Litecoin would need to avoid a fall through the $281 pivot level to support a run at the first major resistance level at $296.

Support from the broader market would be needed, however, for Litecoin to break out from Thursday’s swing hi $291.25.

Barring an extended crypto rally, the first major resistance level and resistance at $300 would likely cap any upside.

In the event of an extended rally, Litecoin could test resistance at $315 before any pullback. The second major resistance level sits at $306.

Failure to avoid a fall through the $281 pivot level would bring the first major support level at $271 into play.

Barring an extended sell-off, Litecoin should steer well clear of the second major support level at $256.

Looking at the Technical Indicators

First Major Support Level: $271

Pivot Level: $281

First Major Resistance Level: $296

23.6% FIB Retracement Level: $229

38.2% FIB Retracement Level: $190

62% FIB Retracement Level: $127

Ripple’s XRP

Ripple’s XRP slid by 4.17% on Thursday. Reversing a 2.30% rise from Wednesday, Ripple’s XRP ended the day at $1.75937.

A mixed start to the day saw Ripple’s XRP rise to an early morning intraday high $1.88353 before hitting reverse.

Falling short of the first major resistance level at $2.0210, Ripple’s XRP slid to a late morning intraday low $1.65261.

Steering clear of the first major support level at $1.6004, Ripple’s XRP revisited $1.84 levels before falling back into the red.

At the time of writing, Ripple’s XRP was up by 0.51% to $1.76836. A bullish start to the day saw Ripple’s XRP rise from an early morning low $1.75953 to a high $1.78119.

Ripple’s XRP left the major support and resistance levels untested early on.

XRPUSD 160421 Hourly Chart

For the day ahead

Ripple’s XRP will need to avoid a fall back through the $1.7652 pivot level to bring the first major resistance level at $1.8777 into play.

Support from the broader market would be needed, however, for Ripple’s XRP to break back through to $1.80 levels.

Barring an extended crypto rally, the first major resistance level would likely cap any upside.

In the event of an extended rally, Ripple’s XRP could test resistance at $2.00 levels before any pullback. The second major resistance level sits at $1.9961.

Failure to avoid a fall back through the $1.7652 pivot would bring the first major support level at $1.6468 into play.

Barring another extended sell-off, however, Ripple’s XRP should steer clear of the 23.6% FIB of $1.5426. The second major support level sits at $1.5343.

Looking at the Technical Indicators

First Major Support Level: $1.6468

Pivot Level: $1.7652

First Major resistance Level: $1.8777

23.6% FIB Retracement Level: $1.5426

38.2% FIB Retracement Level: $1.2807

62% FIB Retracement Level: $0.8573

Please let us know what you think in the comments below.

Thanks, Bob

Should You Chase Ethereum Here Or Wait For A Pullback?

In my previous article on Ethereum (ETH) from three weeks ago, I was “… looking for a somewhat tricky, whipsawing, move higher, ideally to around $1880+/-40, but it could even challenge the recent all-time high. From there, I expect several weeks of downside back to $1200+/100. After that, I anticipated the next rally to ~$3000+. However, a weekly close below $1200 targets $900…

Fast forward, and ETH topped this week, so far, at $1891. Thus, using the Elliott Wave Principle (EWP) and Technical Analysis (TA) was once again a powerful way to forecast the price levels to be reached three weeks in advance. Therefore, it is time to become more cautious by, for example, raising stops, maybe take (partial profits), etc.

In this week’s update, I would like to look at the weekly and monthly charts to better understand ETH’s big picture potential (months to years out). See Figure 1 below.

Figure 1. ETH weekly and monthly charts with EWP count and technical indicators.

A retest of 1200+/-100 and then rally to new all-time highs.

As you can see, the weekly and monthly charts feature two different EWP wave-labels, but both point to higher prices (anticipated paths). The weekly chart’s EWP points to two more rallies (black major-5 and blue Primary-V) after an initial pullback (major-4) before this Bull run is over. Whereas the monthly chart suggests, we could see three more rallies (add purple Cycle 5). I always have an alternate (more Bullish) EWP count for Bull runs like ETH is in to ensure my Premium Crypto Trading Members do not miss out or get caught on the wrong side. The market will eventually tell me which one is correct: “anticipate, monitor, and adjust if necessary.”

What we do know, with all certainty, is that the weekly technical indicators (RSI5, MACD histogram, FSTO, and MFI14) are all negatively diverging (red squares). Although divergence is only divergence till it is not, it means ETH is now moving higher on less strength, less momentum, and less liquidity. The latter is essential because liquidity drives markets. If the buying dries up, only selling is left. However, ETH is well-above all its important Simple Moving Averages (SMAs), which are all rising and Bullishly stacked: 10w>20w>50w>200w). Thus this is still a 100% strong, Bull market.

The monthly chart is different as there are no negative divergences on the technical indicators. Instead, the RSI5 is getting very overbought, suggesting there’s less room for upside left over the next 1-2 months. See the 2017 rally for example. However, the monthly Money Flow is still strong, and so is the MACD. Only the FSTO is not in favor of more upside.

Nonetheless, also on the monthly chart, the SMA setup is 100% Bullish: ETH is well-above its rising SMAs, which are also Bullishly stacked: 10m>20m>50m. Thus, this is still a 100% robust, long-term Bull market. Hence, the one-degree higher EWP count compared to what is labeled on the weekly chart has merit.

Bottom line

ETH’s weekly and monthly charts are 100% Bullish and suggest plenty of upside left over the coming months to years. However, negative divergences are creeping in on the weekly chart suggesting a pullback is most likely imminent. A daily close below $1657 will be a severe warning that the $1200+/-100 level will be revisited to complete a more significant correction before ETH can move to new ATHs again.

Buy Ethereum with Binance

GBP/JPY Vs GBP/USD and USD/JPY – March 6th, 2021

GBP/USD last week fell 236 pips from 1.4015 to 1.3776 while overbought GBP/JPY rose 257 pips from 148.14 to 150.71.

Known since the 1930’s, the Japanese pegged GBP/JPY to UK Gold for not only economic viability but the first incursion to the western world of finance. The standard to hold GBP/JPY to the UK held throughout Bretton Woods. Upon the 1972 free float, GBP/JPY became attached permanently with high +90% correlations to GBP/USD.

All JPY cross pairs followed with high and positive correlations as AUD/USD and AUD/JPY, NZD/USD and NZD/JPY, EUR/USD and EUR/JPY while USD/CAD and CAD/JPY became polar opposites as both permanently correlate negatively. USD/CHF and CHF/JPY traditionally also hold opposite correlations.

The Japanese offered not only a double trade but GBP/JPY and GBP/USD as the same exact currency pairs. The same principle holds true for EUR/JPY and EUR/USD, AUD/USD and AUD/JPY and NZD/USD and NZD/JPY. The double trade is permanent for USD/CAD and CAD/JPY.

Why JPY cross pairs remain overbought into week 6 amd not falling with counterpart currencies is the USD/JPY problem to correlations. While GBP/USD correctly correlates to GBP/JPY at +94%, GBP/JPY also not correctly correlates to USD/JPY at +83%. A further problem exists as GBP/USD correlates to USD/JPY at +46 %. All correlations are not only running positive but this situation is the exact same for AUD/JPY, NZD/JPY, EUR/JPY, CAD/JPY and explains why prices remain high and overbought.

Positive correlations are the result of exchange rate prices and relationships to moving averages since correlations are found within the context of averages. USD/JPY trades above vital 105.70,  GBP/USD above 1.3697 and GBP/JPY above 144.80. Correlations are positive because prices trade above respective high / low averages.

Required to assist GBP/JPY to drop is GBP/USD breaks 1.3697 or USD/JPY trades below 105.70. GBP/JPY then decides to fully correlate to USD/JPY or GBP/USD. GBP/JPY in every instant follows GBP/USD as the 91 year correlation and order of currency markets.

Current GBP/JPY trades 1156 pips above GBP/USD and 2506 pips below GBP/CAD. GBP/JPY larger range from GBP/USD becomes 144.08 and 1.5564. GBP/JPY above is located the 14 year average at 155.38 and the 10 year at 148.36.

Prior to the 2016 interest rate changes by the central banks, the market order to currency pair arrangement existed as GBP/USD, GBP/JPY, GBP/CHF then GBP/CAD.

The new order is arranged as GBP/CHF, GBP/USD, GBP/JPY then GBP/CAD and seen as GBP/CHF 1.2855, GBP/USD 1.3820, GBP/JPY 149.86 or 1.4986 then GBP/CAD 1.7292. Much daylight exists for GBP/JPY to trade freely between GBP/USD and GBP/CAD yet 250 pips traded last week from a distance of 1100 and 2500 pips between exchange rates.

Why GBP/CHF and all currency  pairs arranged as Other Currency / CHF dropped from contention as support is due to the uniqueness to the SNB’s interest rate system. Libor is miles from actual interest rates as first comes Saron, Call Money rates and the most vital Debt Register Claims.

JPY cross pairs overall contain downside moves from GBP/JPY at 300 pips and 200 for AUD/JPY and NZD/JPY.

USD/JPY for the week is not only light years overbought but the 5 year average is located at 109.01. A good target is found at 106.65.

GBP/JPY big break lower is located at the 10 year average at 148.38. A break then GBP/JPY trades 146.00’s easily.

GBP/USD this week opens between 1.3768 and 1.3840. Below 1.3768 challenges most vital 1.3697, above 1.3840 then GBP/USD travels much higher.

GBP/CHF and GBP/CAD run good and positive correlations at +93% and +96 % for GBP/CAD. For GBP/NZD and GBP/AUD remain problems as correlations run negative at -43% and -64% for GBP/AUD.

