Global stocks dip on tax reform jitters gold shines

Global stocks dip on tax reform jitters gold shines

A sense of caution was felt across financial markets during Thursday’s trading session as concerns surrounding the progress of U.S. tax reforms resurfaced.

Asian stocks were mostly lower early trading on Friday thanks to this growing uncertainty, while the lack of risk appetite exposed European shares to further losses. With Asian and European markets gripped by U.S. tax reform jitters, The financial market could come under pressure this afternoon as investors scatter away from riskier assets to safe-haven investments.

dollar slips on tax reform uncertainty
It has certainly been a rough trading week for the dollar, which was thoroughly punished by low inflation concerns and growing uncertainty over the fate of U.S. tax reforms.

The impact of Wednesday’s dovish U.S. rate hike can still be reflected in the dollar’s price action, with growing concerns about the progress of U.S. tax reform fueling the downside. Taking a look at the technical picture, the dollar Index still remains under pressure on the daily charts. Repeated weakness below the 93.50 level may open a path lower towards 93.20 and 90.00 respectively.

Currency spotlight – EUR/USD
The Euro sharply depreciated against the dollar during Thursday’s trading session after the European Central Bank left rates unchanged in December.

Although the central bank raised growth forecasts, inflation was still predicted to remain below the golden 2% target into 2020. With the ECB reiterating its pledge to provide stimulus as long as needed, bears were offered a fresh opportunity to attack the Euro currency. While the euro/U.S. dollar (EUR/USD) currency pair has ventured higher during Friday’s trading session, there is a suspicion that this could be based on dollar weakness.

Taking a closer look at the technical picture, the EUR/USD is still under some noticeable pressure on the daily charts with 1.1850 acting as a resistance. Sustained weakness below this level may encourage a further decline back towards 1.1730 and 1.1680, respectively. Alternatively, a breakout above 1.1850 could open a path higher to 1.1920.

Commodity spotlight – Gold
Gold prices appreciated during Friday’s trading session as the dollar slipped, driven by investor concerns about the progress of U.S. tax reforms.

The upside was complimented by fears over low inflation in the United States, which clouded the prospects of higher interest rates beyond 2017. With the dollar vulnerable to further losses, thanks to uncertainty over tax reforms and investors questioning the Federal Reserve’s ability to raise rates three times in 2018, Gold (which is zero-yielding) could remain buoyant.

From a technical standpoint, the yellow metal is in the process of a technical bounce on the daily charts, with the next level of interest at $1,267. Alternatively, a failure for prices to keep above $1,250 has the ability to open a path back towards $1,236 and $1,230, respectively.

Commodities Technical Analysis, December 11th — December 15th

Commodities Technical Analysis, December 11th — December 15th

The technical analysis, that includes the indicators’ data and major pivot points for WTI Oil, Gold, Silver and Copper as traded on spot market as of December 10th, 2017:

Crude Oil

Indicators

Moving Averages RSI Parabolic SAR CCI
Long Neutral Short Neutral

Crude Oil - Indicators as of Dec 10, 2017

Floor pivot points

3rd Sup 2nd Sup 1st Sup Pivot 1st Res 2nd Res 3rd Res
53.91 54.86 56.12 57.07 58.33 59.28 60.54

Crude Oil - Floor pivot points as of Dec 10, 2017

Woodie’s pivot points

2nd Sup 1st Sup Pivot 1st Res 2nd Res
54.94 56.29 57.15 58.50 59.36

Crude Oil - Woodie's pivot points as of Dec 10, 2017

Camarilla pivot points

4th Sup 3rd Sup 2nd Sup 1st Sup 1st Res 2nd Res 3rd Res 4th Res
56.17 56.78 56.98 57.19 57.59 57.80 58.00 58.61

Crude Oil - Camarilla pivot points as of Dec 10, 2017

Fibonacci retracement levels

0.0% 23.6% 38.2% 50.0% 61.8% 100.0%
55.80 56.32 56.64 56.91 57.17 58.01

Crude Oil - Fibonacci retracement levels as of Dec 10, 2017

Gold

Indicators

Moving Averages RSI Parabolic SAR CCI
Short Neutral Short Short

Gold - Indicators as of Dec 10, 2017

Floor pivot points

3rd Sup 2nd Sup 1st Sup Pivot 1st Res 2nd Res 3rd Res
1201.66 1222.55 1235.16 1256.05 1268.66 1289.55 1302.16

