Jun 15, 2020

10 min read

Financial Markets News Against Cryptocurrency Market Neutrality Sentiment

By Rubika Ventures® on The Capital

Federal Reserve Chairman Jerome Powell will appear before Congress over concerns about a possible COVID-19 surge. Investors will be watching US retail sales data for clues to the rebound rebound hike, and investors await whether the recent rally in stocks could hold.

In the Old Continent, everything indicates that the Bank of England will further expand its stimulus program after learning that the economy contracted by more than 20% in April. And it’s going to be a busy week in the European Union, with a new round of Brexit talks and a summit to debate her proposed post-pandemic recovery fund.

This is what you need to know to start your week according to the mainstream media and financial opinion.

Dollar Positive Pull Back Retraction

Many media outlets do not stop talking about the positive retraction that the dollar is having and the last closing of the day that is causing global economies to pay a lot of attention to this asset.

Particularly, days ago we had already analyzed that the dollar would have a new trend in favor of buyers, and today that is more evident.

That is why we expect it to remain within this pivot of “high” and with the trend of concentrating the price at 71% of the Fibonacci retraction line at the point of 96,698 with projection towards 101,023 and with the probability of recovery. of about 30%.

The Crypto Mouse Trap

We know that many traders are confused with the real sentiment of the cryptocurrency market. One day it seems to be bullish, another day it is bearish and suddenly a new character appears to make the situation worse: Kangaroo. It seems like a joke, but in our terms, the markets and especially the crypto markets in recent weeks seems to be over control.

We saw this situation when analyzing Bitcoin on the weekly chart. But the truth is that this Kangaroo may actually be a mousetrap. See why.

Bitcoin Kangaroo Market

Weekly close of Bitcoin below the primary trend line and touching 61% of the Fibonacci retraction line. With this closure, it is the sixth time that the price rejects the strongest resistance of the 10k. Particularly and graphically, Bitcoin is beginning to show signs of correction in favor of what would be the beginning of wave 2.

Too many indicators (RSI, MACD & Stochastic RSI) indicate inclination in favor of the bears, but we still need some additional confirmations to be certain of this.

The above is accompanied by the reduction in the volume of negotiations, which is converging towards initiation of little interest and perhaps interest in making profits.

Basically, to have good confirmation of wave 2, it is necessary for Bitcoin to break the 61% Fibonacci support at 9212.33 and the point of convergence between the MA50, EMA21, and the line delimited by the Ichimoku cloud and at the exact point of 8596.22.

As we had said in a previous story, if wave 2 started a basic correction calculation it would be approximately 30% and with projection towards 7175, at the point of convergence between MA100 and Kinjun Sen. Extreme case we can get to touch the respected high trend line since 2017, within the limitation of 78% of the Fibonacci retraction line at 6564.39.

For the positive case, we may be breaking the downtrend line, the resistance of 10173.51, and look for the touch of the most important downtrend line at approximately 11070.20 which would be 50% of the Fibonacci retraction line.

Which we see difficult with what most of the indicators of breath show us and mainly the point of convergence that the Ichimoku cloud has been showing us weeks ago at 7171.56.

On the other hand, many analysts are saying that Bitcoin is simply making a large re-accumulation within the 8561.25 and 9767.23 zones, indicating strong lateralization.

The Daily Confusion

Bitcoin’s daily chart shows us a high struggle between 8730 and 9894, indicating extreme lateralization of price and accumulation.

MA50, EMA50, Bollinger Band low, the 23% Fibonacci retraction line for the short term, and the trend line that we have drawn as important support, are behaving as protection points for the price.

Other indicators point to a certain trend of accumulation with tolerance to correction. For now, we can be in a zone within the ABCD pattern.

Oil Price Threat Again

It is not being a good week for the oil market, says investing. Both West Texas and Brent are trying to recover this Friday after yesterday’s collapse when WTI dropped 8% and Brent 7.6%. At this time, West Texas is trading at around $ 36 and Brent at $ 38.

“The falls are due to the increased uncertainty in demand regarding possible outbreaks of the virus, to which must be added new increases in inventories of US crude,” they point out in Banca March.

Thus, the sector “continues to have doubts about the rebalancing of supply and demand despite the latest OPEC + agreement to extend production cuts,” added Renta 4 (MC: RTA4).

Thus, as Norbert Ruecker, Julius Baer’s Head of Economics & Next (LON: NXT) Generation Research (SIX: BAER) explains, “The recent rally in oil prices takes a well-anticipated respite as pandemic fears resurface. and oil market participants are likely to make some profit.”

Bonzon believes that the price will rebound in the longer term, “as the recovery in demand and limited supplies should soon lead to oversupply. The ongoing pullback could provide attractive re-entry opportunities for risk-conscious investors.”

