In this week's edition of "Monday Madness," we jump right into the British markets and the GBP/USD pair.
After reaching five-month highs late last week, we can see GBP/USD seems to have hit a significant resistance at 1.31857. The pair has since fallen a little over 1% and currently sits near the 1.3 support. A bounce from resistance is not surprising from GBP/USD, given the current circumstances. The US Labour Report is due this week, which is obviously weighing on anyone trading this pair after last month's report defied almost all analysts' expectations. In addition, the Bank of England is facing heavy pressure to adjust interest rates after declining to do so the past several months. Traders should keep an eye on both of these catalysts this week, as either could propel GBP/USD past the 1.32 resistance or below the 1.30 support.
The next forex pair we will cover is EUR/USD. We can see this pair's price action is similar to GBP/USD, as both pairs are reacting to news coming out of the United States, including the Labour Report, as well as the Non-Farm Payroll, which was released last week. Taking a look at the chart, we can see EUR/USD topped out last week at 1.9161, just a few hundred pips away from the psychological resistance of 2.0. Regardless of any fundamentals, a pullback at such a significant resistance is to be expected, especially after a multi-month uptrend for EUR/USD. One would expect more consolidation and possibly a heavier correction before attempting to break the 2.0 resistance. Analysts at MUFG Bank seem to agree, c they "a short-term tactical trade idea to reflect the increased risk of a correction lower for the EUR/USD in the near-term. They see a target at 1.1600 and a stop loss at 1.1950."
Moving onto USD/ JPY, we can see the pair is still hovering in the familiar 105 region, a wedge-like region the price has gravitated to for almost 5 years. Upon closer inspection, however, it seems that USD/JPY has closed just outside this wedge for the first time with July's monthly candle. This is a high-time-frame observation, so it will take much longer to play out than intraday, daily, or weekly formations, However, it appears USDJPY has finally made a break outside this wedge formation, albeit to the downside. If the 106 level continues to hold as resistance, it would not be surprising to see this pair drift all the way down near the 100 level.
In conclusion, major forex markets are making swings directly related to the perception of the strength of the USD and the US economy, as investors are still looking for ways to safeguard their wealth, and in this case, by arbitraging currency and forex markets. This wealth preserving ties in directly with the macro trend of what we called last week the 'Asset Era'; in a world where monetary inflation is near all-time highs, we can see investors rush to hard assets, with one of the most interesting developments in the assets markets being cryptocurrency, which leads us right into our next section.
To kick-off, we'll jump right into BTC/USD first as we see it heading towards the pinnacle of resistance at the $11,900. If BTC/USD breaks through, we could see the next massive wave up for Bitcoin. Looking back, we had BTC break the longtime resistance above the five-figure mark of $10,000 on Monday, and now the overall mission for BTC/USD has been to recover lost ground since $12,000. Thinking that BTC/USD is in a macro bull market, it might be a bad idea to bet against BTC/USD long term, as monetary policies at central banks are still loose, concluding our newsletter this week, we'll head straight into the world's second most active digital asset market, Ethereum.
Moving into ETH/USD, we can see that price action is closely following the number one asset in the space. One difference between these assets, however, is the fact that Ethereum's moves seem to be much more pronounced than Bitcoin's, on account of the fact that Ethereum's market cap is just only a fifth of Bitcoin's. Taking a look at the chart, we can see ETH/USD is hovering right below its major resistance at $400. Though a further correction is not unlikely, we believe that the 'Asset Era' of trading will continue to propel cryptocurrencies and other hard assets much higher, which certainly will include the second most active digital asset - Ethereum.
This Week in Financial History:In August 1946, the pioneer of Computerized Trading, Ed Seykota was born. Ed's first computerized trading system was based on exponential moving averages and was built and tested on an IBM mainframe. By the early 1970s, Ed became an analyst at a major brokerage firm, where he later developed the first commercial computerized trading system for managing clients' money in the futures markets.
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