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Daily Market Analysis By FXOpen

This is a discussion on Daily Market Analysis By FXOpen within the Analytics and News forums, part of the Trading Forum category; Rising US Inflation Supports the Bullish Case for Gold Last week, two events dominated the price action in financial markets ...

      
   
  1. #181
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    Rising US Inflation Supports the Bullish Case for Gold



    Last week, two events dominated the price action in financial markets – the US inflation and Fed Chair Powell’s semiannual testimony. Both brought a new perspective to market participants, but summer trading conditions eventually prevailed.

    Namely, despite the rising inflation environment and the market-moving statements from the Fed Chair, the market did not move much. It is typical for the market to consolidate during the summer months, and so July and August are known as months with declining volatility.



    Rising Inflation – Bullish for Gold and Equities

    The US inflation data for the month of June showed inflation surging. It reached 5.4% YoY, much higher than expectations. In fact, inflation in the United States did not reach such levels for at least three decades.

    Traders should remember that last year, in August, the Fed shifted its price stability mandate. It moved from targeting 2% to averaging 2% inflation. Therefore, higher inflation above 2% is not quite a concern for the Fed because we do not know what it is the period used for averaging.

    In other words, if the Fed considers the last 12 months or more, then inflation is likely to be below the 2% AIT (Average Inflation Targeting) target. Because of that, the semiannual testimony that the Fed Chair held last week was critical for understanding how the Fed views inflation.

    Fed Powell admitted that the central bank is surprised by how hot inflation is running, but he reiterated the fact that the Fed views it as transitory. We will find out further down the road if that is true or not.

    In the meantime, with inflation at 5.4% and the US 10-Year Treasury yield at 1.3%, we talk about a negative 4.1% real yields. Therefore, investors are forced to look for alternatives.

    One is gold. Commodities have typically served against higher inflation and this time should be no different. The price of gold, therefore, traded with a bid tone last week, rising from below $1,800 at the time inflation data was released, to over $1,830 before giving back some gains.

    Another is the stock market. The US equities have outperformed their peers and keep trading close to their highs. The earnings season started strong, with financial services corporations posting strong earnings for the second quarter. If the trend continues, funds will keep pouring into the stock market.

    All in all, rising inflation bodes well for gold and equities. The next thing to monitor is the tapering of the asset purchases from the Fed. It may be announced as soon as the Jackson Hole Symposium in August, if inflation keeps rising.

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  2. #182
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    BTC and XRP – Once again moving to the downside



    BTC/USD

    The price of Bitcoin has been falling downwards and made a decrease of 9.14% from Sunday’s high of $32,289 to its lowest point today at $29,336. It has broken the significant horizontal support zone and is currently interacting with the descending support level from the channel in which it was since the ending days of May.



    On the hourly chart, you can see that this is another downfall back to its lows of the 26th of June and is eyeing out the one on the 22nd. This downward trajectory is the continuation of the descending triangle from the start of July which was broken on the downside today. This area is still considered as support so we might see a bounce for another minor recovery but the picture still looks bearish with the price most likely headed further down in the upcoming period.

    If this last descending support breaks the price will move further down and with no significant support close it could continue moving to the $18,000 zone where the next one is. This would be expected in either way but potentially these low levels would be viewed as a good buying opportunity for some, which can lead to a minor recovery first.

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  3. #183
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    EUR/USD Remains At Risk, USD/JPY Eyes More Upsides



    EUR/USD started a major decline and it traded below 1.1800. USD/JPY is attempting an upside break above the 110.00 resistance zone.

    Important Takeaways for EUR/USD and USD/JPY

    • The Euro is facing an increase in selling pressure below the 1.1800 level.
    • There is a major bearish trend line forming with resistance near 1.1800 on the hourly chart of EUR/USD.
    • USD/JPY started a fresh increase after it found support near the 109.10 zone.
    • There is a key bearish trend line forming with resistance near 110.00 on the hourly chart.


    EUR/USD Technical Analysis

    After a close below 1.1850, the Euro started a major decline against the US Dollar. The EUR/USD pair gained bearish momentum and it broke the 1.1820 support zone.

    The pair settled below the 1.1800 level and the 50 hourly simple moving average. It traded as low as 1.1755 on FXOpen and the pair is still showing a lot of bearish signs. Recently, there was a minor upside correction above 1.1770.



    The pair surpassed the 23.6% Fib retracement level of the recent decline from the 1.1825 high to 1.1755 low. It is now facing resistance near the 1.1780 level.

    The first key resistance is 1.1790 zone and the 50 hourly simple moving average. It is close to the 50% Fib retracement level of the recent decline from the 1.1825 high to 1.1755 low. There is also a major bearish trend line forming with resistance near 1.1800 on the hourly chart of EUR/USD.

