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USD’s rebound lacks credibility The greenback is attempting to stage a recovery on Tuesday, but after the Asian demand, momentum has faltered. The current widespread strengthening doesn’t look convincing and will likely attract a new wave of selloff in the short term. The potential US government shutdown this Friday is in favor of such developments. The risk of a shutdown has increased recently, after Republicans supposed they won’t be able to pass the spending bill by the deadline (on Friday). Democrats refuse to support a deal that does not protect young illegal immigrants. These disagreements may yet make the UD dollar nervous, though the authorities will likely avoid the shutdown at the last minute. As for EURUSD, despite the local retreat, the bullish trend remains intact and the upside risks persist as long as the currency pair is trading above the 1.2030 area. Doubts over the German coalition deal have undermined the recent euro’s rally, but the correction is rather another buying opportunity than a bearish signal. EURUSD may resume its ascent on Wednesday, if the euro area inflation data point to consumer prices growth. In this scenario, the initial upside target is 1.2270. The break above this level will introduce scope for the 1.23 threshold.
by HelenRush
Bitcoin: bears in full control Bitcoin is trying to stage a recovery early this week, but struggles to gain momentum as bears are still in control of the virtual currency. Today’s gains are so far capped by the $13,770 mark. The cryptocurrency is up 2.2% on the day. Despite the downside pressure has marginally eased lately, and the price doesn’t leave attempts to regain the local resistance in the $15,000 area, the bearish risks still persist on the back of government crackdown around the world. It looks like the Chinese authorities are set for escalating the crackdown on cryptocurrency trading, targeting online platforms and mobile apps that offer exchange-like services. Moreover, the government is said to also target individuals and companies providing settlement, clearing as well as market-making services for centralized trading. Meanwhile, the South Korean authorities have somehow allayed market concerns after emphasizing that the plan to ban cryptocurrency exchanges is just under discussion, and the final decision is yet to be taken. The overall background in the industry stays gloomy on the back of regulator’s signals around the world that continue to scrutinize digital currencies. In such circumstances, the bullish potential is still limited, and further attempts to overcome the $15,000 mark will likely continue to attract sellers. In the short-term, bitcoin needs to regain the $14,000 level.
BITFINEX:BTCUSD
by HelenRush
Lackluster USD fuels demand for gold Gold prices are rising for a third straight session on Friday. Spot price reached the mid-September high of $1,333.08, up 0.7% on the day and is set for a fifth straight week of gains. Since December 1 the metal has climbed almost 4%. A widespread weakness in dollar is the key driver behind the current bullish rally in gold. Judging by the persistent USD selloff, the precious metal has the potential for further gains, though there is a risk of local corrections due to some overbought signals. The greenback is under substantial pressure against most major currencies, and the bearish mood intensified after yesterday’s data showed the U.S. producer prices fell for the first time since August 2016. The report added to concerns that the Fed won’t hike three times this year while other major central banks are set to tighten this year. If gold manages to hold its gains, spot prices will focus on the immediate resistance level at $1,334.30, while the next bullish hurdle is expected at $1,340. This barrier may dent the buyers’ enthusiasm and sent the precious metal in the correction mode.
TVC:GOLD
by HelenRush
USD struggles to gain momentum ahead of CPI Following the yesterdays’ selloff, the US dollar is trying to stage a comeback on Thursday, after Chinese government officials played down the reports that China is going to reduce its US Treasury holdings. However, the momentum looks limited as the bulls are taking a wait-and-see approach ahead of tomorrow’s key US economic data. The market will analyze CPI figures with respect to the prospect of another Fed rate hike, though the regulator prefers to monitor the PCE index due at the end of January. The December inflation is expected to ease to 0.2% m/m following a jump by 0.4% in the previous month. If so, it will be another blow for the greenback, while dismal retail sales figures may add to the downward pressure. In the longer term, the key risk for the USD in 2018 is Trump’s domestic and foreign policy. The latest events signal a background for a trade war between China and the United States, which may pose a threat to the global economy. Increase of tensions on this front will further undermine USDJPY’s positions. The pair slipped to the 111.25 end of November lows and is now trying to stage a recovery which is capped by the 112.00 hurdle. Failure to regain this level will introduce scope for 111.00 area and lower.
