Big Mac Index shows USD is overvalued and pointed to long-term decline
According to Big Mac Index, at the start of 2020, only the two currencies (NOK, CHF) were overvalued to USD, while ten years ago there were 15. Last time we saw that in 2001 just before the multi-year trend turn.
What does it mean for the dollar for now? Absolutely nothing. History shows that while currencies tend to compensate for their under/overpricing, this path takes years and can be abruptly interrupted at any moment by sudden economic shocks.
But from longer term perspective, this observation suggests that this or next year the dollar may fall under pressure, starting to compensate some of its overvalue. We observed a similar pattern after 2001 when only three currencies were overvalued against the dollar.
https://fxpro.news/daily-forex-outlook/big-mac-index-shows-usd-is-overvalued-get-ready-for-decline-20200122/
According to Big Mac Index, at the start of 2020, only the two currencies (NOK, CHF) were overvalued to USD, while ten years ago there were 15. Last time we saw that in 2001 just before the multi-year trend turn.
What does it mean for the dollar for now? Absolutely nothing. History shows that while currencies tend to compensate for their under/overpricing, this path takes years and can be abruptly interrupted at any moment by sudden economic shocks.
But from longer term perspective, this observation suggests that this or next year the dollar may fall under pressure, starting to compensate some of its overvalue. We observed a similar pattern after 2001 when only three currencies were overvalued against the dollar.
https://fxpro.news/daily-forex-outlook/big-mac-index-shows-usd-is-overvalued-get-ready-for-decline-20200122/
Foreign exchange markets revived on Tuesday, moving in the wake of worries around the mysterious Chinese coronavirus, causing move to safe-heavens. On Wednesday, market sentiment is more optimistic as most indices are trying to shake off these fears, turning to growth.
Pound adds to the dollar for the third day, but has not yet played Friday's drop. CAD unchanged to USD ahead of CPI release and Bank of Canada's rate decision. As no changes expected, all attention focused on the statement and the subsequent BOC press conference.
Pound adds to the dollar for the third day, but has not yet played Friday's drop. CAD unchanged to USD ahead of CPI release and Bank of Canada's rate decision. As no changes expected, all attention focused on the statement and the subsequent BOC press conference.
#WaveAnalysis
#Boeing under bearish pressure after the earlier breakout of long-term support level 321.00 (which has been steadily reversing the price from August).
The breakout of this support level accelerated the active short-term impulse wave 3, which belongs to the medium-term downward impulse sequence (3) from November.
Boeing is likely to fall further toward the next round support level 300.00 (target price for the completion of the active impulse wave 3).
#Boeing under bearish pressure after the earlier breakout of long-term support level 321.00 (which has been steadily reversing the price from August).
The breakout of this support level accelerated the active short-term impulse wave 3, which belongs to the medium-term downward impulse sequence (3) from November.
Boeing is likely to fall further toward the next round support level 300.00 (target price for the completion of the active impulse wave 3).
#WaveAnalysis
#USDCAD recently reversed down from the resistance area lying between the resistance level 1.3090 (former strong support from December) and the 38.2% Fibonacci correction of the previous sharp downward impulse from last month.
The downward reversal from this resistance area stopped the previous short-term corrective wave (b).
USDCAD is likely to fall further toward the next support level 1.3030 (low of the previous short-term correction a).
#USDCAD recently reversed down from the resistance area lying between the resistance level 1.3090 (former strong support from December) and the 38.2% Fibonacci correction of the previous sharp downward impulse from last month.
The downward reversal from this resistance area stopped the previous short-term corrective wave (b).
USDCAD is likely to fall further toward the next support level 1.3030 (low of the previous short-term correction a).
Stock markets remain under pressure due to fears of the Chinese virus outbreak. Futures on Dow Jones have lost 0.6% this week, while Chinese Hang Seng declined 4.2%. Luxury goods manufacturers (Burberry, LVMH) and airlines companies (Air China, Japan Airlines) received the most blow due to demand concerns.
CHF, JPY add to the dollar on safe-heavens demand. AUD moves against the market after the second consecutive strong employment report, that reduced expectations of new rate cuts. CAD lost 0.8% after BoC comments opened the door to imminent rate cuts.
CHF, JPY add to the dollar on safe-heavens demand. AUD moves against the market after the second consecutive strong employment report, that reduced expectations of new rate cuts. CAD lost 0.8% after BoC comments opened the door to imminent rate cuts.