GBP/JPY

Included are GBP/JPY moving averages from 5 day to 253 days. The averages are perfect and derived from the ECB. The first number is the day average followed by trading days then the average.

A 20 day average is actually 15 days, a 50 day average is actually 36 days. Trading day averages to factor perfectly start at the beginning of every year then the numbers increase as days trade. A 50 day average is most stable as it only trades 36 to 50 days.

A 5 day average begins Monday at 2 days, then 3 for Tuesday and Wednesday and 4 for Thursday. A full 5 day average only trades on Fridays.

5 Day     5             149.2391

10 Day  9             149.1325

20 Day  15           148.3808

50 Day  36           145.2691

100 Day               71           142.5398

200 Day               143       139.9417

253 Day               180       139.1231

As GBP/JPY trades lower then the averages drop.

Targets

Targets are not only known miles ahead but targets stack to watch trades unfold.

Current targets: 149.7549, 149.8496, 149.5086, 148.1852, 146.0887, 143.7901, 143.0356.

The ECB and most central banks factor exchange rates to 6 decimal places and 4 for USD/JPY and JPY cross pairs and I follow the ECB exactly.

Eurozone Retail Sales and U.S Jobless Claims Keep the EUR and Dollar in Focus

Earlier in the Day:

It’s was a quieter start to the day on the economic calendar this morning. The Aussie Dollar was in action in the early part of the Asian session.

For the Aussie Dollar

Retail sales and trade data for January were in focus this morning.

In January, retail sales increased by 0.5%, month-on-month, partially reversing a 4.1% slide from December.  This was a downward revision from a prelim 0.6% rise.

According to the ABS,

  • Food retailing increased by 1.6%, with household goods retailing up by 0.1% in January.
  • Other retailing increased by 1.4%
  • Clothing, footwear, and personal accessory retailing fell by 3.6%, however, weighed by a 6.1% slide in clothing retailing.
  • Department store sales fell by 0.4%, with cafes, restaurants, and takeaway food services down by 0.8%.

In January, Australia’s trade surplus widened from A$6.785bn to A$10.142bn. Economists had forecast a narrowing to A$6.500bn.

According to the ABS,

  • Goods and services credits increased by A$2,316m (6%) to A$39,849m.
    • General merchandise exports increased by A$2,613m (9%), supported by a sharp increase in the export of non-rural goods.
    • Rural goods exports fell by 8m.
    • Net exports under merchanting fell by A$6m, with non-monetary gold exports falling by A$142m.
  • Debits fell by A$694m (2%) to A$29,707m.
    • General merchandise imports fell by A$577m. Heavy declines in the imports of consumption goods (AS$330m) and intermediate and other merchandise goods (A$229m) weighed.
    • Non-monetary gold imports fell by A$135m.

The Aussie Dollar moved from $0.77658 to $0.77767 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.04% to $0.7778.

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.07% to $0.7251, while the Japanese Yen was down by 0.05% to ¥107.06 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s another busy day ahead on the economic calendar. Key stats include Eurozone retail sales and unemployment figures for January.

German construction PMI figures for February are also due out but will likely have a muted impact on the EUR.

At the time of writing, the EUR was down by 0.11% to $1.2050.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. February’s construction PMI is due out later this morning.

We don’t expect too much influence on the Pound, however, which will remain in the hands of market risk sentiment.

At the time of writing, the Pound was down by 0.16% to $1.3932.

Across the Pond

It’s busier day ahead on the economic calendar. Factory orders and the weekly jobless claims figures will likely have the greatest influence.

Unit labor costs and nonfarm productivity numbers for the 4th quarter are also due out but should have a muted impact on the Dollar.

At the time of writing, the Dollar Spot Index was up by 0.11% to 91.049.

For the Loonie

It’s a quiet day ahead. Labor productivity numbers for the 4th quarter are due out later today.

We don’t expect too much influence from the numbers, however.

Market risk sentiment and impact on crude oil prices will remain the key driver ahead of the BoC monetary policy decision next week.

At the time of writing, the Loonie was down by 0.04% to C$1.2660 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

EOS, Stellar’s Lumen, and Tron’s TRX – Daily Analysis – March 4th, 2021

EOS

EOS rallied by 4.42% on Wednesday. Reversing a 1.09% fall from Tuesday, EOS ended the day at $3.8289.

A mixed start to the day saw EOS fall to an early morning intraday low $3.6367 before making a move.

Steering well clear of the first major support level at $3.5335, EOS rallied to a late morning intraday high $4.0767.

EOS broke through the first major resistance level at $3.8381 and the second major resistance level at $4.0036.

Falling short of $4.10 levels, EOS fell back through the first major resistance level to sub-$3.80 levels before finding support.

EOS briefly broke back through the first major resistance level at $3.8381 before ending the day at sub-$3.83 levels.

At the time of writing, EOS was up by 0.56% to $3.8502. A mixed start to the day saw EOS fall to an early morning low $3.7525 before rising to a high $3.8631.

EOS left the major support and resistance levels untested early on.

EOSUSD 040321 Hourly Chart

For the day ahead

EOS would need to avoid a fall back through the $3.7474 pivot level to support a run at the first major resistance level at $4.0582.

Support from the broader market would be needed, however, for EOS to break back through to $4.00 levels.

Barring an extended crypto rally, the first major resistance level and Wednesday’s high $4.0767 would likely cap any upside.

In the event of an extended rally, EOS could test resistance at $4.30 before any pullback. The second major resistance level sits at $4.2874.

Failure to avoid a fall back through the $3.8474 pivot would bring the first major support level at $3.6182 into play.

Barring an extended sell-off, however, EOS should steer clear of sub-$3.50 levels. The second major support level sits at $3.4074.

Looking at the Technical Indicators

First Major Support Level: $3.6182

First Major resistance Level: $4.0582

23.6% FIB Retracement Level: $6.52

38% FIB Retracement Level: $9.68

62% FIB Retracement Level: $14.77

Stellar’s Lumen

Stellar’s Lumen rose by 0.45% on Wednesday. Partially reversing a 2.78% loss from Tuesday, Stellar’s Lumen ended the day at $0.4210.

A bearish start to the day saw Stellar’s Lumen fall to an early morning intraday low $0.4120 before making a move.

Steering clear of the first major support level at $0.3986, Stellar’s Lumen struck a mid-day intraday high $0.4385.

Coming up against the first major resistance level at $0.4381, Stellar’s Lumen slid back to sub-$0.42 levels before finding support.

A late move back through to $0.42 levels delivered the upside on the day.

At the time of writing, Stellar’s Lumen was up by 0.50% to $0.4231. A mixed start to the day saw Stellar’s Lumen fall to an early morning low $0.4170 before rising to a high $0.4237.

Stellar’s Lumen left the major support and resistance levels untested early on.

XLMUSD 040321 Hourly Chart

For the day ahead

Stellar’s Lumen would need to move through the pivot level at $0.4238 to bring the first major resistance level at $0.4357 into play.

Support from the broader market would be needed, however, for Stellar’s Lumen break back through to $0.43 levels.

Barring an extended crypto rally, the first major resistance level and Wednesday’s high $0.4385 would likely cap any upside.

In the event of an extended rally, Stellar’s Lumen could test the second major resistance level at $0.4503.

Failure to move through the $0.4238 pivot would bring the first major support level at $0.4092 into play.

Barring another extended crypto sell-off, however, Stellar’s Lumen should steer clear of sub-$0.40 levels. The second major support level sits at $0.3973.

Looking at the Technical Indicators

First Major Support Level: $0.4092

First Major Resistance Level: $0.4357

23.6% FIB Retracement Level: $0.3426

38% FIB Retracement Level: $0.2823

62% FIB Retracement Level: $0.1850

Tron’s TRX

Tron’s TRX rallied by 4.00% on Wednesday. Reversing a 1.26% fall from Tuesday, Tron’s TRX ended the day at $0.04887.

A choppy start to the day saw Tron’s TRX fall to an early morning intraday low $0.04624 before making a move.

Steering clear of the first major support level at $0.04501, Tron’s TRX rallied to a mid-day intraday high $0.05049.

Tron’s TRX broke through the first major resistance level at $0.04929 to revisit $0.050 levels before sliding back to sub-$0.048 levels.

Finding late support, Tron’s TRX broke back through the first major resistance level at $0.04929 to revisit $0.0499 levels before easing back.

Resistance at $0.050 pinned Tron’s TRX back late in the day.

At the time of writing, Tron’s TRX was up by 2.15% to $0.04992. A mixed start to the day saw Tron’s TRX fall to an early morning low $0.04790 before striking a high $0.04996.

Tron’s TRX left the major support and resistance levels untested early on.

TRXUSD 040321 Hourly Chart

For the Day Ahead

Tron’s TRX need to avoid a fall through the pivot level at $0.04853 to bring the first major resistance level at $0.05083 into play.

Support from the broader market would be needed, however, for Tron’s TRX to break back through to $0.050 levels.

Barring an extended crypto rally, the first major resistance level and Wednesday’s high $0.05049 would likely cap any upside.

In the event of an extended rally Tron’s TRX could test resistance at $0.053 before any pullback. The second major resistance level sits at $0.05278.

Failure to avoid a fall through the $0.04853 pivot would bring the first major support level at $0.04658 into play.

Barring an extended sell-off, however, Tron’s TRX should steer clear of sub-$0.045 levels. The second major support level sits at $0.04428.

Looking at the Technical Indicators

First Major Support Level: $0.04658

First Major Resistance Level: $0.05083

23.6% FIB Retracement Level: $0.03211

38.2% FIB Retracement Level: $0.0428

62% FIB Retracement Level: $0.0648

Please let us know what you think in the comments below

Thanks, Bob

European Equities: Economic Data and Bond Yields in Focus

Economic Calendar:

Thursday, 4th March

German IHS Markit Construction PMI (Feb)

ECB Economic Bulletin

Eurozone Retail Sales (MoM) (Jan)

Eurozone Unemployment Rate (Jan)

Friday, 5th March

German Factory Orders (MoM) (Jan)

The Majors

It was another relatively bullish day for the European majors on Wednesday.