by HelenRush
Bitcoin traders are getting more cautious Bitcoin is falling for a fourth-straight day to trade at one-week lows in the $13,150 area. Following a brief breach of the $17,000 mark, the price failed to preserve its gains and have surrendered to the bears again. Over the last three weeks, the digital currency plummeted 30%. The recent retreat is due to growing concerns over the regulatory and government crackdown on bitcoin, notably in China and South Korea. The market fears that these two countries’ aggressive steps will have major widespread consequences for the industry due to their large share in the global cryptocurrency trade. In particular, China, which previously banned ICOs, is going to clamp down on the local miners as they are consuming huge amounts of resources in the country. Meanwhile, South Korean authorities are inspecting six large local banks offering virtual accounts to institutions. Moreover, the South Korean government has called for financial regulators of other countries to cooperate in curbing virtual currency trading. In such circumstances, it’s difficult to bet on bitcoin recovery in the short term. Due to bearish drivers mentioned above, bitcoin traders are getting more cautious and will likely stay away from buying, so the downside pressure will persist so far. The immediate support is now at $13,150. Failure to hold above the $13,000 level may allow for weakness back to the $11,550 area.
BITSTAMP:BTCUSD
by HelenRush
It’s too early to bet on BoJ normalization The Japanese yen jumped higher overnight as the BoJ announced trimming longer-dated JGB purchases. This decision was viewed by the market as the first small step towards the monetary policy normalization in the country at a time when other major central banks are about to start reducing stimulus. In a knee-jerk reaction, the USDJPY pair dropped 0.5% and touched the low at 112.50, bouncing back from a two-week high of 113.40 reached yesterday. The local rally was like a rehearsal for more significant steps from the local monetary authorities. However, the BoJ decision should be interpreted as a prelude to a policy change. In our view, such expectations are premature as inflation in Japan is still low. So the JPY’s bullish potential looks limited. It may take quite a lot of time before the regulator even starts to seriously think about normalization. Another hurdle for the Japanese currency is the widespread “risk-on” mood on the back of global economic growth and amid signs of reduction in tensions on the Korean peninsula. In the short-term, the pair needs to regain the 113.00 hurdle which is now the immediate major resistance. A break above 113.20 will alleviate the downside pressure and introduce scope to the 113.40 two-week high.
by HelenRush
CAD’s rally warrants cautionThe loonie was the star of the day on Friday, fuelled by a spectacular Canadian jobs report for December. Following November's 79,500 increase, jobs rose by 78,600, beating the modest market estimate of +2,000. It was the thirteenth consecutive month of employment growth. Moreover, the unemployment rate dropped by 0.2% to a record low of 5.7%. The impressive figures sent USDCAD to new 3-month lows at 1.2354. The unexpectedly strong report made the market convulsively review the BoC rate hike expectations 2018. The market is now pricing around a 70% chance of a hike on Jan. 17, while before the release the odds were roughly 30%. In this respect, there is a room for the loonie to continue its bullish move, especially on the back of USD’s general weakness. However, the current rally warrants some caution, as traders may be overestimating the BoC’s ambitions. The risks are the uncertainty around NAFTA and the potential impact of tighter domestic mortgage rules. These factors may prevent the central bank from hiking during the next meeting, which will be a disappointment for the CAD. So far, the pair USDCAD struggles to make a meaningful recovery. The price is stuck around the 1.24 mark. In the short-term it needs to recover above 1.2480 area in order to alleviate immediate bearish pressure and regain the 1.25 hurdle.