Powell’s appearance

Fed President Jerome Powell will appear to speak about the central bank’s semi-annual monetary policy report to Congress on Tuesday and Wednesday. Investors will be on the lookout for any additional guidance on the Fed’s view of the economy and any further details on its extraordinary bond purchase and loan programs, wrote investing.

Last week, the Fed said it plans years of support for an economy facing a long and harsh recovery after the Coronavirus pandemic, and monetary policymakers forecast the economy will contract 6.5% in 2020 and the unemployment rate will be 9.3% at the end of the year.

Retail Sales And Grant Applications

May US retail sales data is released on Tuesday and investors will be on the lookout for signs of the economy’s recovery.

April retail sales registered an unprecedented drop of 16.4% in April, but it appears to have bottomed out and economists are forecasting a rebound of 8% in light of the lifting of containment measures in many states.

The latest report of initial jobless claims will be released Thursday. Unemployment subsidy applications totaled 1.5 million last week, marking the tenth consecutive weekly decline as hiring recovers slowly. Although applications have slowed, the unemployment rate, currently at 13.3%, remains at historical levels.

The agenda also includes reports on industrial production and housing promotions.

Can The Stock Rally Last?

As the US economy begins to recover from the sharp slowdown caused by the coronavirus, some fund managers have been drawn to the value of stocks, a sector that performed poorly during the recent rally.

Stocks have tended to underperform during the bull market period that has lasted more than a decade and ended this year.

That pattern has been self-asserting recently: The S&P 500 stock index has risen just 4.5% in the past month versus the 5% rise in the S&P 500 growth index.

But rising uncertainty around economic forecasts or the course of the pandemic could push investors back to take an interest in growth companies that have paid off in recent months, so investors will be on the lookout for economic data this week.

Expand Stimulus Measures

All central banks are fighting the economic consequences of the Coronavirus pandemic, but the Bank of England also has to deal with Brexit. April’s 20% drop in GDP leaves the British economy at 2002 level; This year could bring the biggest contraction in the last 300 years.

The Bank of England is expected to release another £ 150bn at its meeting on Thursday, adding to the announced expansion in March and some analysts calculate it could even extend to £ 200bn.

The current purchase rate appears on track to reach the limit in the next two months and a rise would help avoid premature discussions about the end of monetary policy or quantitative easing.

The UK will also release its unemployment, inflation, retail sales, and house price inflation data for the week.

Movement In The European Union

EU Commission President Von der Leyen will meet British Prime Minister Boris Johnson on Monday in a bid to revive stalled talks on post-Brexit ties. So far, there hasn’t been much progress towards the free trade agreement and there isn’t much time left until the deadline expires in late 2020.

Then on Thursday and Friday, EU leaders will meet to discuss the recovery fund proposal to repair the economic damage caused by the pandemic. Most members support the recovery fund, but a quartet called “the Four Frugal” — the Netherlands, Austria, Denmark, and Sweden — remains skeptical. For the proposal to be successful, it must be accepted by all, and any delay will be a major setback for the euro.

Asset Performance During COVID-19

Bitcoin outperformed traditional asset classes in both absolute and risk-adjusted metrics during the COVID-19 shutdown in the US, says tradeblock. While nearly all asset classes initially declined in early March in a flight to cash and low-risk short term bonds, bitcoin outpaced others in the rally in April and May to reclaim losses. In the figure below we diagram absolute returns across various assets during the COVID-19 crash and corresponding rally.

US equities, bitcoin, gold, and bonds all saw accelerated declines as COVID-19 spread throughout the world in March 2020. While bitcoin experienced significant losses initially, the asset staged a strong rally since–recovering its losses. Gold similarly, after initially declining as investors fled to cash, rebounded to reclaim its safe haven status in the weeks that followed. In the figure below, we diagram the performance of US equities, bonds, gold, and bitcoin year-to-date (YTD).

Institutions With Great Interest

Open interest on the CME’s bitcoin options product hit an all-time high this past week. Earlier this year the CME launched bitcoin options contracts for the first time — complementing its bitcoin futures product offering that launched in late 2017.

Similar to its futures product offering, activity in its bitcoin options contracts started off slowly before picking up in recent weeks. In the figure below we diagram bitcoin options open interest over the past monthly period.

In addition to a rising interest in its options contracts, the CME’s futures products have also seen increased trading volume recently. The push likely is coming as institutions are getting increasingly comfortable with Bitcoin. In a recent survey conducted by Fidelity, the investment management firm found that 36% of large institutions had some exposure to digital currencies, with bitcoin being the most commonly held.

See you in the next story! With love 💛 Rubika Ventures® Team!

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