The CAC40 and the DAX30 saw gains of 0.35% and 0.29% respectively, while the EuroStoxx600 ended the day flat.

It was a choppy session for the majors, which faced rising Treasury yields late in the European session. News that the U.S would have enough vaccine doses to vaccinate everyone in the U.S before the summer drove yields higher.

Earlier in the session, economic data from the Eurozone had delivered mixed results. While the February PMI numbers were largely better than expected, the Eurozone’s private sector continued to contract.

The Stats

It was a busy day on the economic calendar on Wednesday.  Service sector PMI numbers for Italy and Spain were in focus early in the European session.

Finalized service and composite PMI figures for France, Germany, and the Eurozone also provided the majors with direction.

In February, Spain’s services PMI increased from 41.7 to 43.1. Economists had forecast a rise to 43.0.

Service sector activity also continued to contract in Italy. In February, the Services PMI increased from 44.7 to 48.8, coming in ahead of a forecasted 46.0.

For France, the services PMI fell from 47.3 to 45.6 in February, which was up from a prelim 43.6.

German’s Services PMI fell from 46.7 to 45.7, which was down from a prelim 45.9.

It was a different story for the composite PMIs, however.

An impressive pickup in manufacturing sector activity in Germany led to a rise in the German composite from 50.8 to 51.1. This was down marginally from a prelim 51.3.

For France, the Composite fell from 47.7 to 47.0. This was up from a prelim 45.2, however.

The Eurozone

For the Eurozone, the Services PMI rose from 45.4 to 45.7 in February, which was better than a prelim 44.7.

As a result of better numbers from Italy and Spain, the Composite PMI rose from 47.8 to 48.8, an upward revision from a prelim 48.1.

According to the February survey,

  • The modest fall in activity was closely linked to a decline in new orders, which fell for a 5th consecutive month.
  • In spite of this, new export business increased at its strongest pace for nearly 3-years.
  • For the Eurozone, there was a net increase in employment for the 1st time in 12-months.
  • Input cost inflation was recorded for the 9th successive month and to the sharpest degree since the Nov-2018.
  • As a result, output charges rose for the first time since last February.
  • Optimism hit its highest level in 3-years, supported by the rollout of vaccines and easing of restrictions.

From the U.S

The market’s preferred ISM Non-manufacturing PMI and ADP nonfarm employment change figures were in focus late in the session.

In February, the ISM Non-Manufacturing PMI fell from 58.7 to 55.3. Economists had forecast for the PMI to hold steady at 58.7.

  • The Price Index rose from 64.2% to 71.8%, aligned with a marked pickup in inflationary pressures in other major economies.
  • Other sub-indexes were in decline, weighing on the headline PMI figures.
    • ISM Non-Manufacturing Business Activity Index fell from 59.9 %to 55.5%.
    • The Employment Index fell from 55.2% to 52.7%.
    • Finally, the New Orders Index slid from 61.8% to 51.9%.

The ADP Nonfarm Employment figures for February also disappointed, with employment rising by just 117k in February. Economists had forecast a 177k rise following a 195k increase in January.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Wednesday. BMW (+4.54%), Continental (+4.49%), and Volkswagen (+4.67%) led the way, while Daimler trailed with a more modest 0.94% gain.

It was also a bullish day for the banks. Deutsche Bank ended the up by 1.62%, with Commerzbank gaining 1.02%.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 2.52% and by 2.46% respectively, with Soc Gen rallying by 3.62%.

It was a mixed day for the French auto sector, however. Stellantis NV slipped by 0.22%, while Renault rallied by 5.21%. While Stellantis closed out the day in the red, Stellantis delivered positive earnings and an optimistic outlook on Wednesday that supported the broader auto sector.

Air France-KLM eked out a 0.07% gain, with Airbus SE ending the day up by 1.37%.

On the VIX Index

It was a 2nd consecutive day in the green for the VIX on Wednesday. Following a 3.21% gain on Tuesday, the VIX rose by 10.66% to end the day at 26.67.

Rising U.S Treasury yields delivered the upside for the VIX, as the U.S equity markets responded to vaccine updates from the administration.

The NASDAQ slid by 2.70%, with the Dow and S&P500 falling by 0.39% and by 1.31% respectively.

VIX 040321 Daily Chart

The Day Ahead

It’s another busy day ahead on the European economic calendar. Key stats include retail sales and unemployment figures for the Eurozone, with the ECB Economic Bulletin due out ahead of the numbers.

While we can expect some market sensitivity to the numbers, expect the ECB Economic Bulletin to be the key driver early on.

With the ECB in action next week, the markets will be looking for clues on what to expect at the press conference. Inflation, the economic outlook, EUR strength, and their impact on monetary policy will likely be the main areas of focus.

From the U.S, the weekly jobless claims figures and January factory order numbers will also influence late in the European session.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 45 points.

For a look at all of today’s economic events, check out our economic calendar.

German Consumer Confidence Delivers EUR Support

Following a relatively quiet Asian session on the economic calendar, it was yet another relatively quiet day on the Eurozone economic calendar.

German consumer sentiment was in focus going into the European open.

Confidence Improves but Fails to Reverse the Lockdown Shock

For March, the GfK is forecasting a pickup in consumer sentiment from -15.5 (revised) to -12.9. Economists had forecast an increase to -14.3.

While coming in ahead of economists’ forecasts, the improvement was not enough to reverse the deterioration from February.

For February, the GfK had forecasted consumer sentiment to slide from -7.5 to -15.6.

According to the GfK press release:

  • Consumer sentiment began to recover in February after the collapse in confidence in response to the lockdown measures introduced at the start of the year.
  • There were improvements in both economic and income expectations, with propensity to buy also on the rise.
  • The improvement in consumer sentiment was also supported by a decline in propensity to save.
  • After as much as a 37-point slide at the start of the year, the propensity to buy indicator increased by 7.4 points.
  • In spite of the rise, the indicator remained 46 points lower than the same time last year.
  • Income expectations increased by around 9.4 points after 4 consecutive monthly falls.
  • By contrast to the other indicators, the economic outlook indicator was higher than the same time a year ago. In February, the indicator increased by 6.7 points to 8 points.

Market Impact

Ahead of the stats, it was another mixed start to the day for the EUR, which fallen to a pre-stat current day low $1.21559 before rising to a current day high $1.21829.

Upon the release of the inflation figures, the EUR slid from $1.21813 to a post-stat low $1.21680 before finding support.

At the time of writing, the EUR was up by 0.14% to $1.21787. All-in-all, the numbers were EUR positive, with the indicators suggesting a pickup in spending.

EURUSD 250221 Minute Chart

Next Up

4th quarter GDP numbers, core durable goods, weekly jobless claims figures from the U.S…

Should You Buy Ethereum Soon?

Last week I showed, see here, using the Elliott Wave Principle (EWP) and Technical Analysis (TA) that Ethereum (ETH) was most likely about to embark on a nasty correction to $1300s. It was trading at $1920s then, topped a few days later at around $2040 and dropped this week to as low as $1361…

Thus, (black) major-4 -as shown in last week’s chart, is IMHO now underway and has already reached the ideal target zone as outlined last week ($1300+/-100). So is this wave-4 already complete, and can we now expect the rally to $3000+? Hold your horses, not so fast. Let me explain.

Figure 1. ETH daily chart with detailed EWP count and technical indicators.

The Elliott Wave Principle points to a bounce followed by the next move lower.

This week’s “flash crash” is what I call an “initiation wave”; it has set in motion the more extensive correction: blue wave-a in Figure-1. But, from EWP -and from studying chart patterns in general- we know that there’s always this “dead cat bounce” first before the next leg lower starts. In EWP-terms, this counter-trend rally is called a B-wave. B-waves always consist of three smaller waves: a, b, c. In Figure-1, I have labeled the B-wave in blue and its smaller waves in green.

IMHO, wave-a of B is now underway or has possibly already been completed, and green wave-b should ideally target $1495-1575, from which green (minor) wave-c will target $1845-1930, ideally. This upside target zone is based on a simple c=a relationship. It also matches well with a typical 62-76% retrace of the initiation wave-A. The caveat is that 4th waves are often the least reliable, i.e., most variable, and in addition to that, hardest to forecast price structures. In general terms, they can be considered as a healthy consolidation, i.e., profit-taking, after a big run-up (the prior wave-3) with lots of shorter-term twists and turns, rips and dips. Many would then call the “bull flags.”

Whatever we call it; after wave-A comes wave-B (now underway) and then wave-C: green-red-black path in Figure 1, which is not accurate in time. Assuming wave-B tops around $1880+/-40 and that wave-C=A, then wave-4 should bottom around $1200+/-100. From there, I anticipated the next larger multi-month rally: major wave-5. If the 2017 rally is of any guide, see last week’s article, then please know the major-4 wave back then was a 70% correction, but followed by an 1100% rally (!). Please keep these numbers in mind in anticipation of the pending wave-5.

Bottom line: shorter-term I am looking for a somewhat tricky, whipsawing, move higher, ideally to around $1880+/-40, but it could even challenge the recent all-time high. From there, I expect several weeks of downside back to $1200+/100. After that, I anticipated the next rally to ~$3000+. However, a weekly close below $1200 targets $900. That translates to a 55% correction, and if 2017 is of any guide, it would still be fully within the norm.

Thus, trade ETH accordingly: sitting through a 40-50% correction thinking it will go to $3000 is not a strategy. It is dead money, which could be allocated somewhere else. And hope is never a strategy but a disaster recipe. Trade safe!