Gold - Floor pivot points as of Dec 10, 2017

Woodie’s pivot points

2nd Sup 1st Sup Pivot 1st Res 2nd Res
1220.48 1231.03 1253.98 1264.53 1287.48

Gold - Woodie's pivot points as of Dec 10, 2017

Camarilla pivot points

4th Sup 3rd Sup 2nd Sup 1st Sup 1st Res 2nd Res 3rd Res 4th Res
1229.36 1238.57 1241.64 1244.71 1250.85 1253.92 1256.99 1266.21

Gold - Camarilla pivot points as of Dec 10, 2017

Fibonacci retracement levels

0.0% 23.6% 38.2% 50.0% 61.8% 100.0%
1243.43 1251.34 1256.23 1260.18 1264.13 1276.93

Gold - Fibonacci retracement levels as of Dec 10, 2017

Silver

Indicators

Moving Averages RSI Parabolic SAR CCI
Short Oversold Short Short

Silver - Indicators as of Dec 10, 2017

Floor pivot points

3rd Sup 2nd Sup 1st Sup Pivot 1st Res 2nd Res 3rd Res
14.71 15.16 15.48 15.93 16.25 16.70 17.02

Silver - Floor pivot points as of Dec 10, 2017

Woodie’s pivot points

2nd Sup 1st Sup Pivot 1st Res 2nd Res
15.13 15.43 15.90 16.20 16.67

Silver - Woodie's pivot points as of Dec 10, 2017

Camarilla pivot points

4th Sup 3rd Sup 2nd Sup 1st Sup 1st Res 2nd Res 3rd Res 4th Res
15.39 15.60 15.67 15.74 15.88 15.95 16.02 16.23

Silver - Camarilla pivot points as of Dec 10, 2017

Fibonacci retracement levels

0.0% 23.6% 38.2% 50.0% 61.8% 100.0%
15.60 15.78 15.89 15.99 16.08 16.37

Silver - Fibonacci retracement levels as of Dec 10, 2017

Copper

Indicators

Moving Averages RSI Parabolic SAR CCI
Short Neutral Short Short

Copper - Indicators as of Dec 10, 2017

Floor pivot points

3rd Sup 2nd Sup 1st Sup Pivot 1st Res 2nd Res 3rd Res
270.29 280.55 287.47 297.73 304.65 314.91 321.83

Copper - Floor pivot points as of Dec 10, 2017

Woodie’s pivot points

2nd Sup 1st Sup Pivot 1st Res 2nd Res
279.72 285.81 296.90 302.99 314.08

Copper - Woodie's pivot points as of Dec 10, 2017

Camarilla pivot points

4th Sup 3rd Sup 2nd Sup 1st Sup 1st Res 2nd Res 3rd Res 4th Res
284.95 289.68 291.25 292.83 295.97 297.55 299.12 303.85

Copper - Camarilla pivot points as of Dec 10, 2017

Fibonacci retracement levels

0.0% 23.6% 38.2% 50.0% 61.8% 100.0%
290.80 294.85 297.36 299.39 301.42 307.98

Copper - Fibonacci retracement levels as of Dec 10, 2017

If you have any questions or comments on this commodity technical analysis, please feel free to reply below.

Market events to watch for the week of Dec. 12

Market events to watch for the week of Dec. 12

Market events to watch this week:

Tuesday, December 12
4:30 am GBP CPI y/y
8:30 am USD PPI m/m

Wednesday, December 13
4:30 am GBP Average Earnings Index 3m/y 
8:30 am USD CPI m/m
8:30 am USD Core CPI m/m
10:30 am USD Crude Oil Inventories

2:00 pm USD FOMC Economic Projections
2:00 pm USD FOMC Statement
2:00 pm USD Federal Funds Rate
2:30 pm USD FOMC Press Conference
7:30 pm AUD Employment Change
7:30 pm AUD Unemployment Rate
9:00 pm CNY Industrial Production y/y

