Another week of Geo-political tensions wraps up the on the financial markets. But the Equity investors were more focused on the U.S earnings seasons which has crossed the half way mark with better than expected earnings beating the long-term average of 64%. Having said that the Global economy still faces headwinds with Europe slipping into recession (Eurozone businesses started out 2019 with their weakest growth rate since mid-2013 as a slowdown that started in manufacturing spread to services, with demand weakening for the first time in more than four years) topped by the Brexit uncertainty, another U.S government shut down looming & no breakthrough in U.S-China trade talks. Cryptos spent most of the week in dark clouds with a smart rebound showing up at the time of writing. It was a similar comeback by the Greenback in Forex markets which we will take a detailed look later. Here’s a brief summary of the markets for you.
After spending most of the week in bearish consolidation, digital coins finally made a move up from the lows and survived another scare yet again! This is pretty evident from the Bitcoin hourly chart. A little mundane week for the news headlines in the Cryptoverse – functionality additions for Coinbase & Huobi crypto trading platforms, Ripple adding 11 more prestigious universities to its Blockchain Research Initiative, while Zcash added a security patch to its network. Crypto winter over yet? Let’s look at the BTC chart to get a sense of it all. BTCUSD turned around pretty sharply on the weekend with good volume to overtake the previous resistance turned support now. Most of the other Cryptos exhibited a similar move. Coming back to Bitcoin, it seems to be creating a strong support in the $3400 region. So far the higher lows in the daily chart has been upheld. Immediate support for BTC is around $3640 zone above which the bias remains bullish, while a drop below this could see an extended consolidation to the $3560 region which needs to be breached for the bias to flip to the downside. Total market cap $121 billion and BTC dominance stands 52.9% at the time of writing.
Despite a two-day reversal to end the week, the major indices of the U.S stock markets managed to close with a seventh weekly gain. The market moves so far signify that the investors are treating a lot of the economic data as priced in. I mentioned all the headwinds for the global markets & the economy at the beginning but for optimists, the U.S government shutdown & U.S-China trade talks are ultimately headed towards resolution a few weeks down the road, with China’s Caixin/Markit’s services PMI posting a reading of 53.6 which is well above the 50.0 mark separating growth from contraction in the economy. Or will it be the cyclicals that will take care of the markets?
Looking at the S&P 500 chart, the index remains strongly pegged in a bullish channel albeit with some appetite for a correction from the relentless bullish momentum that we have seen the past few weeks. Immediate support is around 2640 above which the bullish momentum still stay intact. Only a break of the 2800-2810 level would signal a new MT bullish run taking shape, but we might see some consolidation below that level.
It has been a W-shaped recovery for the Dollar Index in Forex markets. With the honoring of the bullish trend line going back to September of last year, it looks as the Greenback is getting ready to overtake the previous high in the 96.65 zone. If successful the DXY might be looking at another MT bull run. A major correction in the Equities would of course expedite this move & vice versa.
The moves in the individual pairs were a confirmation of this fact especially the EURUSD which has dropped off significantly from the high (1.1514) created at the end of the last month – the pairs seems set to resume the MT downtrend. News of recession in the European continent have certainly not helped the case of this pair which closed @ 1.1320 for the week. GBPUSD has held astonishingly well against the Brexit backdrop but wonder what would happen in case of a hard Brexit. Commodity pairs were generally weaker, but USDCAD managed a small rebound in favor of Loonie with a robust jobs report out of Canada on Friday.
The Economic calendar next week will post GDP numbers from Germany & Japan, RBNZ rate decision from New Zealand, GDP & CPI data out of UK, New Yuan Loans & CPI from China and Retail sales, CPI & U. of Michigan sentiment reports from U.S, apart from some key Central bankers’ speeches. To end it all, here is a comic depiction of what the state of the global economy looks like right now in the hand of Bears!