Buy Ethereum with Binance

Bitcoin and Ethereum See Major Weekend Corrections After Hitting New ATHs

Bitcoin (BTC) and Ethereum (ETH) have seen massive price increase over the past week, only for their prices to reach the peak over the weekend, and then see strong corrections as the final week of February started. Both coins have seen massive price drops over the last two days, but this doesn’t necessarily mean that the rally has ended.

Bitcoin price crashes

Bitcoin has been making headlines about new highs and new records for weeks, and even months, at this point. The coin’s current all-time high, reached on February 21st, puts it at $58,400. Over the past week, the coin surged from $50k to reach this record over the weekend.

While it did go up and down between $56k and $58k for several days, it appears that it did not make any of these upper levels into a strong enough support to withstand the correction that came after.

The price crashed on February 21st, dropping from $58,400 to $55,800, according to data from CEX.IO. However, yesterday, February 22nd, it dropped from $55,800 to $47,600. The drop caused traders and investors to start buying, causing an immediate recovery to $53,859, but as soon as the price came back above $50k, people started selling again. Asa result, BTC price dropped below $50k once more, currently sitting at $49,920.

The oversell came soon after veteran trader, Peter Brandt, hinted that BTC could peak at $200k in a recent tweet. However, he also said that it is likely that the coin’s price will go through a deep correction before hitting this price. It is possible that this was the correction he was expecting to see, although it is just as likely that this is only a beginning.

Meanwhile, Elon Musk once again spoke about cryptocurrencies on Twitter, this time in response to Changpeng Zhao. In a recent interview, Zhao noted that he is surprised that Musk is pushing Dogecoin so much, but that he is, ultimately, free to like whatever he wants. However, he did note that it was interesting that Musk’s company, Tesla, bought $1.5 billion of BTC and not DOGE.

To that, Musk replied that Tesla’s action is not reflective of his opinion. Having Bitcoin is a simply less dumb form of liquidity than cash, as he stated.

He did point out that he is an engineer, and not an investor. Later on, in conversation with Peter Schiff, Musk also mentioned in a different context that Bitcoin and Ethereum ‘do seem high,’ potentially hinting that he expects a correction.

Ethereum price crashes after hitting $2k

Ethereum has been going up for a long time now, slowly but surely heading towards the $2k mark. The coin did not have many instances where it suddenly skyrocket like what Bitcoin tends to do. Instead, it was a long but steady growth, and it finally allowed ETH to hit the $2,000 milestone late on February 19th. The coin reached this milestone just as the weekend started, and it even kept going for the most part on Saturday.

According to CEX.IO data, ETH’s current all-time high is at $2,035. After reaching this high, however, the coin saw a strong correction. It dropped to $1800, recovering to $1,920 after a brief period. On Sunday, it remained between $1900 and $1970, fluctuating between these two positions.

However, yesterday, February 21st, the coin saw a massive crash that took it down to $1550 before seeing a recovery to $1,800. As of today, Ethereum price is dropping again, currently once again sitting at $1593, and currently still heading down.

At the same time as the price was crashing, Binance had one of its withdrawal suspensions that prevented users from withdrawing ETH and Ethereum-based tokens.

Needless to say, a lot of people were quite infuriated with the exchange, which once again claimed that the high network congestion is responsible for the inability of users to withdraw money. Binance has had a bit too many incidents a bit too often, and the exchange has also made headlines in which it was blamed for purposefully choking Ethereum’s network to drove more users to its platform.

What is next for Bitcoin and Ethereum?

It is safe to say that both, Bitcoin and Ethereum have reached uncharted territories over the past few days, and it is understandable that investors and traders were in a rush to sell as soon as something signaled a correction was coming. However, this is likely only a bump on the road, and a lot more of price growth is expected by the experts.

Konstantin Anissimov, Executive Director at CEX.IO

A Sharp Rise In Gold Is Overshadowed By Silver’s Daily Gains

Leading the forefront was silver futures, which gained 3.6% in trading today. This was followed closely by the electronically traded fund SLV, which outperformed futures as they gained 3.90%. The Ishares Silver trust is currently up to $0.98 per share and fixed that $26.25.

As of 4:10 PM EST, silver futures basis, the most active March 2021 Comex contract is currently fixed at $28.245, after factoring in today’s net gain of $0.98. Although the initial open for trading today created a small gap between the close on Friday, silver prices filled the gap when they traded to a low of $27.33 and then recovered with substantial gains.

kitco silver

Gold futures prices recovered and had a strong showing gaining $30 on the day. Basis, the most active April contract gold, traded and closed above $1800 per ounce for the first time since it broke below $1800 on February 16. Currently, April futures are fixed at $1807.30, which is a net gain of 1.68%, or $29.90. Not far behind in terms of percentage gains on the day was the electronically traded fund GLD which gained 1.49% and is currently fixed at $169.50.

kitco gold

Although gold had a stellar performance today, it continues to be outshined by its sister metal silver. On a technical basis, we have seen silver prices climb substantially ever since the 50-day moving average crossed above the 100-day moving average, which occurred on January 25.

During the end of January, silver was trading at roughly $25.50 per ounce. After a rapid price advance which took silver prices to $29.40 then on February 1, it sustained a major selloff taking the precious white metal to $26.33. What would follow would be a period of 12 trading days in which prices consolidated around $27.

In fact, silver dropped to its 50-day moving average on Friday of last week, trading to an intraday low of $26.10 before recovering above $27. This was followed by today’s stellar performance taking silver well back above $28 per ounce.

Both gold and silver rebounded today as they reacted to market sentiment, assuming that there would be inflationary concerns down the road. These concerns outweighed the upswing in treasury yields. In the case of silver, the industrial use combined with inflationary concerns were underlying factors moving silver higher.

Our target remains $30 to $33 in silver. We believe that it could easily reach the upper ends of our projection once a final fiscal stimulus bill is voted upon and passed.

All of the precious metals benefited from a weaker U.S. dollar. The dollar index lost roughly 3/10 of a percent today and is currently fixed at 90.10

For more information on our service simply use this link.

Wishing you as always, good trading and good health,

Gary S. Wagner

February 19th 2021: Sterling Clocks Fresh 2021 Peaks Amid Dollar Losses

Note—Charts provided by Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

February, as you can see, remains off session lows, though currently trades 0.4 percent lower.

Downstream, 1.1857/1.1352 represents demand, while northbound shines light on ascending resistance (prior support – 1.1641).

In terms of trend, the primary uptrend has been in play since price broke the 1.1714 high (Aug 2015) in July 2017.

Daily timeframe:

Demand from 1.1923/1.2001—an area housing support at 1.1965 (previous Quasimodo resistance)—remains an area of focus.

RSI action remains gripping two converging RSI trendline resistances (yellow box), while circling the 50.00 centreline.

H4 timeframe:

As USD demand receded amid disappointing labour market, Europe’s single currency benefitted on Thursday.

The one-sided move higher took over 1.2075 resistance, with price movement taking on resistance from 1.2087 in recent hours. Quasimodo resistance at 1.2149 is seen to the upside, with a break uncovering the 88.6% Fib level at 1.2162 and resistance from 1.2179.

H1 timeframe:

Quasimodo support at 1.2023, a level accompanied by a 127.2% Fib extension at 1.2029, has done a superb job in holding price higher.

Thursday’s bullish impetus, as you can see, has landed candle action within a stone’s throw from the 1.21 level and 100-period simple moving average. Moving through here could direct flow to resistance at 1.2132 (a previous Quasimodo support), stationed just south of 1.2150 resistance.

RSI movement, as you can see, climbed above resistance around 54.20/47.05 and retested the upper edge of the base in recent moves, suggesting overbought conditions today.

Observed levels:

Based on current chart studies, 1.21 potentially offers fragile resistance. A H1 breakout above 1.21, therefore, could be interpreted as a bullish cue, targeting H1 resistance at 1.2132, followed by 1.2050 (aligns with H4 Quasimodo resistance at 1.2149).

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

January’s half-hearted shooting star candle (often construed as a bearish indication at peaks) has so far failed to seduce sellers. February, as you can see, trades a touch off session highs, up by about 1.7 percent.

This brings light to 0.8303/0.8082—a supply zone aligning closely with trendline resistance (prior support – 0.4776). In the event sellers regain consciousness, however, long-term demand resides at 0.7029/0.6664 (prior supply).

In the context of trend (despite the trendline resistance [1.0582] breach in July 2020), the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high [2018]).

Daily timeframe:

Partly modified from previous analysis –

AUD/USD bulls modestly stepped forward on Thursday, snapping a two-day bearish phase.

Upriver, beyond 2021 pinnacles at 0.7820, supply inhabits the 0.7937/0.7890 neighbourhood. Calling for attention to the downside, on the other hand, is trendline support, an ascending level drawn from the low 0.5506.

RSI flow remains flirting with trendline resistance. A downside move here has the 50.00 centreline in sight, while moves north could have the value invade overbought space.

H4 timeframe:

Current flow is seen fluctuating between resistance parked at 0.7769 and drop-base-rally demand at around the 0.7727ish region (green).

Outside of this range, support at 0.7698 can be found, a previous Quasimodo resistance, while a bullish play may target resistance drawn from 0.7805.

H1 timeframe:

H4 resistance mentioned above at 0.7769 recently made an entrance, following an earlier push off session troughs, movement that took on 0.7750 resistance and the 100-period simple moving average. A H1 close north of 0.7771 could spark a bullish theme to 0.78, despite a nearby Quasimodo resistance plotted at 0.7782.

RSI followers may also note the value climbed the 50.00 centreline, implying upside momentum is to the upside and could continue to overbought territory.