Thursday, December 14 
3:30 am CHF Libor Rate
3:30 am CHF SNB Monetary Policy Assessment
4:00 am CHF SNB Press Conference
4:30 am GBP Retail Sales m/m
7:00 am GBP MPC Official Bank Rate Votes

7:00 am GBP Monetary Policy Summary
7:00 am GBP Official Bank Rate
7:45 am EUR Minimum Bid Rate

8:30 am EUR ECB Press Conference
8:30 am USD Core Retail Sales m/m
8:30 am USD Retail Sales m/m
8:30 am USD Unemployment Claims

*All times EDT

About the Author

Alfonso Esparza, senior currency analyst at OANDA, specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends.

Bitcoin Reluctantly Approaching Previous $11,800.01 All-Time High

Bitcoin Reluctantly Approaching Previous $11,800.01 All-Time High

After blasting toward the former $11,395 BitStamp all-time high on November 29, bitcoin rather abruptly and violently retracted to the $9,252.96 November 29 daily low. The markets have consolidated since then, and the price has managed to quickly recover above the previous $10,000 psychological resistance level, which is now serving as a key support. Additionally, a new all-time high was secured yesterday at $11,800.01, and we may even break ahead of that valuation, but only if the current uptrend continues with matching hourly trading volume.

Bcash was until recently, also trading within a steep descending channel, losing out to both ethereum (bch/eth) and bitcoin (bch/btc) respectively. The situation has changed quite a bit these past couple of days, with bitcoin cash slowing creeping ever closer to previous price zones. However, volume is marginally lagging so caution is advised. Bitcoin gold on the other hand has gradually climbed higher, although there have been several apparent pullbacks along the way. Likewise, the same is true for a select few alternative crypto currencies, which were hit even harder by bitcoins first eye-catching fallback. The chaos that followed the rally resulted in sudden price corrections of more than 50% in some cases.

Despite the havoc raging across the wider markets, bitcoin supports are plentiful. This is again understandable, especially when we reevaluate how far the largest crypto currency has surged in just this last week alone. Primary supports stand out at yesterday’s $10,517.38 daily low, the $9,000 weekly low, and at the $5,555.55 monthly low. Secondary supports are discernible at $11,204.35, $10,737.86, $10,619.85, $9,369.20, $9,252.96, $8,348.06, $7,998.12, $7,886.40, $7,590.09, $7,570.17, $7,499.82, $7,353.51, $6,991.37, $6,956.42, $6,776.88, $6,314.14, $6,025.93, $5,872.75, $5,754.5, $5,645.18, and at $5,591.17.

The $11,800.01 all-time high is our primary resistance level. Fibonacci extensions for the current trading range are at: $12,460.81 (fib 1.236), $12,869.61 (fib 1.382), $13,200.01 (fib 1.5), $13,530.41 (fib 1.618), $14,600.02 (fib 2.0), $15,669.62 (fib 2.382), $16,330.42 (fib 2.618), $17,400.03 (fib 3.0), and at $19,130.43 (fib 3.618). Overlaps have almost occurred with Fibonacci retracements as well, this is most noticeable with the $11,204.35 (the 0.786 fib is at $11,194.31) and $10,737.86 supports (the 0.618 fib is at $10,722.5).

Bollinger bands on the daily have considerably widened, signaling further price volatility. Nonetheless, the upper bands have been breached several times, which is often a sign of inherent bullishness. The 4-hour appears less chaotic, portraying a more stable divide between the outer bands, with price remaining close to the median line. Hourly bands are depicting a similar situation, even though the price has dipped below the median line.

The 30-day MA, 180-day MA, and 365-day MA are almost all in a perfectly parallel ascending order, with the same angle of ascent. Bearish crossovers have not occurred with either of the three, in any combination or sequence. The VWMA is rising, in line and in warm proximity to the 30-day MA. The EMA is acting accordingly, firmly following short-term price movement and momentum.

RSI is neither overbought nor oversold, although it may be setting the stage for future oversold conditions. %R Williams is in a similar situation, inconclusive for now. The MACD has been establishing bullish and bearish crossovers in a consecutive interchanging order (marked appropriately with green and red vertical bars below). Simultaneously, OBV is on a steady rise in the face of dwindling volume.