by HelenRush
Brent: it’s time to take profit Brent is relatively stable around its fresh mid-2015 highs above $68, though on Friday it started to signal a bearish correction and has briefly slipped under the psychological mark, which may trigger profit taking at very attractive levels. The recent rally was fueled by a number of bullish factors, including further drop in the US crude oil inventories, civil unrest in Iran, militant attacks in Libya, high compliance rate among OPEC+ members, and weak USD across the board. Brent crude is now up by more than 10% from its December lows mainly due to political tensions in Iran. But the unrest hasn’t so far affected oil production itself in the country, so this optimism may be overestimated. For now, the barrel looks overbought, and this is another argument for a local correction in prices which are a step away from the next major barrier at $70. The proximity to this level may scare off some bulls as well. Nevertheless, as long as the US stockpiles continue to drop, and there is a threat of supply disruptions, the potential bearish moves will be limited, and the overall sentiment will remain upbeat.
TVC:UKOIL
by HelenRush
Bitcoin has bullish potential After a two-day rise, bitcoin is under pressure again. The price struggles to regain bullish momentum and overcome the $15,000 barrier, though the current pressure is limited. Earlier BTC fell to an intraday low of $14,091.95, while the intraday high was set at $15,400. The largest cryptocurrency is deprived of fundamental drivers for now, especially amid widening talks about the speculative bubble and its imminent burst. The short-term positive momentum the price received yesterday is lost already. On Wednesday, BTC appreciated following the reports that a large Founders Fund bought around $15-$20 million of the cryptocurrency. Overall, bitcoin has recovered only partially after the recent aggressive correction. It needs to regain the $15,500 resistance in order to target its record highs again. The short-term bullish sign is that the price has established higher lows – it is signaling scope for an upside move. As long as bitcoin stays above the $12,600 level, the outlook is positive. The immediate resistance is at $15,000.
BITSTAMP:BTCUSD
by HelenRush
USD will stay on the sidelines The US dollar will likely face new challenges this year after a dismal 2017, when the currency suffered losses against all of its G10 peers. The EURUSD pair hit a four-month high of $1.2080 overnight and bounced a bit on Wednesday amid local profit taking. However, the general tone around USD remains bearish. A number of global central banks are expected to signal a shift in their monetary policy this year. This is negative for the greenback which enjoyed an advantage before, when the Fed was the only regulator taking steps in the process of monetary policy normalization. The ECB member Ewald Nowotny said the central bank may end its stimulus program this year if the euro zone economy continues to grow strongly. As the prospects of policy tightening depend on the economic numbers, the markets will be closely watching the euro area macro data in the coming month. And if the figures stay decent, the euro will likely appreciate further in the longer term. Considering the overall bullish outlook for EUR, which cemented as the pair broke above the 1.1960 and 1.2000 resistance levels, local retracements will further provide opportunities for opening new longs, especially on the back of market skepticism around further Trump’s legislative victories.
by HelenRush
Bitcoin struggles to regain bullish traction Bitcoin tried to stage a recovery but faced another major hurdle. In particular, South Korea signaled a possibility of a shutdown of local cryptocurrency exchanges. The government is planning to introduce new regulation which may include the prohibition of anonymous trading accounts operating in the country. Considering that South Korea accounts for nearly one-fifth trading volume in bitcoin, a crackdown on the local industry, if implemented, may dampen the sentiment around the cryptocurrency quite severely. Moreover, the UK adds fuel to the fire. CEO of London Block Exchange said that cryptocurrency shouldn’t be exempt from tax liability. If the country really imposes taxes on bitcoin profits similar to the ones that stock investors pay, it will be another blow the digital asset as this step will curb the appeal of bitcoin which is now often uses as a tool for tax evasion. These are the risks for the digital currency in the longer term. The price failed to accelerate higher and regain the $15,000 mark overnight. In the short-term, the currency needs to recover above the $15,700 area in order to alleviate the immediate bearish pressure. The key local resistance is the $16,500 mark, where the price was rejected two days ago. The initial bullish target is now the $14,000 level.