Observed levels:

Monthly and daily timeframes displaying scope to attack higher levels places a question mark on H4 resistance from 0.7769. A H1 close above the latter could have breakout buyers make a show, with 0.78 (H1) targeted, set just south of H4 resistance at 0.7805.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Buyers are beginning to show life on the monthly scale, following January’s bullish engulfing candle.

Up by 1 percent, descending resistance (not considered traditional trendline resistance) takes the spotlight to the upside, etched from the high 118.66, whereas support inhabits 101.70.

Daily timeframe:

Partly modified from previous analysis –

Thursday extended Wednesday’s retracement out of supply from 106.33/105.78, consequently throwing light on the nearby 200-day simple moving average at 105.51.

The RSI indicator recently produced bearish divergence off overbought territory. Support remains on the table around 57.00.

H4 timeframe:

Partly modified from previous analysis –

The October 7 (2020) peak at 106.11 made a show Wednesday and, as you can see, stimulated a bearish response that extended into Thursday’s session.

Demand remains in sight at 105.26/105.41 and 105.26/105.14 (commonly referred to as stacked demand), while should buyers eventually overthrow 106.11, a 127.2% Fib projection at 106.44 is in view, shadowed by Quasimodo resistance at 106.58.

H1 timeframe:

Technical framework on the H1 scale shows price grinding towards the 100-period simple moving average at 105.61, with a break shining light on a neighbouring trendline support, taken from the low 104.41.

Upside, we can see the 106 figure, shadowed by two nearby Quasimodo resistances at 106.09 and 106.27.

RSI fans will note the value is circling a 50.00 support area.

Observed levels:

Largely unchanged outlook.

The reaction from daily supply at 106.33/105.78 might tempt sellers to extend the unit lower and retest the 200-day simple moving average around 105.51. Given the monthly timeframe’s bullish position right now (see above), a dip to the SMA could spark a bullish theme. Note the SMA also coincides closely with H4 demand at 105.26/105.41 and H1 trendline support.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Following December’s 2.5 percent advance—movement that stirred major trendline resistance (2.1161)—February has refreshed multi-month highs at 1.3985.

In terms of trend structure, however, the primary trend has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way—April high, 2018. In effect, the aforesaid high represents the next upside objective on the monthly chart.

Daily timeframe:

Sterling nudged higher against the dollar Thursday amidst successful COVID-19 vaccinations across the UK. As you can see, this placed supply at 1.3996/1.3918 under pressure.

North of supply we can see we have resistance parked at 1.4011, a previous Quasimodo support base (red).

RSI action remains teasing the upper edge of a 3-month range between support around 47.00 and resistance at the 66.00 region, testing overbought territory.

H4 timeframe:

For those who read previous analysis you may recall the following (italics):

Early hours Tuesday witnessed price movement puncture the upper side of supply from 1.3942/1.3900 (glued to the lower side of daily supply at 1.3996/1.3918). With many price action traders likely to view this as a bullish cue (sellers consumed at supply), dip-buying could emerge off support from 1.3852.

As evident from the chart, 1.3852 served well as support and has indeed taken on supply from 1.3942/1.3900, which has brought light to another supply at 1.4034/1.3989 (fastened to the upper side of daily supply mentioned above at 1.3996/1.3918 which also houses daily resistance at 1.4011).

H1 timeframe:

Upside gained speed heading into London hours on Thursday, overriding the 100-period simple moving average, the 1.39 figure and 1.3951 tops.

Ultimately, what this has done is throw the key figure 1.40 into the realms of possibility, a psychological barrier aligning with a 100% Fib extension at 1.4022 and a 127.2% Fib projection from 1.3996. Therefore, this is likely to be on the radar for many GBP/USD traders today.

RSI flow has recently exited overbought territory, following a peak at 79.87.

Observed levels:

The 1.40 figure on the H1 and associated Fib levels is likely to not only interest sellers, but it may also be a logical upside target for longs. Also of interest is 1.40 unites closely with daily resistance at 1.4011 and H4 supply parked at 1.4034/1.3989.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Sterling Clocks Fresh Multi-Month Peaks Vs. Dollar Amidst On-going Vaccination Progress

Note—Charts provided by Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

February has so far witnessed a healthy floor of bids emerge around the 1.1950 neighbourhood, consequently stirring a hammer formation (though we will not know this until the month concludes).

Downstream, 1.1857/1.1352 represents demand, while northbound shines light on ascending resistance (prior support – 1.1641).

In terms of trend, the primary uptrend has been in play since price broke the 1.1714 high (Aug 2015) in July 2017.

Daily timeframe:

Partly modified from previous analysis –

EUR/USD continues to consolidate last week’s gains around 1.2130, following a recovery from demand at 1.1923/1.2001—an area housing support at 1.1965 (previous Quasimodo resistance). 1.2190 tops, shadowed by Quasimodo resistance from 1.2278, are seen as possible upside targets.

RSI fans will note the value remains engaging with the 50.00 centreline, which happens to share space with two converging trendline resistances (yellow box).

H4 timeframe:

Outlook unchanged due to lacklustre performance –

Quasimodo resistance at 1.2142—aligning with a 78.6% Fib level at 1.2138 and a 50.0% retracement at 1.2149—remains centre of attention on the H4 scale, withstanding two upside attempts last week. Space north of here may call for resistance at 1.2179, with subsequent buying to possibly take aim at another resistance plotted at 1.2214.

As you can see, Friday also discovered a healthy pocket of bids from swing support recognised at 1.2087, leaving 1.2075 support unchallenged.

H1 timeframe:

Monday had H1 sellers respond from Quasimodo resistance at 1.2142 noted on the H4 scale. H1 buyers also welcomed the 100-period simple moving average at 1.2122. Taking on higher levels may see buyers push beyond what appears to be a consumed H1 Quasimodo resistance at 1.2173 to pursue 1.22 resistance.

47.05/54.20 continues to serve as support out of the RSI indicator, a support/resistance area in play since the beginning of February.

Observed levels:

Outlook mostly unchanged due to lacklustre performance –

Both monthly and daily timeframes ended last week off worst levels, in the shape of a hammer pattern—movement often interpreted as a bullish cue. By the same token, both charts demonstrate room to scale higher, targeting 1.2190 tops on the daily chart.

On the shorter term, H4 Quasimodo resistance at 1.2142, despite blending closely with Fib studies, has failed to invite selling beneath local H4 support at 1.2087. The non-committal tone from sellers, along with H1 holding off the 100-period simple moving average, places a question mark on the H4 Quasimodo formation.

According to chart studies, therefore, H1 buyers could potentially reach for the 1.22 neighbourhood.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

January’s half-hearted shooting star candle (often construed as a bearish indication at peaks) has so far failed to seduce sellers. February, as you can see, trades a touch off session highs, up by about 2 percent.

This brings light to 0.8303/0.8082—a supply zone aligning closely with trendline resistance (prior support – 0.4776). In the event sellers regain consciousness, however, long-term demand resides at 0.7029/0.6664 (prior supply).

In the context of trend (despite the trendline resistance [1.0582] breach in July 2020), the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high [2018]).

Daily timeframe:

Partly modified from previous analysis –

Modest USD weakness elevated AUD/USD appeal Monday, recording a third successive daily advance and testing 0.7782 tops.

North of 0.7782, technical elements imply a continuation bid, refreshing 2021 pinnacles and possibly drawing in supply from 0.7937/0.7890. Sellers regaining consciousness, on the other hand, could lead trendline support back into the fight, an ascending level drawn from the low 0.5506.

RSI flow recently dethroned the 50.00 centreline and landed the indicator at RSI trendline resistance, with further upside to possibly touch overbought space.

H4 timeframe:

Bearish flow stepped aside within supply at 0.7769/0.7749 in recent trading, tripping any stops and retesting the upper side of the zone.

Quasimodo resistance plotted at 0.7781 appears to have already been consumed, with continuation moves potentially eyeballing resistance taken from 0.7805.

H1 timeframe:

AUD/USD action was pretty much muted on Monday, despite managing to eke out modest gains on the session.

Upstream, 0.78 psychological resistance resides close by, while lower on the curve, sellers could approach 0.7750 support and the 100-period simple moving average.

Familiar trendline support, taken from the low 23.72, remains in the frame on the RSI, with the value continuing to claw out position north of the 50.00 centreline.

Observed levels:

Partly modified from previous analysis –

The monthly could call for higher levels over the coming weeks, which may lend buyers support on the daily scale and have the pair refresh 2021 highs, with daily supply at 0.7937/0.7890 also to possibly make an entrance.

Across the page on the short-term timeframes, H4 supply at 0.7769/0.7749 was taken out and retested on Monday. This shines the technical spotlight on possible buying today, targeting 0.78 (H1) and 0.7805 resistance on the H4.

The combination of 0.71 and 0.7805 could also attract a short-term correction move, though given higher timeframe flow pointing higher, any moves lower could be short-lived.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Buyers are beginning to show some life on the monthly scale, following January’s bullish engulfing candle.

Resistance can be seen in the form of a descending line (not considered traditional trendline resistance), etched from the high 118.66, whereas follow-through weakness shifts focus to support at 101.70.

Daily timeframe:

Partly modified from previous analysis –

Technical structure to be mindful of:

  • The 200-day simple moving average at 105.54 and supply coming in from 106.33/105.78.
  • Lower on the curve, demand at 103.56/103.93 is close by, shadowed by trendline resistance-turned support, pencilled in from the high 111.71.

The RSI indicator rebounding from 57.00 support (previous resistance) has elbowed overbought conditions back in sight.

H4 timeframe:

Supply at 105.26/105.14 failed to inspire follow-through selling on Monday and swiftly stepped aside. Trekking higher terrain today, therefore, could be in the offing, taking aim at the alternate AB=CD resistance at 105.63 (the 127.2% Fib extension)—provided a platform for sellers to work with early last week.