Bitcoin began trading from the $5,555.55 monthly low on November 12 (GMT 04:00), and after more than 2 weeks elapsed, we witnessed a new $11,392.31 all-time high on November 29 (GMT 14:00). The actual event resulted in a pullback to the $9,252.96 November 29 daily low (GMT 19:00), which was followed by a bounce back in price to the $10,624.60 November 30 daily high (GMT 4:00), and a consequent second reversal to $9,000 weekly low on November 30 (GMT 13:00). The subsequent 3 days were chiefly characterized by a strong bullish bias that concluded with yet another new all-time high, this time at $11,800.01 on December 3 (GMT 15:00). The price has since then oscillated between the $11,800.01 all-time high and yesterday’s $10,517.38 fundamental support.

If you have any questions and comments on bitcoin today, use the form below to reply.

BTC USD trades in a bullish impulse

BTC USD trades in a bullish impulse

BTC USD is trading in a bullish impulse of a higher degree, labeled as black wave V. We see four of five bullish waves completed from November 11, which indicates that a top can be near. The current rally, which may be the final wave of V, may see limited upside near the upper Elliott Wave channel and near the Fibonacci ratios of 2.618 or 1.0. All three elements have a common thing, they offer resistance, so be aware of a three-wave bearish reversal.

About the Author

Gregor Horvat, based in Slovenia, has been in the forex markets since 2003. He is a technical analyst and individual trader who has worked for Capital Forex Group and TheLFB.com. He also is founder of forex services on www.ew-forecast.com. EW-Forecast.com provides technical analysis of the financial markets, highlighting behavioral patterns based on the Elliott Wave Principle (EWP). Website: http://www.ew-forecast.com/

Commodities Technical Analysis, December 4th — December 8th

Commodities Technical Analysis, December 4th — December 8th

The technical analysis, that includes the indicators’ data and major pivot points for WTI Oil, Gold, Silver and Copper as traded on spot market as of December 3rd, 2017:

Crude Oil

Indicators

Moving Averages RSI Parabolic SAR CCI
Long Neutral Long Neutral

Crude Oil - Indicators as of Dec 3, 2017

Floor pivot points

3rd Sup 2nd Sup 1st Sup Pivot 1st Res 2nd Res 3rd Res
54.97 55.85 57.08 57.96 59.19 60.07 61.30

Crude Oil - Floor pivot points as of Dec 3, 2017

Woodie’s pivot points

2nd Sup 1st Sup Pivot 1st Res 2nd Res
55.94 57.25 58.05 59.36 60.16

Crude Oil - Woodie's pivot points as of Dec 3, 2017

Camarilla pivot points

4th Sup 3rd Sup 2nd Sup 1st Sup 1st Res 2nd Res 3rd Res 4th Res
57.14 57.72 57.91 58.11 58.49 58.69 58.88 59.46

Crude Oil - Camarilla pivot points as of Dec 3, 2017

Fibonacci retracement levels

0.0% 23.6% 38.2% 50.0% 61.8% 100.0%
56.74 57.24 57.55 57.80 58.04 58.85

Crude Oil - Fibonacci retracement levels as of Dec 3, 2017

Gold

Indicators

Moving Averages RSI Parabolic SAR CCI
Long Neutral Short Neutral

Gold - Indicators as of Dec 3, 2017

Floor pivot points

3rd Sup 2nd Sup 1st Sup Pivot 1st Res 2nd Res 3rd Res
1238.52 1254.33 1267.37 1283.18 1296.22 1312.03 1325.07

Gold - Floor pivot points as of Dec 3, 2017

Woodie’s pivot points

2nd Sup 1st Sup Pivot 1st Res 2nd Res
1253.64 1265.99 1282.49 1294.84 1311.34

Gold - Woodie's pivot points as of Dec 3, 2017

Camarilla pivot points

4th Sup 3rd Sup 2nd Sup 1st Sup 1st Res 2nd Res 3rd Res 4th Res
1264.54 1272.48 1275.12 1277.77 1283.05 1285.70 1288.34 1296.28

Gold - Camarilla pivot points as of Dec 3, 2017

Fibonacci retracement levels

0.0% 23.6% 38.2% 50.0% 61.8% 100.0%
1270.14 1276.95 1281.16 1284.57 1287.97 1298.99