Oil intensifies the decline due to a new wave of oversupply fears
This week’s dynamics of oil indicates the weakness of arguments for further growth. It took the market a few hours to offset the news about production disruptions in Libya on Monday, while the reaction to the Chinese virus pressures the markets for the fourth day.
The latest data showed an increase in production in the USA to 13 million barrels per day. US reported a steady Crude production increase from 2016, despite significant price fluctuations over this time.
https://fxpro.news/daily-forex-outlook/oil-intensifies-the-decline-due-to-a-new-wave-of-oversupply-fears-20200123/
This week’s dynamics of oil indicates the weakness of arguments for further growth. It took the market a few hours to offset the news about production disruptions in Libya on Monday, while the reaction to the Chinese virus pressures the markets for the fourth day.
The latest data showed an increase in production in the USA to 13 million barrels per day. US reported a steady Crude production increase from 2016, despite significant price fluctuations over this time.
https://fxpro.news/daily-forex-outlook/oil-intensifies-the-decline-due-to-a-new-wave-of-oversupply-fears-20200123/
Bitcoin follow the markets on autopilot, but may decouple
Over the last 24 hours, Bitcoin lost around 2% and changed hands just below $8,500. In the short term, this coincides with the dynamics of global financial markets, where pressure on risk assets also prevails.
From the technical point of view, on the daily chart Bitcoin forms a second red candle after closing the day below the 200-day average, which may indicate the potential for a further decline in the coming days.
At the same time, it is worth distinguishing between the reaction of the market when it moves in autopilot mode and the response of investors to big shocks. Bitcoin is one of the assets on which investors are trying to get a return “above the market” by riding a growth wave or leading a decline at the moment of local drops.
https://fxpro.news/analysis-and-insight/bitcoin-follow-the-markets-on-autopilot-but-may-decouple-20200123/
Over the last 24 hours, Bitcoin lost around 2% and changed hands just below $8,500. In the short term, this coincides with the dynamics of global financial markets, where pressure on risk assets also prevails.
From the technical point of view, on the daily chart Bitcoin forms a second red candle after closing the day below the 200-day average, which may indicate the potential for a further decline in the coming days.
At the same time, it is worth distinguishing between the reaction of the market when it moves in autopilot mode and the response of investors to big shocks. Bitcoin is one of the assets on which investors are trying to get a return “above the market” by riding a growth wave or leading a decline at the moment of local drops.
https://fxpro.news/analysis-and-insight/bitcoin-follow-the-markets-on-autopilot-but-may-decouple-20200123/
China actively fights the spreading of coronavirus, restricting movement from 11 cities. WHO stopped short from calling emergency measures, which is positively perceived by the European markets. The market focus now shifting to PMI indices set to publish today on Euro area, UK and the US. Sensitive to demand for risks currencies -- ZAR, TRY, GBP -- add to the dollar this morning. Protective -- CHF, JPY and Gold -- are losing some ground.
Worries around China's coronavirus is
Anonymous Poll
45%
reason for sell stocks
55%
opportunity to buy lower
Brexit moves the pound and the euro in different ways
EURGBP moved from 10-years peak to 3-years lows over just five-month, despite overall calm on FX. It seems, Brexit separates not only EU and UK economies but also EUR and GBP trends
During the last weeks of the 2019, the pound experienced some decline, but for the most part, it associated with a correction in traders’ positions after the impressive rally. This week, the pound stood out brightly against both the dollar and the euro once again, recovered some positions.
https://fxpro.news/daily-forex-outlook/brexit-moves-the-pound-and-the-euro-in-different-ways-20200124/
EURGBP moved from 10-years peak to 3-years lows over just five-month, despite overall calm on FX. It seems, Brexit separates not only EU and UK economies but also EUR and GBP trends
During the last weeks of the 2019, the pound experienced some decline, but for the most part, it associated with a correction in traders’ positions after the impressive rally. This week, the pound stood out brightly against both the dollar and the euro once again, recovered some positions.
https://fxpro.news/daily-forex-outlook/brexit-moves-the-pound-and-the-euro-in-different-ways-20200124/
Bitcoin
Technical analysis seems to have played a crucial role in recent #Bitcoin dynamics. Closing the day on Wednesday below the 200-day average signaled a further decline, which we witnessed. During the last 24 hours, the benchmark cryptocurrency has lost another 2% and changed hands at $8.350.
