We start this Week's edition of Saturday Sit Down, on the forex market, with GBP/USD. Looking at the chart, we can see that it broke out its local high on 18 August 2020 and moved all the way to 1.32671. However, most of these gains were given back the next day upon release of the Federal Open Market Committee (FOMC) 's August meeting. The FOMC is composed of the most influential members of the United States' central banking system, so suffice to say their meetings are highly impactful on the United States were abroad. The highlight of this meeting was that a 'highly accommodative stance of monetary policy likely needed for some time'. However, this is not surprising, considering the Federal Reserve officials concluded that economic uncertainty has only increased since their last meeting in mid-June. With increased uncertainty, it's clear the international economy is responding by de-risking, sending stocks, and forex pairs dumping, inversely causing the USD and underlying DXY index to pump. The GBPUSD pair is obviously no exception, especially since the bulk of its bullish momentum has been driven by USD weakness.
Moving onto EURUSD, we can see its action has been much the same. The pair broke out its local top and moved all the way to 1.19656. Just like GBPUSD, the Euro was sent tumbling after the release of the FOMC minutes. As FXStreet noted, "The greenback is collecting a possible safe haven bid here as the correlation of precious metals and the US stock market sees both assets classes tumbling. Spot gold is down 3%, and the SPX loses 0.17%." Given the strong correlation between major forex pairs such as EURUSD and the aforementioned markets, it stands to reason that the Euro would be rejected at this level. What's interesting is that both EURUSD and GBPUSD topped out right at or before significant resistances (1.2 and 1.3, respectively). Even without the release of these FOMC minutes, this seems to be a logical place for consolidation before the next significant move. We believe both of these markets will continue to consolidate, given the lack of catalysts on the horizon, and both will continue to be driven by DXY.
The exception in this conversation is the USDJPY. Unlike the previous two pairs, USD strength has sent the pair soaring to local highs at 106. USDJPY is up nearly 1% on the 19 August 2020 trading session alone. Traditionally speaking, JPY is a safe-haven pair, compared often to the Swiss Franc. With sentiment moving away from risk at the moment, one would expect JPY to pump against USD. In a recent report, Morgan Stanley tried to shed some light on this situation.
" While the yen and the Swiss franc remain havens, their dynamics are "shifting," according to the Morgan Stanley analysts. Morgan Stanley analysts went further, saying, "Recent correlation and flows analysis suggests that USD/JPY could even rally" in times of investor fears, "counter to market perception. We find that Japanese investors have actually bought foreign assets in times of uncertainty and didn't repatriate," they said.
Closing out this Week's Saturday sitdown, we head straight into Bitcoin and the BTC/USD pair as we see Bitcoin continuously flirting with the $12,000 range, but bears continue to cast doubt on Bitcoin's ability to range and consolidate here above. Overall sentiment levels for the cryptomarket are ranging between neutral and bullish, and if we see bitcoin break down under $10,000 again, it could signal a very bearish sell-off.
Following Bitcoin's lead, we see ETH/USD also attempting to break out and range above significant technical and psychological levels ($400, $420, and $500). Before going, we covered in the previous edition, some macro-bear-trends surrounding ETH/USD & BTC/USD. These two trends revolved around Ethreuem's Gas Fee and Large Bitcoin Wallets Transfers, but regardless investors seem to continue to remain bullish despite the recent price drop and we're watching it carefully, and over the coming weeks, we'll be expanding Overbit.com's coverage of the CryptoMarket - stay tuned.
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