Gold - Fibonacci retracement levels as of Dec 3, 2017

Silver

Indicators

Moving Averages RSI Parabolic SAR CCI
Short Neutral Short Short

Silver - Indicators as of Dec 3, 2017

Floor pivot points

3rd Sup 2nd Sup 1st Sup Pivot 1st Res 2nd Res 3rd Res
15.05 15.63 16.03 16.61 17.01 17.59 17.99

Silver - Floor pivot points as of Dec 3, 2017

Woodie’s pivot points

2nd Sup 1st Sup Pivot 1st Res 2nd Res
15.59 15.95 16.57 16.93 17.55

Silver - Woodie's pivot points as of Dec 3, 2017

Camarilla pivot points

4th Sup 3rd Sup 2nd Sup 1st Sup 1st Res 2nd Res 3rd Res 4th Res
15.90 16.17 16.26 16.35 16.53 16.62 16.71 16.98

Silver - Camarilla pivot points as of Dec 3, 2017

Fibonacci retracement levels

0.0% 23.6% 38.2% 50.0% 61.8% 100.0%
16.20 16.43 16.57 16.69 16.81 17.18

Silver - Fibonacci retracement levels as of Dec 3, 2017

Copper

Indicators

Moving Averages RSI Parabolic SAR CCI
Short Neutral Short Neutral

Copper - Indicators as of Dec 3, 2017

Floor pivot points

3rd Sup 2nd Sup 1st Sup Pivot 1st Res 2nd Res 3rd Res
285.93 293.61 299.76 307.44 313.59 321.27 327.42

Copper - Floor pivot points as of Dec 3, 2017

Woodie’s pivot points

2nd Sup 1st Sup Pivot 1st Res 2nd Res
293.23 298.99 307.06 312.82 320.89

Copper - Woodie's pivot points as of Dec 3, 2017

Camarilla pivot points

4th Sup 3rd Sup 2nd Sup 1st Sup 1st Res 2nd Res 3rd Res 4th Res
298.29 302.10 303.36 304.63 307.17 308.44 309.70 313.51

Copper - Camarilla pivot points as of Dec 3, 2017

Fibonacci retracement levels

0.0% 23.6% 38.2% 50.0% 61.8% 100.0%
301.30 304.56 306.58 308.22 309.85 315.13

Copper - Fibonacci retracement levels as of Dec 3, 2017

If you have any questions or comments on this commodity technical analysis, please feel free to reply below.

Riding the Eurodollar Rate Curve

Riding the Eurodollar Rate Curve

There are 40 quarterly contracts available for trading three-month Eurodollar interest rates futures. Currently, you can trade front month September 2017 Eurodollars out quarterly to the September 2027 contract. For each contract the price is listed as 100 less a quarterly interest rate. For example, on Sept. 8, 2017, the price shown for the December 2017 futures contract was 98.625, a rate equal to 1.375%. With a relatively flat yield curve at present, the rate on the December 2026, contract was not much higher – 97.345, a rate of 2.655%.

“Eurodollar vs. Treasury yields,” (right) shows the relationship between Eurodollar futures and the Treasury yield curve on Sept. 25, 2017. Following the shortest-term interest rates that are coordinated with Libor (London Interbank offer rate), both the Treasury yields and Eurodollar rates move higher. Yields that are higher for longer-term bonds would be considered normal since investors are expected to require a higher return for longer-term investments.

The chart shows that short-term Eurodollar rates needed to move higher more quickly since they are responsible for lifting the Eurodollar yield curve so that it is close to the Treasury yield curve. For intermediate terms, such as three to five years through the longest maturities, the Eurodollar and Treasury yield curves are closely related with Eurodollar yields, slightly higher than Treasury yields.

Eurodollar vs. Treasuries
Investment decisions on Eurodollar futures take a different approach from decisions on Treasury bonds because bonds are priced according to their market yields vs. the bond’s yield to maturity — the present value of the bond after discounting future payments of interest and principal by the current required yield for the bond’s remaining time to maturity. Changes in the price of Eurodollar futures depend on the number of basis points (each equal to 1/100 of 1%) that the quarterly rate changes. Each basis point of rate change equals $25 – an amount determined by the underlying deposit of $1 million Eurodollars, over a quarter of one year, times the rate of 1% divided by 100.

