CURRENCY HIGHLIGHTS – December 2019
Euro Continues To Show Lack Of Strength.
The Euro has rallied a bit during the trading in december, reaching towards the 200 day EMA and failing yet again. By doing so it shows that the market is going to continue to struggle overall. This shows just how precarious the market is right now, and as we drift into the holiday season, it’s very likely that the market will probably do very little in the way of movement. Ultimately, this is a marketplace that probably reaches back towards the 1.11 handle, and then possibly even as low as the 1.10 level underneath.
Essentially, the market is trading between the 1.10 level on the bottom and the 1.12 level on the top. The downtrend line of course comes in the play as well, so that being said it’s likely that we will continue to see a lot of back and forth, with more of a downward feel. The holidays will crush liquidity, and at this point it’s likely that we will see the market fade rallies going forward, and as a result it’s likely that the market will have a general malaise. Ultimately, this is the wrong time of year to expect a huge move, and therefore we think it’s simply going to go back and forth with more of a downward drift.
Somehow, if we were to break above the 1.12 level it’s likely that the market could go towards the 1.14 handle after that. If we were to do the opposite, meaning breaking down below the 1.10 level, then the market probably goes down to the 1.09 handle. In general, we believe that this market is probably going back and forth more than anything else going forward.
There’s a full slate of economic data from Japan, but most of it is on the minor side. Of keen interest for traders will be the Bank of Japan Monetary Policy Meeting Minutes on December 24, a speech by BOJ Governor Kuroda on December 26, and the BOJ Summary of Opinions on December 27.
The Dollar/Yen had an up and down week before settling slightly better. The mostly sideways price action indicates investor indecision and impending volatility. While prices remained just slightly under the May 30 top at 109.930, buyers were scarce which may be related to light pre-holiday volume or position-squaring ahead of the new year.
Last week, the USD/JPY settled at 109.456, up 0.102 or +0.09%.
The Dollar/Yen was also underpinned by rising U.S. Treasury yields, which widened the spread between U.S. Government bonds and Japanese Government bonds. This helped make the U.S. Dollar a more attractive asset. Stronger demand for risky assets also supported the Forex pair.
British Pound Pulls Back Drastically After Johnson Comments. The British pound has pulled back drastically during the week after Boris Johnson informed everyone that there was going to be no extension for leaving the European Union. With that, the pound acted quite negatively, but we have since seen the market bounce from a major level.
The British pound has broken down quite drastically after the surge higher earlier in the week, as Boris Johnson suggested that there would be no extension when it comes to leaving the European Union. Quite frankly, he came to deliver Brexit and it looks like he’s going to. This had a lot of the “weak hands” in the market running for cover, and therefore we have seen a pretty significant break down. That being said though, the 1.30 level should continue to be very important as it is the top of the previous bullish candle. That candlestick breaking to the upside opens up the door to a potential move to 1.38, and obviously the 1.35 level will have caused significant resistance anyway. After this pullback though we anticipate that the British pound will continue to grind higher and eventually break back towards the 1.35 handle, before fulfilling that move to the 1.38 handle again.
Are Buyers Propping Up Prices in Anticipation of Stock Market Correction? We can speculate that gold is being supported by traders betting that the possibly overextended stock markets may be ripe for a near-term correction.
Gold finished marginally lower last week in a mostly listless trade. Volume was extremely light and the market remained rangebound for the fifth straight week as traders continued to look for new catalysts to refresh volatility and drive the market in a big way in either direction. A little more than a week ago the market lost two major catalysts that were providing support: The U.S.-China trade dispute and the Brexit uncertainty.
Last week, stronger than expected U.S. economic data helped support the idea that the Federal Reserve would refrain from further rate cuts in 2020. This news helped raise Treasury yields, turn the U.S. Dollar into a more attractive assets and weaken foreign demand for dollar-denominated gold. Also helping to keep a lid on gold prices was strong demand for risky assets. U.S. stocks hit record highs last week and the strong close indicated the rally could extend into the holiday-shortened week. Last week, President Trump was impeached by the U.S. House of Representatives. The financial markets showed little response to the news and there was little evidence that gold traders were using the news as a reason to increase hedge positions.
BITCOIN and ALTCOINS
In last month Bitcoin price suffered and was cruising in a range between $6.700 and $7.400. Most of altcoins dropped slightly against Bitcoin who remains the absolute king of digital assets in the moment. Many other players are also entering blockchain and crypto field and the future of money is digital for sure. Institutional investors are investing 200-500 million dollars weekly. Daily volume of trading with cryptocurrencies has surpassed 50 billion dollars. The general sentiment in the crypto market is very positive and as said many times already, we expect a huge breakout of cryptocurrency.
The blockchain industry is developing extremely fast. Various projects are coming to life, more and more big merchants are starting to accept cryptocurrencies, first Smart Cities designed on blockchain solutions are being built, even some countries are considering establishing national government-backed cryptocurrencies.