The above swings the pendulum in favour of buyers, at least in the short term until we shake hands with 105.63.

H1 timeframe:

Monday observed narrow trading—movement which established a bullish pennant pattern from 105.41 and 105.26. A breakout north unearths a possible drive into Quasimodo resistance at 105.55, a level surrounded by a 161.8% Fib projection at 105.58 and an 88.6% Fib level at 105.61. Beyond here, bullish flow could also approach another Quasimodo resistance at 105.80.

Failure to breakout higher is likely to shift interest to support priced at 105.14, followed by the 105 figure.

The RSI indicator shows the value recently exited overbought waters and is currently hovering around the 65.00 neighbourhood.

Observed levels:

Monthly, daily and H4 timeframes point to a possible breakout above the H1 timeframe’s bullish pennant, targeting at least H1 Quasimodo resistance from 105.55 (aligns with the 200-day simple moving average around 105.53 and the H4 alternate AB=CD resistance at 105.63).

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Following December’s 2.5 percent advance—movement that stirred major trendline resistance (2.1161)—February has refreshed multi-month highs at 1.3918.

In terms of trend structure, however, the primary trend has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way—April high, 2018. In effect, the aforesaid high represents the next upside objective on the monthly chart.

Daily timeframe:

Amidst a modestly softer USD and vaccine optimism out of the UK, GBP/USD welcomed fresh yearly peaks ON Monday and tested supply at 1.3996/1.3918. This follows the break of resistance at 1.3755 earlier last week.

RSI enthusiasts will note the indicator recently broke above the upper edge of a 3-month range between support around 47.00 and resistance at the 66.00 region (the value stands at 68.78), and is on the verge of entering overbought territory.

H4 timeframe:

Monday kicked off on the front foot, lifting the currency pair north of 1.3852 resistance into the walls of supply at 1.3942/1.3900 (glued to the lower side of daily supply at 1.3996/1.3918).

H1 timeframe:

Monday echoed a subdued stance as price forged a rising wedge pattern between 1.3883 and 1.3914 around the 1.39 figure.

As you can see, the lower side of the rising wedge has already given way. Should 1.39 step aside, downside may gain speed and test 1.3850 support, along with nearby trendline support, taken from the low 1.3566.

Observed levels:

Though monthly price appears set to take aim at higher levels, the daily timeframe testing supply at 1.3996/1.3918, along with H4 also testing supply at 1.3942/1.3900, could send H1 south of 1.39 towards the 1.3850 neighbourhood.

DISCLAIMER:

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Is Volatility Giving a Warning?

It has almost been a year since the Volatility Index (VIX) -aka the fear index- has closed below 20. The two years before, it was mostly around the low to mid-teens. The last time the VIX closed below 20 was February 21, 2020. Does this mean there’s no complacency anymore in the markets and only fear?

While the VIX is a real-time market index representing the market’s expectations for volatility over the coming 30 days, the lesser know VXV measures implied volatility three months out. One way to look at fear/greed is to use the VIX divided by the VXV: VIX/VXV ratio, as it filters out higher baseline readings liker now. See figure 1 below.

Figure 1. VIX/VXV daily ratio

Chart, histogram Description automatically generated

High readings, i.e., spikes, coincide, clearly, with market bottoms as there is a lot of short-term “fear”; the VIX is very high. Since market bottoms form quickly, the ratio shows spike-highs. Conversely, when the readings become very low, i.e., traders and investors expect barely any volatility over the next 30 days, the market is -based on historical evidence since March 2009 low- close to a correction.

Low VIX/VXV readings and future market performance.

The current VIX/VXV ratio sits at 0.754. When the rate is about this low, vertical blue lines, returns for the S&P500 are often less than stellar. Namely, in 2012 the S&P500 lost 10-14% eventually. In 2015 the index stalled almost a year, adding a mere 3.5%, only to lose nearly 15%. Similarly, in 2016, albeit the pullback was shallow (-5%). In 2017 there were several <0.75 readings, and the market ignored those, gaining almost 20% since the first reading in August 2020 but losing at least 6% since the last <0.75 reading from December 2020. Besides, less low readings, like in 2018 and 2019, can still lead to 20% losses.

Thus, although the ratio is not precis in nailing the very top because as said tops take time, the current low readings warn that the S&P500 is closer to a significant, albeit interim, top, than a bottom. And as usual, “forewarned is forearmed.” IMHO, it does not mean to go full-on short or abandon all ships. It means one could, for example, raise stops, take partial profits, etc., which have never caused anyone any pain.

 

3 Airline Stocks Ready for Takeoff

Coronavirus-induced stay-at-home orders and border closures have wreaked havoc on the airline industry in 2020. Furthermore, a move to remote working during the pandemic threatens to significantly reduce corporate travel moving forward. Philanthropist and Microsoft co-founder Bill Gates recently said he expects business travel to disappear by over 50% longer-term. “My prediction would be that over 50% of business travel and over 30% of days in the office will go away,” Gates told the New York Times’ Dealbook conference, per CNBC.

However, over the past month, airline stocks have flown back into favor with investors after successful COVID-19 vaccine breakthroughs give hope that pre-pandemic travel levels may return as more people take to the skies. Below, we take a look at the three largest airline stocks by market capitalization.

Southwest Airlines Co. (LUV)

The Dallas-based low-cost carrier operates over 700 aircraft in an all-Boeing 737 fleet, primarily targeting leisure and independent small business customers. Although the Federal Aviation Administration (FAA) lifted its 20-month ban of the troubled Boeing 737 Max from flying passengers Wednesday, Southwest said the jet wouldn’t re-enter service until later next year. From a technical standpoint, the share price broke out above a nine-month downtrend line that may see it retest its pre-pandemic high at $58.83. The airline has a market cap of $27.35 billion.

Delta Air Lines, Inc. (DAL)

With a market cap of $25.67 billion, Delta flies to over 300 destinations in more than 50 countries. The company announced in September that it plans to borrow $6.5 billion, backed by its frequent-flyer loyalty program to secure liquidity to ride out the tail end of the pandemic.

More recently, the full-service airline canceled one in every five flights it was scheduled to operate on Thanksgiving Day amid crew shortages brought about by the health crisis. Turning to the charts, a recent cross of the 50-day SMA back above the 200-day SMA and breakout above a multi-month downtrend line may lead to further gains toward crucial overhead resistance at $51.

United Airlines Holdings, Inc. (UAL)

United Airlines operates as a full-service carrier through its strategically located hubs in San Francisco, Chicago, Houston, Denver, Los Angeles, New York/Newark, and Washington, D.C. Last month, Raymond James’ airline analyst Savanthi Syth upgraded the airline’s stock to ‘Outperform’ from ‘Market Perform’ and reiterated the firm’s $60 price target.

Syth argues the company sits in a better position than its competitors for a travel revival after securing a pilot agreement through 2022. He also noted that United has no pending fleet retirements, allowing it to rapidly increase capacity when demand picks up. Moving on to the chart, a comprehensive breakout above a crucial downtrend line and the 200-day SMA could see the shares take flight to the January swing low at $74.34. The airline has a market value of $13.18 billion.

For a look at today’s earnings schedule, check out our earnings calendar.

Baidu Completes Double Bottom Reversal

Chinese search engine Baidu Inc. (BIDU) reports Q3 2020 earnings after Monday’s U.S. closing bell, with analysts looking for a profit of $13.08 per-share on $27.5 billion in revenue. If met, earnings-per-share (EPS) would mark a 750% profit increase compared to the same quarter in 2019.  The stock fell more than 6% after posting mostly in-line results in August but recovered quickly and is now trading at a 10-month high.

Baidu Marketing On The Mend

Baidu’s marketing division produces 85% of total revenue, exposing price action to cyclical economic trends. That division took a hit during the first quarter shutdown but is now back on the growth track. Search inquiries and revenue driven by the hugely-popular mobile app rose 28% in Q2 2020 and double digits year-over-year, raising prospects for strong performance in coming quarters. In addition, the company expects to enhance average revenue per user (ARPU) through membership, gaming and live streaming initiatives.

Barclay’s analyst Gregory Zhao just upgraded the stock to ‘Overweight’ and raised the price target to $170, noting, “we think both the online marketing services and the new AI initiatives of Baidu Core are reaching an inflection point. Since 2Q20 its marketing division has followed the online ad industry’s recovery trend to gradually restore growth momentum. We also see substantial upside in the potential monetization through membership, gaming and live streaming to fully utilize existing traffic.

Wall Street And Technical Outlook

The stock has underperformed broad technology benchmarks in recent years, despite bullish Wall Street coverage. It’s currently rated at a ‘Strong Buy’, based upon 7 ‘Buy’ and 2 ‘Hold’ recommendations, and no analysts are recommending that shareholders close positions. Price targets currently range from a low of $130 to a Street-high $182 while the stock closed Friday’s U.S. session $14 below the median $160 target.

Baidu posted new three new highs into 2018 and entered a steep decline that hit a 7-year low in the first quarter. It spent the last 8 months working back to the January 2020 high at 147 and just completed the 100% retracement. This level marks a high volume 2019 breakdown through the 2018 low, as well at 200-week moving average resistance. A better-than-expected report and strong guidance may be needed to mount this formidable barrier.

For a look at all of today’s economic events, check out our economic calendar.

Pfizer’s COVID-19 Vaccine weighs on Gold prices

As it broke key price supports around $1,950/ounce, and finally $1900/ounce amid a pending wave of quantitative easing after Joe Biden was declared the winner of the recently concluded U.S election.

It’s fair to elaborate that gold traders were caught unawares as gold bears wreaked havoc at unprecedented levels, aftermath prices have recovered slightly, at the time of writing this publication the yellow metal was trading at about $1,889/ounce. The sudden rebound has seen lately in the greenback also clampdown on any bullish resolve in keeping price above $1,900/ounce.