    A close above 1.1780 and 1.1800 could open the doors for a steady increase. If not, the pair might continue to move down below 1.1765. An intermediate support is near the 1.1755 level.

    The next major support is near the 1.1750 level, below which the pair could drop towards the 1.1700 support in the near term.

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  4. #184
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    LTC and EOS – Higher high expected before the completion of this rise



    LTC/USD

    The price of Litecoin has been on the rise from Tuesday’s low of $104 and made an increase of 13.86% as it came up to $118.8 today. Since then we have seen some sideways movement but the price is in an upward trajectory overall.



    Looking at the hourly chart, you can see that this increase is counted as the starting impulse from the new count which is why now a higher high would be expected. The sideways movement we’ve seen is in that case the 4th wave and is likely going to end as a flat correction, establishing support above the 0.786 Fib level.

    If this is true, then the price is now set to continue moving to the upside for a higher high which would be the end of this first impulsive move after which a retracement would be expected of the same degree. But the price would then be expected to continue moving upward for at least one more wave if this is an ABC to the upside. If this is the 1st sub-wave of the higher degree impulsive move then we are to see even higher levels of the price of Litecoin in the upcoming period, potentially above the $150.

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  5. #185
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    GBP/USD and GBP/JPY: British Pound Could Gain Strength



    GBP/USD started a fresh increase after a drop to 1.3580. Similarly, GBP/JPY started a decent increase and it broke the 151.00 resistance zone.

    Important Takeaways for GBP/USD and GBP/JPY

    • The British Pound traded as low as 1.3571 before climbing higher against the US Dollar.
    • There was a break above a major bearish trend line with resistance near 1.3700 on the hourly chart of GBP/USD.
    • GBP/JPY also climbed higher above the 150.00 and 151.00 resistance levels.
    • There was a break above a key bearish trend line with resistance near 150.15 on the hourly chart.


    GBP/USD Technical Analysis

    This past week, there was a strong decline in the British Pound below the 1.3800 level against the US Dollar. The GBP/USD pair even broke the 1.3700 and 1.3650 support levels.

    It traded as low as 1.3571 on FXOpen before it started a fresh increase. There was a steady upward move above the 1.3650 resistance level. The price surpassed the 1.3680 resistance level and the 50 hourly simple moving average.



    There was also a break above a major bearish trend line with resistance near 1.3700 on the hourly chart of GBP/USD. The pair is now trading nicely above the 1.3750 level.

    It traded as high as 1.3798 before correcting lower. There was a break below the 1.3760 level. The pair tested the 23.6% Fib retracement level of the recent increase from the 1.3571 low to 1.3798 high. It is now trading inside a contracting triangle with resistance near 1.3760.

    A clear break above the triangle resistance could set the pace for a larger increase above 1.3780. The next key resistance is near 1.3800, above which the pair could rise towards the 1.3880 level.

    On the downside, an initial support is near the 1.3735 level and the 50 hourly SMA. If there is a break below the 1.3735 support, the pair could test the 1.3700 support. If there are additional losses, the pair could decline towards the 1.3650 level.

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  6. #186
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    Crucial Week Ahead for USD Traders



    The week ahead is decisive for USD traders as three main events will dominate financial markets – the FOMC Meeting, the Advance GDP, and the Core PCE Price Index.

    Last Thursday, the European Central Bank revised its forward guidance on interest rates to reflect the new strategy. It delivered a more dovish forward guidance, but the euro did not react. Summer trading conditions, plus the fear of a wrong positioning ahead of the important US data next week, resulted in tight market ranges.



    FOMC Statement and Press Conference to Move the USD

    This week it is all about the FOMC Statement and how the Federal Reserve Chairman Jerome Powell delivers the Fed’s message. He will likely reiterate that the tapering of asset purchases, currently running at $120 billion/month, is still far away into the distant future.

    But inflation is pressuring the Fed. The sharp rise in inflation, and specifically in house prices, will likely pressure the Fed into sticking to its tapering prospects.

    The market expects that the Fed will announce the tapering of its asset purchases in December this year and to effectively start the process in January 2022. A possible rate hike is seen only in December 2023, and so the short to medium-term focus is on tapering.

    This coming Wednesday, the market participants will focus on how the Fed sees the Delta variant and the possible impact on the economy.

    US Advance GDP

    The US economy is expected to have grown by 8.5% in the second quarter. The report, released Thursday, will show the degree of economic reopening and how the fiscal and monetary stimulus has impacted the recovery.

    The Fed will likely choose to stay deliberately behind the curve. Yet, there is room to surprise markets by, say, announcing the tapering decision at the August Jackson Hole meeting. The only way the Fed will do that would be for inflation to overshoot the target even more.

    Core PCE Price Index

    On Friday, the Core PCE Price Index in the United States is expected at 0.6% MoM, but the bias is that we will see a higher print. Given the sharp rise in inflation lately, which is running at rates not seen since four decades ago, the market expects inflation to keep rising. Supply bottlenecks caused by the economic reopening are the cause for the sharp increase in prices.