BITSTAMP:BTCUSD
by HelenRush
EURUSD eyes German CPI The EURUSD’s rally gained traction on Thursday on the back of a broad-based US dollar weakness exacerbated by the year-end thin trading. A new wave of aggressive selling in the buck was mainly provoked by the recent declines in Treasury yields and adjusting positions ahead of the New Year’s holidays. The pair extended the rally above 1.19 and encountered resistance around the 1.1950 area, flirting with fresh four-week highs. Tomorrow Germany releases final December CPI and the markets are expecting a gain of 0.5% after a 0.3% rise during the previous month. In today’s economic bulletin, the ECB expressed confidence that the underlying euro area inflation will rise gradually. If the German data doesn’t disappoint and signal a more robust inflation growth in the largest European economy, the release may provide a fresh bullish impetus for the single currency’s move. In such circumstances, the EURUSD pair will try to overcome the key 1.1950-60 zone, opening the way to the 1.20 psychological mark. But as Friday is the last trading day of the year, some traders may partially close long euro positions following another potential rally. Therefore, the profit-taking slide may threaten the 1.19 threshold which is the key to the downside in the short-term.
by HelenRush
Brent: it’s profit taking time Brent oil rallied to fresh two-and-a half year highs overnight, breaching $66 a barrel for the first time since June 2015 after news of a pipeline explosion in Libya, which fuelled supply disruption concerns. But prices encountered resistance in the $66.50 area and retraced under $66 a barrel. Brent extended its corrective slide towards $65.50 and has stabilized. As the black gold tapped on the $66 handle, the market welcomed the signal as a good opportunity for profit taking which was exaggerated by low trading volumes. According to the latest estimates, the repair work in Libya will take about a week. So it’s a short-term supporting factor for prices. Meanwhile, partial flows have already restarted at the Forties Pipeline System’s Kinneil facility. The issue with Forties is gradually fading into the background ahead of the weekly US crude stockpiles data. And it was also a catalyst for Brent retracement, though a broadly weaker USD remains supportive to crude. Given the risks from the US data, especially on the production side, there is a chance the bearish correction will continue, which is also a reasonable strategy at the turn of the year. In such scenario, Brent may probe $64.80 a barrel. The move lower will introduce scope to the $64.50 area.
TVC:UKOIL
by HelenRush
Bitcoin is licking wounds, but risks persist Bitcoin is recouping loses from a flash-crash experienced as the price tumbled from a record high at $19,850 and stopped only below the $12,000 mark late last week. Today, the cryptocurrency is trying to regain the $15,000 handle, climbing back into positive territory. Despite the current recovery from an aggressive last week’s selloff, which was the worst week since 2013, the downward risks still persist, as a growing number of regulators and central banks are warning against investments in cryptocurrencies, insisting on the speculative nature of the recent surge in prices. Investors took profit recently, which looked quite reasonable considering the scale of the bull rally. And now we see new buyers entering the market at more attractive levels. However, if in the short-term this correction may be interesting, in the longer term another wave of selling is possible, and it may bring the bitcoin price even under the $15,000 area. Therefore, the bulls should be careful in the current recovery.