The precious metal is fast losing its safe-haven status on the bias that its inverse correlation to stocks is much less appealing as global investors look into other alternatives as seen in recent days.

Digging deeper, into a key macro distorting gold prices is COVID-19 vaccine on bias that it pushed 10-year U.S Treasury yields to their highest point since COVID-19 pandemic started, meaning the surge in U.S Treasury yields and impressive gains recorded relatively in global stocks means it might just be a matter of few weeks for the precious metal to fall below the $1,800 price level.

This has kept gold traders bearish in the near term, on the bias that the precious metal is priced lower and not until a Joe Biden’s presidency comes to effect we might see the bullion metal trading below $1,800 price levels.

It would be unfair ruling out gold bulls as the mother of all stimulus packages seem to be on its way, judging by reports on the blue party’s economic agenda in bailing out a fragile economy battered by COVID-19 virus, means gold prices could recover remarkably after the end of January 2021.

However if the COVID-19 vaccine plus the stimulus deal creates a reflationary impulse not seen before, the U.S central bank might have no option but to lift interest rates earlier than expected, meaning gold investors might have a lot to battle for, as prices could tank below $1500/ounce in the long term.

For a look at all of today’s economic events, check out our economic calendar.

COVID-19 – The Race to a Vaccine

The 2nd Wave

The 2nd wave of the COVID-19 pandemic has hit Europe hard. As a result, a number of countries across the EU have had little choice but to reintroduce lockdown measures.

Britain has also reintroduced lockdown measures across England this week.

For the U.S, things are not much better. New daily COVID-19 cases continue to set new records as the West enters an uncertain winter.

The economic devastation from the 1st wave could pale into insignificance when considering the likely impact of the 2nd wave.

For this very reason, the race towards an effective and widely available COVID-19 vaccine is all the more important.

Until an effective vaccine is readily available, containment measures, border control, and more will remain economically debilitating.

The Race Participants

There are a vast number of pharma companies that are currently in the race to deliver the 1st effective COVID-19 vaccine.

Some of these companies are researching more drugs than others, suggesting that they may be more likely to deliver first. Others may argue, however, that having too many varieties to test will result in a lack of progress.

The companies are shown in the chart below

statistic_id1119090_top-companies-by-covid-19-treatment-vaccines-in-development-2020

While the companies listed above are trialing 60 different drugs and vaccines, as at 28th October, there were reportedly 674 drugs and vaccines in development, targeting COVID-19.

The figures are made available by statista.com and Pharma Intelligence.

Looking at the top 10 companies listed above and a few more in more detail:

U.S Headquartered

EpiVax: Unlisted and headquartered in Providence, USA.

Mateon Therapeutics: Listed on OTCMKTS (“MATN”) and headquartered in California.

Merck & Co.: Listed on the New York Stock Exchange (“MRK”) and headquartered in New Jersey, USA.

Moderna Inc.: Listed on the NASDAQ (“MRNA”) and headquartered in Cambridge, Massachusetts, USA.

Pfizer Inc.: Listed on the New York Stock Exchange (“PFE”) and headquartered in New York City. (Pfizer Inc. has partnered with Germany’s BioNTech SE)

Sorrento Therapeutics: Listed on the NASDAQ (“SRNE”) and headquartered in California. Currently trailing many of the front runners in the race for an effective vaccine.

Talem Therapeutics: This is a wholly-owned subsidiary of ImmunoPrecise Antibodies USA. Its parent company, ImmunoPrecise Antibodies Ltd is listed on the Toronto Stock Exchange.

Tonix Pharmaceuticals: Listed on the NASDAQ (“TNXP”) and headquartered in New Jersey.

Europe Headquartered

AstraZeneca: Listed on the London Stock Exchange (“AZN”) and headquartered in Cambridge, England and Sodertalje, Sweden.

GlaxoSmithKline: Listed on the London Stock Exchange (“GSK”) and headquartered in Brentford, England.

Grifols, S.A: Listed on the Bolsa de Madrid (“GRF”) and headquartered in Barcelona, Spain.

Asia Headquartered:

GC Pharma: Listed on the Korea Stock Exchange (“006280”) and headquartered in Yongin, South Korea.

As indicated above, the U.S pharmas make up the lion’s share of companies in the race to deliver a COVID-19 vaccine.

Coronavirus – The Latest Numbers

When considering the fact that the U.S has recorded an alarming 9,919,522 COVID-19 cases and 240,953 COVID-19 related deaths, it is not surprising that Pharma U.S is leading the charge.

Looking at the latest Coronavirus figures, the total number of cases currently sits at 49.031. While 34.98m have reportedly recovered, there have been 1.24m reported deaths.

For Europe and the U.S, the number of cases reported amidst the 2nd wave has been far more significant than in the 1st wave.

When considering the fact that the winter has just begun, these numbers are likely to balloon further.

For the Global Economy, the key to any recovery rests on finding an effective vaccine and soon. Failure to successfully trial a vaccine by the end of the year will leave the world exposed for another full quarter.

Larger multinational companies may be able to tighten the belt. Small to medium-sized companies, however, will begin to shut down in far greater numbers than seen in the 1st wave.

The damage to the economy would be so severe that some nations will be in the economic wilderness for a decade if not more.

So, having identified the key players in the race to an effective COVID-19 vaccine, the next step is to understand at what stage of clinical trials each currently stands.

The Clinical Trials

Companies that are more advanced may not ultimately reach the end goal first, but they do have a greater chance.

For this reason, share prices have tended to reflect how advanced and successful trials have been to date.

According to Pharmaintellgence.informa.com,

Of the total 674 drugs, 510 are currently in the preclinical trial phase. This means that the vast majority may not make it to clinical trials.

Of the remainder:

  • 49 are currently in phase 1 clinical trial.
  • 75 are in phase 2, and
  • 28 are in phase 3.

Taking a closer look at the current trials testing drugs for the treatment and/or prevention of COVID-19 fund in Trialtrove, the breakdown in phases is as follows:

  • I: 431
  • II: 1,728
  • III: 1,011
  • IV: 327

From the numbers above, it is clear that the sector is making strong progress towards effective treatment and/or vaccine.

The Front Runners

  • AstraZeneca (“AZN”) announced this week that they are on track to deliver a vaccine as early as this year. The company is due to deliver test results by the end of the year. AstraZeneca is working with the University of Oxford to deliver an effective vaccine.
  • Moderna Inc. (“MRNA”) is reportedly getter ready for a global launch. In late October, the company stated that it had already accepted in excess of $1bn in deposits from governments. Late-stage trials are underway.
  • Pfizer Inc. (“PFE”) and BioNTech SE have announced that they may release initial late-stage trial data this month. If results are positive, Pfizer Inc. will apply from the FDA for emergency use authorization.

While the above are in their final stages, there are a number of other pharmas also making progress.

FDA approvals, however, may be hard to come by for pharmas looking to enter the largest COVID-19 market. That will, therefore, give the likes of Moderna Inc. and Pfizer Inc. the upper hand for now. The flood gates could open, however, should both hit snags at this late stage. Such an event could give AstraZeneca a green light to enter the U.S market.

In the days and weeks ahead, we will continue to monitor progress towards a vaccine and review other pharmas in the race.

Trading Currencies: Into the Final Straight

With the first US presidential debate on the 29th, we have officially entered the final phase of the 2020 presidential race, a race that is getting tighter than we realise.

Although most polls suggest a Biden win, how the final results will fall is still a mystery, and FX trading is reflecting this risk.

DXY’s Recent Uptrend – Could It Be A Telling of USD’s Future Path?

Since entering the final 60 days of the campaign, the US dollar basket has begun to pop and is trading in a strong upward channel. It has added as much as 300 points since the 60-day mark as seen in this chart. Check USD price today.

Keep an Eye on the Following Issues If You’re Trading DXY and USD

There are five main issues of the campaign that are beginning to take shape, and these issues, when discussed by the candidates, are moving DXY.

These include:

  1. The Supreme Court – the reactions to which can been seen from the 21st of September after the passing of Ruth Baber Grinberg.
  2. COVID-19 handling – this is a big issue for Trump’s re-election, over 60% of American are worried about the handling of the disease.
  3. Race and violence in the cities – Handling of this issue varies greatly between the two candidates and will spark fierce debate.
  4. The Economy and its recovery – polls suggest Americans see Trump as a better candidate here. If Biden wins, the initial reactions in FX and equities may be a slight negative from an economic reasoning.
  5. Validity of the Vote – this is building as one of the biggest risks in the market. The President continues to seed this idea to his supporter base – a contested election would put volatility front and centre and would ramp up risk-off trading.

How Is the Market Forecasting the USD Trend?

If we try to take a look at the market forecast of EUR/USD, we will notice that experts are mostly predicting a bullish trend for the pair in the long run. Given the high uncertainty surrounding the US politics as well as its economy, it’s obvious that the market is unsure how the USD trend may go. Nonetheless, as the election draws closer, the debates would offer fresh clues and ideas for USD traders.

Source: Data on 25 Sep on Mitrade (updated every Friday)

If USD’s Broad Weakness Continues, How Can Traders Make the Most of It?

With the election happening in just a month and with two more debates to go, it’s very likely that USD trend will go on a roller-coaster ride with unpredictable turns and loops. Yet, the good thing about trading forex or even index derivatives is that traders have the freedom to decide to go long or short based on the market’s trend. With derivative market’s characteristic that allows traders to buy/sell with leverage and relatively low deposit, traders can grasp more opportunities during this volatile period.

