Daily Analysis: Yen Surges as Stocks Bounce again before Crucial Inflation Report

23:27 13/02/2018

Tuesday Market Recap

Asset Current Value Daily Change
S&P 500 2661 0.24%
DAX 12,197 -0.70%
WTI Crude Oil 59.17 -0.22%
GOLD 1331.00 0.39%
Bitcoin 8600 -2.93%
EUR/USD 1.2357 -0.53%

Today’s session started out on a negative note in global markets, as the jump in the Japanese Yen, the traditional safe-haven currency, spooked equity investors who are still on the edge because of last week’s volatility-driven crash. Stocks recovered yet again in the second half of the session, with US stocks leading the late rally, pushed higher by the broad weakness in the Dollar.

S&P 500 Futures, 4-Hour Chart Analysis

Despite the modest gains, from a technical perspective, US, and even more so international markets are still in a negative short-term setup, and odds favor the continuation of the correction. Trading volumes were very low compared to last week’s panicky levels, as the major players are waiting for tomorrow’s widely watched, and now feared Consumer Price Index and Retail Sales reports.

DAX Futures, 4-Hour Chart Analysis

As the swift rise in rates across the yield curve was the main reasoning behind the sell-off that triggered the collapse of the short-volatility trade, investors are concerned that another release that reinforces the trend could cause another wave of selling.

Markets gained confidence from the words of Jerome Powell, the new Fed Chair, who promised gradual monetary tightening while also vowing to keep an eye on the stability of financial markets. Given the near-record levels of stock valuations, and the still crazy low interest rates, we just want to say good luck with that Mr. Powell.

USD/JPY, 4-Hour Chart Analysis

Forex markets were dominated by the weak-Dollar theme, with especially the break-down of the USD/JPY pair making waves across the globe. The Yen is now at levels not seen since September against the Dollar, and only slightly shy of an 18-month high, as Asian safe haven flows increased thanks to the weakness in Japan and China. The Euro is almost trading at pre-crash levels, even as the risk-on and commodity-related currencies, like Aussie the Canadian Dollar, and the Pound continue to struggle.

Crude oil remained under strong selling pressure, while copper registered strong rally in the quiet environment, as commodities remained mixed despite the rebound in stocks. Precious metals are gaining strength, thanks to the weakness in the Dollar, and as gold is working its way through its correction, another round of selling in stocks could propel it to new rally highs soon.

Gold 4-Hour Chart Analysis

Cryptocurrencies

The crypto market a slightly bearish and very choppy day, with an early sell-off that was followed by stabilization, as the broad consolidation continued. Ethereum Classic followed through on its recent relative strength, and scored double-digit gains yet again, while Stellar also stood out with a late-day rally attempt that could lead to a break-out above the $0.43 level.

Stellar, 4-Hour Chart Analysis

The larger coins all remained under yesterday’s levels and the strong resistance zones ahead, with Bitcoin hovering around the $8600 level for most of the session, amid very low trading activity. As the volatility compression continued in the major altcoins as well, we might be in for a showdown between bears and bulls in the coming days, as the consolidation pattern will likely resolve in one way or another. While short-term, bears might still have their day in the sun; we continue to expect a durable rally in the segment with no new lows in this cycle.

Featured image from Shutterstock


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