BITSTAMP:BTCUSD
by HelenRush
EURUSD: the Catalan factor won’t stay long Euro had to interrupt its 4-day winning streak after the news that pro-independence parties secured a renewed majority in the Catalan parliament. Such election results reduce hope for mitigating the constitutional crisis in the country. As a result, EURUSD dived to lows in the 1.1816 area where it met “demand on dips” and recovered partially to the comfort zone at 1.1850. Despite the election results are increasing the risk of reviving the independence drive in the province, the scale of the issue itself is limited and it will hardly challenge the growth potential of the whole euro area. So these immediate local political risks won’t hurt euro much in the longer term. Considering doubts in the US tax overhaul efficiency and subdued inflation in the United States, dollar will likely remain vulnerable, which will offset the current local risks for euro. On Wednesday, the EURUSD pair peaked at the 1.19 1st December high and pulled back slightly. This resistance stays key to the upside. The break above will introduce scope to the 1.1945 area. As long as euro remains above 1.1780, the immediate bullish scenario is relevant
by HelenRush
Gold: a chance to confirm recovery Gold showed a robust recovery from last week’s 4-month low at $1,236.49. On Thursday, the precious metal posted a 2-week high at $1,268.28 but failed to extend rally on the back of reviving USD demand. Nevertheless, considering that we now see a V-formation on the charts, there is a chance that following the current retreat, gold will not lose its momentum and accelerate higher afterwards. Despite some local USD demand, the currency will hardly be able to gain any follow-through traction, at least in the short-term, as the US tax overhaul approval failed to impress the dollar bulls. Moreover, there is much skepticism over the tax reform efficiency for the economy and concerns about this plan which would add more than $1 trillion to the federal budget deficit over the next decade. On the back subdued USD prospects, the precious metal may preserve recent gains and attract buyers again, especially if safe-haven demand which revived a bit today, remains intact. In this respect the results of Catalonia election. If the pro-independent parties do better in the vote, risk aversion may increase and support gold demand. In this case the first bullish target is at $1,264.66.
TVC:GOLD
by HelenRush
Bitcoin looks attractive againBitcoin was bleeding for three days in a row and has fallen almost 20% from record peaks on the approach to the $20,000 handle which was almost reached on Sunday, when CME Group launched bitcoin futures. The recent aggressive sales of the digital currency were due to another hack attack on a South Korean crypto-currency exchange Youbit which subsequently decided to file for bankruptcy after 17% of its assets were stolen. The exchange offered trading 10 cryptocurrencies, including bitcoin. Meanwhile, negative statements from the Asian authorities added fuel to the flames. In particular, Japanese Finance Minister Taro Aso said that bitcoin had not been proven as a credible currency, while the central bank of Singapore issued a warning against investment in cryptocurrencies. Another reason behind bitcoin’s unlucky streak was the news that Coinbase is launching bitcoin cash trading, which immediately sparked speculation on the threat of migrating bitcoin users to bitcoin cash. Nevertheless, after reaching a one-week low at $15567 earlier today, the digital currency attracted buyers and got back into positive territory. Now, when the bulk of these short-term negative factors is already priced in, the asset looks interesting for opening longs again, though in this market there is always a risk of abrupt price moves
BITSTAMP:BTCUSD
by HelenRush
Stockpiles data may set oil in motion Crude oil prices continue fluctuating between small gains and losses on Tuesday. Brent is seeking to regain the key $63 handle, but so far fails to resume its recent Forties-inspired rally. Only a decisive break above this level will alleviate immediate downside pressure and open the way to the intermediate resistance at $63.80 and then to $64 a barrel. The continuing concerns over supply disruption on the back of the Forties pipeline outage in the North Sea keep oil prices afloat, though the broad-based US dollar weakness is also somehow supportive. The Forties pipeline operator Ineos today reported that the timescale for repairs remains around two to four weeks starting from the date of shutdown (Dec. 11). It means that, barring some shock from the US, prices may stay elevated at least till the end of this year. Meanwhile, in the short-term the market will focus on the US data. Today, the US API crude inventory data release will set the tone. If the report shows that the massive build in gasoline inventories has slowed last week, and crude oil stockpiles decreased for a fifth week in a row, Brent will stage a more robust recovery towards the $64 handle.
TVC:UKOIL
by HelenRush
The US tax bill is a risk for gold Gold is trading higher on Monday despite firmer equities and a broadly risk-on mood in the global markets. The precious metal is trying to gain bullish momentum as the price is continuing last week’s recovery from a four-month low at $1,236.49. Despite the recent bullish signs, risks for the spot gold still point to the downside. The key risk for the yellow metal is the US tax bill which is expected to be passed by the lawmakers this week. A positive decision will send the U.S. Treasury yields, equities and dollar higher on the expectations that a major tax cut will spur economic growth in the country. If all goes according to the Trump’s plan, the bill will be adopted in coming days – probably tomorrow. Then the president will sign it into law before Christmas. Such a scenario will boost risk appetite. Thus, it may alleviate immediate upside pressure on gold and allow for weakness back to the $1,2456.77 area and may be lower. Nevertheless, as the markets have largely priced in the tax bill passing, the potential downside pressure on the precious metal will likely be limited.