https://fxpro.news/analysis-and-insight/bit-comment-bitcoin-weaken-after-tech-analysis-signs-20200124/
Technical analysis seems to have played a crucial role in recent #Bitcoin dynamics. Closing the day on Wednesday below the 200-day average signaled a further decline, which we witnessed. During the last 24 hours, the benchmark cryptocurrency has lost another 2% and changed hands at $8.350.
https://fxpro.news/analysis-and-insight/bit-comment-bitcoin-weaken-after-tech-analysis-signs-20200124/
#WaveAnalysis
#Platinum earlier reversed up sharply from the round support level 1000.00 (former multi-month resistance from September, acting as the support now after it was broken by the previous sharp upward impulse wave 3)
The upward reversal from the support level 1000.00 started the (b)-wave of the active short-term ABC correction 4.
Given the overriding daily uptrend – Platinum is likely to rise further toward the next resistance level 1040.00 (which stopped the previous sharp upward impulse wave 3).
#Platinum earlier reversed up sharply from the round support level 1000.00 (former multi-month resistance from September, acting as the support now after it was broken by the previous sharp upward impulse wave 3)
The upward reversal from the support level 1000.00 started the (b)-wave of the active short-term ABC correction 4.
Given the overriding daily uptrend – Platinum is likely to rise further toward the next resistance level 1040.00 (which stopped the previous sharp upward impulse wave 3).
#WaveAnalysis
#EURNZD continues to fall inside the short-term impulse wave C, which started recently from the resistance area lying between the resistance level 1.6830 (former key support from December), upper daily Bollinger Band and the 61.8% Fibonacci correction of the previous downward impulse 5 from December.
The active impulse wave C belongs to the ABC correction (B) from the start of January.
EURNZD is likely to fall further toward the next support level 1.6620 (monthly low from last month and the target for the completion of the active ABC correction (B)).
#EURNZD continues to fall inside the short-term impulse wave C, which started recently from the resistance area lying between the resistance level 1.6830 (former key support from December), upper daily Bollinger Band and the 61.8% Fibonacci correction of the previous downward impulse 5 from December.
The active impulse wave C belongs to the ABC correction (B) from the start of January.
EURNZD is likely to fall further toward the next support level 1.6620 (monthly low from last month and the target for the completion of the active ABC correction (B)).
The spreading China coronavirus take tall on the markets. On Monday morning, Brent Crude Oil has updated October lows on fears of falling demand due to the economic slowdown. There is an increased demand for protective assets (US, Japan government bonds), as well as safe-heaven currencies (dollar, yen).
Crude Oil as the weakest link in China virus story chain
The coronavirus news made investors take a critical look at the assets after the rally of previous months. Crude Oil showed weakness not only because of the virus. Over the last week, Brent price declined by more than $6.5 or 10%.
It was indicative of how quickly it returned to decline at the beginning of the month after the ease of tension between Iran and the US. As is often the case in markets, strong movements are rarely caused by just one reason.
There is increased worries on China and India slowdown above on increased supply and Crude Oil stocks. They are the second and third world economies, respectively.
Lower growth forecasts in China and India are much more worrying for the global energy market than, say, the slowing down of the US and Europe.
This logic makes us think that oil quotations are still in the search mode of the bottom. We cannot rule out that it will be found at levels markedly below $50 per barrel of Brent.
The coronavirus news made investors take a critical look at the assets after the rally of previous months. Crude Oil showed weakness not only because of the virus. Over the last week, Brent price declined by more than $6.5 or 10%.
It was indicative of how quickly it returned to decline at the beginning of the month after the ease of tension between Iran and the US. As is often the case in markets, strong movements are rarely caused by just one reason.
There is increased worries on China and India slowdown above on increased supply and Crude Oil stocks. They are the second and third world economies, respectively.
Lower growth forecasts in China and India are much more worrying for the global energy market than, say, the slowing down of the US and Europe.
This logic makes us think that oil quotations are still in the search mode of the bottom. We cannot rule out that it will be found at levels markedly below $50 per barrel of Brent.
Bitcoin: not gold yet, but glitters now
Bitcoin added more than 3% on Monday morning and changes hands for $8,600.
Given that Bitcoin is often referred to as protective assets like gold in the crypto community, a shift from war threats to fears of an epidemic may play a role. Still, more often than not, positive or negative dynamics are now linked to more obvious reasons, such as increased trading volumes in futures and the triggering of trading bot orders.
Bitcoin added more than 3% on Monday morning and changes hands for $8,600.