    All in all, the week ahead is critical for the USD traders. Now that the ECB decision is behind, the focus will be on the USD, seen as having more room to gain against the euro and the Swiss franc.

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  7. #187
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    BTC and XRP – Upward move likely ended



    BTC/USD

    The price of Bitcoin has been on the rise since the 20th of July when it fell down to $29.316 at its lowest point. From there we have seen an increase of 38.7% as it came up to $40,679 at its highest point yesterday. Today the price fell down to $36,500 area and is now moving to the upside again, but the downfall of 10% might be indicative of the completion of the prior upward movement.



    You can see that the price almost reached its most significant resistance zone at around $41,000 but failed to make interaction. The upward move from the 20th of July was impulsive in sections but the wave structure doesn’t imply a five-wave pattern. Instead, we could be looking at an ABC correction to the upside before the next downward move. The upward movement looks completed either way so now at least a retracement would be expected if not a start of a new downtrend.

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  8. #188
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    EUR/USD and EUR/JPY: Euro Eyes More Upsides



    EUR/USD formed a support base above 1.1780 and corrected higher. EUR/JPY is also rising and it could gain pace above the 130.00 resistance.

    Important Takeaways for EUR/USD and EUR/JPY

    • The Euro extended its decline towards the 1.1750 level before recovering higher.
    • There was a break above a key contracting triangle with resistance near 1.1805 on the hourly chart.
    • EUR/JPY climbed higher nicely and it even settled above the 129.50 zone.
    • There is a major contracting triangle forming with support near 129.70 on the hourly chart.


    EUR/USD Technical Analysis

    The Euro extended its decline below 1.1800 against the US Dollar. However, the EUR/USD pair remained well bid above the 1.1750 support zone.

    The pair formed a base near 1.1760 and it recently started a decent upward move. It surpassed the 1.1800 resistance zone and the 50 hourly simple moving average. There was also a break above a key contracting triangle with resistance near 1.1805 on the hourly chart.



    The pair traded as high as 1.1841 on FXOpen and it is now correcting gains. There was a break below the 23.6% Fib retracement level of the recent wave from the 1.1770 swing low to 1.1841 high.

    The pair is now finding bids near the 1.1810 support zone. The next key support is near the 1.1805 level. It is near the 50% Fib retracement level of the recent wave from the 1.1770 swing low to 1.1841 high.

    Any more losses might call for a move towards the 1.1780 support. Any more losses might lead EUR/USD towards the 1.1750 support zone. On the upside, an initial resistance is near the 1.1830 level. The first major resistance is near the 1.1850 level. Any more gains could set the pace for a move towards the 1.1900 level. The next major resistance is near the 1.1920 level.

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  9. #189
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    Bitcoin May Reach ATH



    On July 27, Reuters released a rebuttal from an Amazon spokesman regarding the company’s plans to implement Bitcoin.

    “Notwithstanding our interest in the space, the speculation that has ensued around our specific plans for cryptocurrencies is not true,” the source said.

    On the backdrop of this new turn, the Bitcoin rate fell, but what is important, it didn’t fall lower than the July 26 level, when London’s City AM newspaper cited an unnamed insider saying Amazon had intentions to accept Bitcoin payments until the end of the year.

    The fact that the official clarification did not bring the price back to the starting point suggests a bullish market sentiment.

    Mike McGlone, Bloomberg’s Intelligence senior commodity strategist, is of the opinion that BTC quotes are more likely to return to the $60,000 mark than fall to $20,000.



    The price of Bitcoin fluctuates around the psychological level of $40k. The level of $36k — the base of the July 26 large-volume candlestick — is important. As long as the bulls keep the price above this level, the situation looks encouraging.

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  10. #190
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    LTC and EOS – Corrective movement seen



    LTC/USD

    The price of Litecoin has been on the rise from the 20th of July when it fell to $104 at its lowest point. From there we have seen an increase of 35.9% measured to its highest point today at $141.83. This last rise was made after a sharp impulsive decline in a slowly moving manner and even though it is still moving to the downside it barely made it past Monday’s high.



    These two signs – slowly moving price after a sharp decline and failure to make a significantly higher high are considered signs of weakness which is why soon a move to the downside would be expected. From the 20th of July have likely seen the completion of the five-wave impulse to Monday’s high. If this is true, then from Monday we have seen the start of the descending move with the rise from Tuesday being its 2nd sub-wave.

    This can be a minor three-wave flat correction with the price continuing its upward trajectory after as it made a slightly higher high compared to Monday’s one. Another possibility could be that this descending move is going to be larger but there aren’t still signs on how it can play out.

    Considering the fact that this move is counted as corrective this structure can be labeled as the A wave from the higher degree ABC count.

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