The concept of riding the Eurodollar rate curve is related to the time-honored investment technique of riding the Treasury yield curve. When the Treasury yield curve contains higher yields for longer-term bonds, it is possible to gain value by investing long-term and allowing the gradual reduction in yield over future time periods to produce increases in the price of the purchased long-term bond.

Since it is assumed that Treasury securities have zero credit risk (after all, the government can always print enough money to pay its bills). The remaining risk, other than inflation is that interest rates might increase, resulting in reductions in the bonds’ present value or price. Interest rate risk for riding the Treasury yield curve depends on the national economic outlook and response by the Federal Reserve in causing rates and yields to rise or fall.

“Eurodollar vs. Treasury yields” exhibits a relatively stable economy with small changes due to decisions by the Fed. There have been changes in the rates on Eurodollar futures (see “Eurodollar futures changes in rates,” above). The chart combines time periods from June 21, 2017, to Sept. 18 and Sept. 25, 2017.

Profit from riding the Eurodollar rate curve – taking a long or short position on a Eurodollar contract – depends on rate changes for specific quarterly Eurodollar futures contracts such as those shown on “Eurodollar futures changes in rates.” Of course, the targets are quarters that show the greatest positive or negative movement in rates, depending on the trader’s forecast of interest rate changes. Several quarters around five years from the present time in September 2017 appear to be good choices for declining rates. For example, Eurodollar futures with expiration dates in 2022 and 2023 show negative tendencies.

How quickly a profit might be made from trading a Eurodollar futures contract will vary with interest rate movements in the market, but a relatively short time period may result. Going from June 21 to Sept. 25 and from Sept. 18 to Sept. 25, we find that there were several profitable trades.

Riding the Treasury yield curve and riding the Eurodollar rate curve are similar in that both trades profit from interest rate changes; however, Eurodollar futures have an advantage in permitting either long or short trades. Treasury securities are priced according to their yields, while Eurodollar futures are priced by short-term (90-day) interest rates.

The Eurodollar Advantage
Traders in Eurodollar futures have one advantage (see “Eurodollar futures rates less yields,” below). This chart indicates the most favorable quarters for riding the Eurodollar rate curve in long futures trades. It shows again that the five-year area of quarterly futures is probably the best for producing negative rate changes and profits on interest rate contracts.  

A short trade in Eurodollar futures might be profitable in the event that increases in Federal Reserve short-term rates were forecast. For this trade, the shortest quarterly contract would be the most profitable over a short time period. A hypothetical example is shown here (see “Effect of 100-basis-point increase,” below). Note the relatively large impact on the Treasury yield curve, short-term, and the relatively short time period over which the 100 basis point rate increase fades in its effect on farther out quarterly rates.

The short-term effects of changes in rates on the Federal Reserve’s favorite area of interest rate control – very short-term maturities – explain why the Fed was forced to purchase intermediate or longer-term bonds in its “Operation Twist,” after its first two rounds of quantitative easing. Even large rate changes in the shortest maturities would have had approximately zero impact on intermediate-term securities.

The rapid fading out of rate changes in any time period is related to the calculation of Eurodollar yields. Beginning with the rate at the most current quarter, each quarter’s calculated yield is equal to the Nth root of successive products as each quarterly rate is multiplied times the product of previous quarterly rates. The result is an exponential reduction in the impact of the rate change in any quarter. There is also the result that every yield shown on the Eurodollar yield curve and Treasury yield curve is an average of previous shorter-term rates.

The progression of Nth roots of interest rate products is the chain of geometric means — yields that are averages of shorter-term 90-day rates.

Profits or losses on trades from riding the Eurodollar rate curve tend to go in the same direction for all maturities on a given day, with the results depending on interest rate movements in the market. Unless interest rate changes are very large, profits and losses will be small for an individual futures contract. Ultimately the profit or loss will depend on the trader’s ability to forecast short-term interest rate changes.

About the Author

Paul Cretien is an investment analyst and financial case writer. His e-mail is PaulDCretien@aol.com.