Given that Bitcoin is often referred to as protective assets like gold in the crypto community, a shift from war threats to fears of an epidemic may play a role. Still, more often than not, positive or negative dynamics are now linked to more obvious reasons, such as increased trading volumes in futures and the triggering of trading bot orders.
Bitcoin spiked above $9,100 on Tuesday morning, where it bumped into a sale-off again. It threw the benchmark cryptocurrency to the round level $9,000. Note that the growth was accompanied by an increase in trading volumes, which should become another factor supporting the growth.
The most common explanation for the growth is due to the Chinese virus, the decline of yuan against the dollar and the strengthening of gold, followed by Bitcoin.
However, there are explanations related to technical indicators. We are talking about a set of exponential moving averages Guppy and a tool for identifying historically high or low prices of the mined bitcoins Puell Multiple. Last time we saw similar their signals just before the rally to $14K.
The most common explanation for the growth is due to the Chinese virus, the decline of yuan against the dollar and the strengthening of gold, followed by Bitcoin.
However, there are explanations related to technical indicators. We are talking about a set of exponential moving averages Guppy and a tool for identifying historically high or low prices of the mined bitcoins Puell Multiple. Last time we saw similar their signals just before the rally to $14K.
Asian markets continued their decline on Tuesday due to spreading fears of a virus impact on the economy. Meantime, European and American indices were stabilizing after the drop yesterday. The foreign exchange market also shows a mixed reaction: currencies that are far from Asia feel better, also adding to USD. Gold retreated below the $ 1580 level.
Some markets stabilised on hopes of help from governments and central banks
While the news of coronavirus spreading remains quite alarming, on Tuesday markets are either showing some risk demand or just moving in flat, avoiding further decline. It seems that participants are deciding to cautiously “buy the dip”.
Traders should understand that the markets may turn down rather quickly if the intensity of negative news increases again. In the meantime, market participants seem to be reacting to the fact that the number of deaths has stopped growing exponentially, and there is still no news of deaths outside of China.
Besides, fears of the economic impact of the virus are somewhat held back by the fact that many authorities are openly announcing these risks. This is a signal to market players that central banks or governments are ready to provide economic incentives to avoid economic shocks.
https://fxpro.news/daily-forex-outlook/some-markets-stabilised-on-hopes-of-help-from-governments-and-central-banks-2020
While the news of coronavirus spreading remains quite alarming, on Tuesday markets are either showing some risk demand or just moving in flat, avoiding further decline. It seems that participants are deciding to cautiously “buy the dip”.
Traders should understand that the markets may turn down rather quickly if the intensity of negative news increases again. In the meantime, market participants seem to be reacting to the fact that the number of deaths has stopped growing exponentially, and there is still no news of deaths outside of China.
Besides, fears of the economic impact of the virus are somewhat held back by the fact that many authorities are openly announcing these risks. This is a signal to market players that central banks or governments are ready to provide economic incentives to avoid economic shocks.
https://fxpro.news/daily-forex-outlook/some-markets-stabilised-on-hopes-of-help-from-governments-and-central-banks-2020
Death toll from a virus in China reached 106, but some markets (Nikkei225, DJI, Euro50) paused their decline. 👉🏻How do you think, is the worst for markets over?
Final Results
54%
Yes
46%
No
After the battle for threshold $9K, the Bitcoin bulls still took the initiative, and on Wednesday morning the benchmark cryptocurrency traded around $9,400, adding 3.5% over the last 24 hours. This price dynamics takes place along with a stable high trading volumes. The bears have retreated, giving the $9,000 mark to the bulls. The Bitcoin dominance index has stopped falling and has been around 66% for some time.
Altcoins are attracting higher demand compared to recent months, but Bitcoin is still in the spotlight of investors. The growth may be driven by the same factors, including the pandemic and institutional investors' interest in the first cryptocurrency. The Bitcoin Greed and Fear Index moved to "greed" territory at 57. Analysts agree that optimism should be moderate, as Bitcoin will have to prove that it can hold on above $9K before it gets a new impetus from the demand.
Altcoins are attracting higher demand compared to recent months, but Bitcoin is still in the spotlight of investors. The growth may be driven by the same factors, including the pandemic and institutional investors' interest in the first cryptocurrency. The Bitcoin Greed and Fear Index moved to "greed" territory at 57. Analysts agree that optimism should be moderate, as Bitcoin will have to prove that it can hold on above $9K before it gets a new impetus from the demand.