Weekly Market Analysis — Sep 13: Gold, Euro and Ethereum Ready to Rumble?
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Highlights:
- Dr Fauci predicts world won’t be normal until at least late 2021
- EU to fight stable coins — More regulation, zero innovation proposed
- 7-month high in active dev for Ethereum; Signal for more ETH gains?
- NASDAQ closed its worst week since March; Is the correction near?
- US Dollar pauses its recovery; EUR/USD on the rise again
- The US IRS on a mission to break “untraceable” privacy coins; it offers a USD $625K prize
- The Fed to take baton from the ECB— delivering explanations on stimulus
- Brexit drama killing everything, incl. British Pound and the UK economy
- Is gold ready to restart its rally? Experts say yes
The week ahead: gold, euro, and ethereum look ready for more gains.
As our economics teacher always said, “it’s all about expectation”. Last week, the market was worried about the monetary policy meeting in the European Central Bank. There was an expectation verbal intervention would push euro prices lower; however, the bank didn’t deliver, and it showed little concern about the EUR/USD price. The pair ultimately stopped its drop, and the dollar lost confidence.
Next week, it will be the turn for the Federal Reserve to decide its monetary policy. Will the Fed provide reasons for USD bulls to start buying again? The market doesn’t expect it, but as per the financial market, nothing is certain and therefore investors will need to take a look at the Fed interest rate decision before taking next steps.
What traders do seem to have confidence in this week are the bullish cases for the euro, gold and, the crypto queen, Ethereum.
Forex: EUR/USD to recover above the 1.1900?
The EUR/USD closed the week virtually unchanged as traders bought the rumour on a verbal intervention into the euro, but they didn’t sell the news. It was a volatile week, and it looks as though there is more to come with the EUR/USD on its way to test September 10 high at 1.1920.
GBP/USD is suffering Brexit chaos as investors are concerned following news saying that the draft legislation on Brexit was against international law. GBP/USD collapsed 3.6% in the week, and now it is under pressure around 1.2800.
AUD/USD is trading in consolidation mode after holding the 0.7200 level last week. If the USD confirms weakness, the AUD/USD will focus on the 0.7400 area.
Stocks: Tech companies under pressure.
The NASDAQ composite suffered its worst week since March as investors are rebalancing their portfolios. Facebook and Amazon closed with 5% losses, Apple and Netflix dropped around 7%, and Tesla collapsed 10.9%.
Markets are now watching how the biggest winners of the post-March rally are becoming the biggest losers of the September rebalancing trade.
The Dow Jones lost 1.66% in the week, the S&P 500 finished the period with a 2.51% decline, while the Nasdaq ended the week 4.06% negative.
Commodities: gold and silver ready to take new highs?
After the USD failed to sustain gains, most experts are now considering that the moment of truth for gold and silver has arrived. XAU/USD closed last week 0.33% up at 1.937, still below the key 1960, but supporting above 1.920. Gold traders are now beating on a new test of the 2.000 area.
Silver is trading in a narrow range between 26.60 and 27.00, however, conditions suggest that a break above 27.00 is possible for the next week. The catalyst for the upside in the XAG/USD will be the Fed. A dovish central bank in terms of inflation would fuel silver gains.
Cryptocurrencies: Development activity suggests an ethereum run.
Despite recent declines, major cryptocurrencies such as bitcoin, ethereum and XRP closed with gains last week.
The ethereum case is interesting as ETH/USD recovery was capped abruptly 390.40; however, developer activity levels have risen to 7-month highs. A significant signal for an uptrend in the ETH prices.
On the other side, A report published by Reuters said that Germany, France, Italy, Spain and the Netherlands are asking the European Commission to set strict regulation to stable coins.
The regulation related news added pressure to DeFi tokens, and most altcoins performed down on Sunday, however, the crypto sphere remains confident in the industry, and development remains at a high.
Ripple capped its recovery from the 0.2300 performed last week at 0.22530 on Sunday. Still, technical indicators suggest more room for gains in the XRP/USD. Litecoin also reported losses on Sunday, but the crypto remains above its 200-day moving average against the US dollar.
Bitcoin remains inside its small range between 10,200 and 10,500. The sentiment is mixed, and the crypto is waiting for more news in the USD weakness topic and COVID-19 vaccine to check market sentiment.
Finally, the US Internal Revenue Service (IRS) has offered a bounty of up to $625K to anyone who can break supposedly untraceable privacy coins such as Monero (XMR) as well as trace the transactions on the Bitcoin (BTC) Lightning Network. The IRS published the proposal last week saying that they will accept submissions in the form of working prototypes up until September 16. Accepted applicants will receive a payment of up to $500,000 to get started. Read the full proposal here.
In summary: Central banks to decide the fate of currencies.
The market will focus on central banks again this week, but this time in the Federal Reserve and the Bank of England. Traders will watch any comment about inflation in the Fed meeting and any Brexit clarifications for the GBP.
In case the dollar confirms its weakness, it will lead to more gains for gold, silver, euro and most cryptos.
Monday: Watch the UK Parliamentary vote on Brexit. Also, inflation news in Britain.
Tuesday: Australian traders will focus on the minutes of the last monetary policy meeting in the Reserve Bank of Australia. China will report its retail sales for August, and the United Kingdom will release its ILO unemployment rate. Later, the ZEW institute will publish its current situation and economic sentiment for Germany and the European Union. A change in sentiment can lead to more euro gains.
Wednesday: Japan will report its trade balance in August, which can add pressure to the USD/JPY to the downside. In the UK, inflation data will be released, and it will surely add pressure to the GBP.
In the United States, Retail Sales will provide more details on how the real economy is doing. A good data can support USD, but remember that risk appetite would lead to a bullish EUR/USD.
Finally, the Federal Reserve will publish its monetary policy decision. Traders will focus on what the FOMC economic projections say and the press conference that Jay Powell will hold. Watch for stimulus and more Fed measures that can affect the USD and potential losses.
On Thursday, the Bank of England will decide its monetary policy too. Watch out on any comment on Brexit and how the United Kingdom is doing with the COVID-19 crisis. Any lack of statement will push the pound down.
On Friday, Canada will report its retail sales, and Michigan University will release its consumer sentiment index. Watch out for potential USD/CAD fluctuations and surprises in the mode of the American buyer.
Our weekly market analysis is a community contribution and is provided for information and educational purposes only. This content should not be considered a recommendation of investment or trading advice and past performance is not indicative of future outcomes. Know the risks involved when trading.