TVC:GOLD
by HelenRush
EURUSD is still good to buy on dips The EURUSD pair basically shrugged off the latest ECB statement which was viewed as dovish by markets. After a dip towards the support area at 1.1760, the pair has recovered part of the post-ECB slide and is probing the 1.18 handle again. The dollar didn’t receive any meaningful support from strong US retail sales data as traders are still focused on the Trump’s tax plan. The uncertainty on this front continues to depress the greenback, which plays into the euro’s hands. The Fed still expects three quarter-point rate hikes next year. But considering low inflation and a number of other economic as well as political risks in the US, the central bank may be forced to slow down the monetary policy tightening in the longer-term. Meanwhile, the ECB is expected to continue to cut the rate of bond purchases on the back of strengthening economic fundamentals for Germany and the Eurozone. In the short-term, EURUSD needs to regain the 1.18 mark. The move above this psychological level will introduce scope to strong resistance at 1.1855. Selling interest is also noted in the 1.1870 zone. Meanwhile the major support is at 1.17 where the pair is still good to buy on dips. The immediate supports come at 1.1770 and 1.1740.
by HelenRush
The BoE fails to break the pound’s spirit The Bank of England unanimously voted to leave interest rates unchanged at 0.50% and reiterated "further modest increases" were likely over next few years. In a knee-jerk reaction GBPUSD retreated, but held within a familiar trading range. The negative initial reaction was partly due to the regulator’s cautious rhetoric, as the market expectations got more upbeat after strong November CPI data. Though the BoE tried not to be “hawkish” today, if CPI continues to accelerate further, Carney will have to intervene at some point in the future. And the next hike may take place earlier than the market expects assuming that Brexit negotiations don’t fail. Moreover, despite the fact that sterling’s bullishness is still capped by the notorious political uncertainty around Brexit, we have decent UK economic fundamentals and dollar weakness which may not be cured by Trump’s tax plan (if approved at all). So the longer-term GBPUSD outlook looks bullish, especially considering the risk of slowing down the Fed’s rate hikes amid stubbornly low inflation. After a brief dive under the 1.34 handle, the pound recovered partially, but stays under a mild short-term pressure. Earlier, the pair failed to extend the local rally above the weekly highs in the 1.3465 area. The most attractive strategy now may be to look for another pullback towards lows around 1.33 for opening new longs.
by HelenRush
USD: Trump’s tax bill is hanging by a thread The greenback gained modestly overnight, buoyed by the impressive US PPI data. Today USD is trading under a mild pressure against most of its counterparts ahead of FOMC decision which is widely expected to bring a 25 bp rate hike. But the market focus suddenly shifted to the political arena where the Thump Republicans faced another hurdle. Specifically, the Democrat candidate Doug Jones won a victory in the Alabama Senate race. It was a great surprise and disappointment for Trump who relied on Moore, as his vote, according to the president’s own calculations, Republicans needed for the tax bill. After the certification of Jones’ victory which may take place immediately after the Christmas, the Republicans’ Senate majority will shrink to 51-49. These developments entail risks for the tax plan, as well as for the whole Trump’s economic agenda in the longer term. Though Moore’s defeat hasn’t pressured the greenback much so far, the consequences may yet add to the list of the USD long-term issues. As for the upcoming Fed monetary policy decision, there is very little chance that Yellen will be “hawkish” during her final scheduled press conference. The cautious Fed tone will be a bearish sign for the USD which may suffer losses across the board. In such circumstances, the EURUSD pair, struggling to attract follow through buying interest this month, may easily regain the 1.18 area. It will alleviate immediate downside pressure and introduce scope for the intermediate resistance at 1.1855.
by HelenRush