TGIF everyone & here’s my take on the 3 financial markets. The Cryptos remained firmly in the red as US Justice department begins to investigate whether the prices of the digital coins are being manipulated. Equities are following the premise “One step forward, two steps backwards” & Dollar bulls continued their rampage in the FX markets.
The Crazy Cryptoverse
It was a slippery slope for the Cryptos as they finally chose the direction to come out of the “indecisive squeeze” — unfortunately it was to the downside to the disappointment of many! On the one hand Cryto maximalists would tell you it is all because of the FUD being created around & on the other side of spectrum there are people who are just buying in since their horoscope said so! I say let’s look at the Bitcoin chart & see what’s going on.
Clearly from the chart one can see that the $10000 resistance is firmly capping any gains of the Crypto kingpin. With the LT bearish trend firmly intact & psychological level acting as a wall we continue to see lower highs. The LT support needs to hold for any constructive move upwards from here. It’s been about four months since the cryptocurrency market hit its peak, at an astonishing $835.68B with the market cap falling to $328.69B at the time of this writing. The staggering fall is also evident from the CCI30 Crypto Index readings.
I don’t want to be bearer of all bad news for Cryptos so here are some of the positive developments (mostly) last week from the #Cryptoverse:
- Monero Unveils Tari, a Second-Layer Protocol to Compete With Ethereum
- Argentina bank added Bitcoin to Cross border payments
- The Marshall Islands Issues its Own Legal Tender Cryptocurrency
- Ubanx will bring crypto to the high street with brick-and-mortar stores
- US/Canada join hands in an operation called Cryptosweep to probe ICOs
- The Bank of England saying it’s not a matter of if, but when, what and how central bank would issue its own digital currency
The Greenback started the week receding from the peak with the Dollar index off highs attributed to positive risk sentiment in market but this turned out to be a temporary relief as USD bulls came back with a vengeance. The US 10 year treasury yield still stays at elevated levels close to 3% mark. Even a softer tone from the FOMC minutes regarding inflation didn’t help dampen the mood of USD bulls.
Looking at the Dollar Index the relentless run by the Greenback is pretty evident with the DXY touching the key resistance level of 94.20 & the RSI remaining strongly pegged in the overbought territory. Although a technical pullback to the support zone is quite possible the bull run doesn’t seem to be fizzling out any time soon.
Combing the individual pairs — the European duo (EURUSD, GBPUSD) remained under severe selling pressure with weak data numbers & risk averse mood in markets; both pairs closed near their weekly lows of 1.1650 & 1.3300 respectively. The other significant move was from USDCAD which finally broke the recent range on the upside to close near the psychological level of 1.3000 with the massive drop in Oil prices & NAFTA worries. Finally the most important move was in the USDJPY which fell from the high of 111.39 to as low as 108.95 before closing @ 109.36 — a classic risk averse move taking a cue from the weakness in equities. And lastly, here’s a nice info graphic on the biggest Forex reserves of different countries of the world.
American equities are increasingly becoming prone to moving on good or bad news recently rather than any sound economic fundamentals or technical levels for that matter. The week started off on a positive note with the easing off of US-China trade tensions & reduction of import duties on passenger cars by China , but the euphoria barely lasted one day. The sentiment turned sour with a sleuth of bad news that followed: Cancellation of US — N. Korea summit, push by US to impose tariffs on imported cars, unhappiness of US President on US-China trade talks & NAFTA negotiations not going anywhere. Despite all this The DJIA (+0.15%) and S&P 500 (+0.31%) managed to hold on to smallish weekly gains however the tech heavy Nasdaq (1.08%) was comfortably in the green.
Looking at the S&P 500 chart the indecisive range trading is pretty evident. The 2700–2740 range will need to be cleared on either side to get a clear picture where market is headed next. The market is looking for a major catalyst to determine the next big move otherwise we maybe in for some extended consolidation in this range.
U.S. companies announced new stock buyback programs totaling about $183B in April-May earnings season, that follows the $191.4B of buybacks announced in the January-February earnings season. #MarketWatch reports, citing Trim Tabs Investment Research.
“The buyback boom early this year confirms our view that the main use of corporate America’s tax savings will be takeovers and stock buybacks rather than capital investment or hiring,” Trim Tabs said.
Time for this week’s comic — things aren’t looking pretty in Europe & emerging markets!
And finally a fun fact from last week in history (#Investopedia)
May 22: It’s Bitcoin Pizza Day! In 2010, a Florida man named Laszlo Hanyecz paid for two Papa John’s pizzas with 10,000 bitcoins — worth over $80 million today.