Mark Your Calendar! Most Important Events to Trade on for USD Traders:

  • Oct 7 (Wed) 7:00-8:30 pm MDT – Vice presidential debate
  • Oct 15 (Thurs) 9:00-10:30pm EDT – Second presidential debate
  • Oct 22 (Thurs) 8:00-9:30pm CDT – Third presidential debate

In the upcoming debates, the 5 issues mentioned in the above will be discussed and dissected by the candidates and it will surely drive FX direction and momentum. Traders should stay alert on the headlines of the debates as well as the overall US politics.

This article is prepared by Lucia from Mitrade and is for reference only. We do not represent that the material provided here is accurate, current or complete. The article content neither takes into account your personal investment objects nor your financial situation, and therefore it should not be relied upon as such. You should seek for your own advice.

Darkest Before Dawn

The MSCI Asia Pacific Index fell for the fourth consecutive session today and many markets (India, Shenzhen, Taiwan, and Korea) fell more than 2% and most others were off more than 1%. Europe’s Dow Jones Stoxx 600 is giving back the past two days’ gains. The S&P 500 could gap lower at the open. Benchmark 10-year yields are a little softer but have remained subdued in the face of the dramatic moves in equities.

The US yield is little changed near 0.66%. Practically no currency could escape the clutches of the rebounding dollar, though the yen and sterling are little changed. The JP Morgan Emerging Market Currency Index is lower for the fifth consecutive session. Gold remains heavy and is approaching the (38.2%) retracement of this year’s rally which is found near $1837. Crude oil is consolidating at lower levels. November WTI is in narrow range below $40 a barrel.

Asia Pacific

Hong Kong and New Zealand report trade figures. Economists did a good job forecasting New Zealand imports and exports. As expected, the formers rose a little and the latter slipped. The takeaway is that New Zealand reported its first trade deficit (~NZD353 mln), snapping a six-month period of trade surpluses. Economists had a harder time with HK figures. Exports pared their decline to 2.3% year-over-year from 3%, but the bigger miss was in the weakness of imports. These fell 5.7% year-over-year after a 3.4% decline in July. The net result was that HK’s trade surplus was halved from the HKD29.8 bln to HKD14.6 bln.

China continues to harass Taiwan with incursions into its air defense zone. The bullying practice has escalated in the past week or so. Beijing’s aggressiveness comes as the US some European countries have stepped up their interactions, including high-level visits. It is hard to say that it is having an economic impact but as a potential flashpoint, it is drawing attention.

Japan may have a new prime minister, but the government’s assessment of the economy remained little changed from last month. The economy is said to be in a severe place but some areas, namely, exports, production, business failures, and jobs, are improving (four of 14 categories). The median forecast in the Bloomberg survey expects the economy to expand 15% this quarter, the first expansion since Q3 19.

The dollar is in less than a third of a yen range today above JPY105.20. The $1.4 bln in expiring options between JPY105.10 and JPY105.25 have been neutralized. The next set is for almost the same amount at JPY105.70-JPY105.75. A four-day uptrend on the hourly bar charts comes in a little above JPY105.20 by the North American open. A break could see JPY104.60-JPY104.80. The Australian dollar is lower for the fifth consecutive session. It dipped below $0.7030 for the first in two months. A break of $0.7000 could see $0.6950 quickly.

The $0.7080 area now offer resistance. The PBOC set the dollar’s reference rate a little softer than the bank models in the Bloomberg survey anticipated. Although some observers see it as a sign that officials are seeking to stop the yuan from strengthening, the fact of the matter is that the dollar remained bid. The greenback is at its best level since the start of last week, a little below CNY6.83. Note that after the US market close today, FTSE-Russell will announce whether it will include Chinese bonds in its indices. A year ago, it refused, but China has reduced barriers to enter and exit.

Europe

European banks took 174.5 bln euros from the ECB’s latest Targeted Long-Term Refinancing Operation. These are loans that can have a rate of as much as minus 100 bp providing the funds are lent to households and businesses. It was at the high end of expectations and follows a 1.3 trillion operation a few months ago. This will lead to another jump in the ECB’s balance sheet. Recall that the ECB’s balance sheet has been slowing increasing as it continues to buy bonds under its APP and PEPP operations. The extra liquidity in the Eurosystem is a factor that is pushing three-month Euribor a little below the minus 50 bp deposit rates. When observers say that central banks are out of ammo, few anticipated the deeply negative loans offered and the introduction of the dual rates.

Neither the Swiss National Bank nor Norway’s Norges Bank altered policy at today’s meetings. The pullback in the Swiss franc in recent weeks is too small to register for officials, who remain concerned about its strength. The OECD regards it as the most over-valued currency in its universe. The threat of being identified by the US as a “currency manipulator” is not a strong enough deterrent as intervention remains one of its key tools. Some had expected the Norges Bank to bring forward its first hike from the end of 2022, but it did not. On the other hand, Hungary raised the one-week deposit rate 15 bp to 75 bp, catching the market by surprise and giving the forint a lift.

The German September IFO survey edged higher. The current assessment rose to 89.2 from 87.9, while the expectations component firmed to 97.7 from a revised 97.2 (from 97.5 initially). The overall assessment of the business climate rose to 93.4 from 92.6. The preliminary PMI data showed the manufacturing sector continues to rebound, while the service sector is stalled.

In the UK, Chancellor Sunak canceled the fall budget and is expected to present a new jobs support program to Parliament today. Speculation in the press is for a German-like arrangement, where the government picks up some of the wage bill for employees that are retained but on shorter hours. Meanwhile, the British Chamber of Commerce estimate suggest over half of UK firms have not completed the government’s recommended steps to prepare for the end of the standstill agreement with the EU.

The euro is extending its decline for a fifth consecutive session. It has dipped below $1.1635 in European turnover. For the first time this quarter, the skew in the one- and two-month options (risk-reversals) favor euro puts over calls. The $1.16 area corresponds to a (50%) retracement of the Q3 gains. The $1.1600-$1.1610 area holds about 1.6 bln euro in options that expire today.

There is another option for nearly 525 mln euro at $1.1625 that also will be cut today. A move above $1.17, where an 845 mln option is struck (expiring today) would help stabilize the tone. Sterling is firm within yesterday’s range, when it tested $1.2675. It is near $1.2750 in late London morning turnover. A push above $1.28 is needed to begin repairing some of the recent technical damage.

America

The US reports new home sale (August) and the KC Fed manufacturing survey (September), but it will be the weekly jobless claims that capture the attention. Seasonal factors encourage expectations for a continued gradual decline. However, note that around in November, the seasonal adjustment will add rather than subtract. The markets will be particularly sensitive to an unexpected increase in weekly jobless claims, especially given the lack of fresh measures by either the Fed or Congress. In fact, some observers attribute the Fed’s somber assessment to prompt more stimulus as a factor that helped spur the down move in equities.

Canadian Prime Minister Trudeau unveiled funding for a wide range of initiatives, including daycare, pharma, housing and environment. None of the three major opposition parties endorsed it. Trudeau leads a minority government and the budget needs to be approved or it could potentially trigger new elections.

Mexico’s central bank meets today. Yesterday’s retail sales report showed a solid 5.5% increase in July, but it was still less than expected. Inflation is running just north of the upper end of Banxico’s 2-4% target. The cash rate target is 4.5%. The peso’s six-week rally is ending with a bang this week and it is off over 5%. After five 50 bp rate cuts, Banxico is widely expected to cut 25 bp today. We suspect the odds of standing pat is greater.

The US dollar poked above CAD1.34 today for the first time since early August. The next important chart area is near CAD1.3440. Initial support is likely around CAD1.3360. If the equity market stabilize the Canadian dollar will likely strengthen. After jumping over 3% yesterday, the greenback extended its gains to MXN22.53 in Asian turnover but has gradually firmed through the European morning. The first area of support is seen in the MXN22.00-MXN22.20 area.

For a look at all of today’s economic events, check out our economic calendar.

This article was written by Marc Chandler, MarctoMarket.

Copper, a Potential Casualty of Further Dollar Strength

What is our trading focus?

HG Copper – COPPERUSDEC20
COPA:xlon – WisdomTree Copper ETC (UCITS eligible)


Copper’s impressive recovery and momentum from the March low, has started to slow with the price struggling to extend its impressive gains beyond 3.10/lb on High Grade copper (COPPERUSDEC20). The rally seen across industrial metals, not least copper, in recent months has been driven by a post-pandemic recovery in Chinese demand supported by credit and scattered supply mine disruptions.

While the fundamental outlook remains supportive, the lack of fresh upward catalysts may now pose a short-term challenge to this poster-child of momentum. Something that has helped attract a substantial amount of speculative long positions from trend following strategies that many hedge funds and CTA’s adhere to.

Copper is currently challenging the uptrend from the March low, but in our opinion the price would have to break below $2.95/lb before it kicks off a correction/consolidation phase. Just like gold’s current correction has more to do with dollar strength than changed fundamentals, an extended period of dollar strength could be the trigger that for now could pause this classic momentum trade.

 

Source: Saxo Group

A key source of inspiration behind the rally has been the continued slump in stocks at warehouses monitored by the three major futures exchanges in New York, London and Shanghai. Not least the drop to a 14-year low in stocks monitored by the London Metal Exchange has supported the market. The tightness that it signaled drove the spot premium over the three-month benchmark to an 18-month high at $40/t last week before easing lower to $28/t yesterday.

During the past week stock levels have stabilized on LME while levels monitored by the SHFE has seen a steady rise since late June. This development combined with softer prices in Shanghai may potentially have shut the arbitrage window for profitably importing copper into China.

The reason why copper risks a non-fundamental supported correction can be found in the weekly Commitments of Traders report. The mention strong momentum has continued to attract an ever increasing net-long position held by speculators such as hedge funds and CTA. Given that many of these positions are purely based on technical analysis a break below $2.95/lb could trigger a correction.

For a look at all of today’s economic events, check out our economic calendar.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire