Weekly Outlook: 6/28/21 - 7/2/21

Are you ready for another week of trading? 

Let’s take a quick look at what happened last week before we start preparing for this new week.

What happened last week?

CRYPTO CRASH 2.0.

Last week was a very busy week in the cryptocurrency market which saw a new crash. Cryptos suffered a new devastating bearish wave with Dogecoin dropping from 0.28 to 0.165 (-41%) in less than a day. Bitcoin went to retest its annual low by going from $41,000 to $28,600 in the space of a week (-30%). Panic was back in the markets and most cryptos are struggling to right the ship since this new fall, with the only exception being Dogecoin which managed to make a bullish rebound. How do we explain everything that has happened? Were there any political, economic or technological announcements that impacted the prices of these cryptocurrencies? 

The answer is yes. First, it is important to know that this new crash is once again linked to China’s announcements banning its mining. The effects are being felt beyond just the price of BTC, which is under severe pressure. The price of BTC has fallen directly, as has the equipment involved in mining Bitcoin. Bitmain, one of the world’s leading manufacturers, has been forced to make a drastic decision. The company, reports Bloomberg, is suspending the sale of Bitcoin mining machines. A direct consequence of the Chinese policy. Bitmain had already announced a day earlier a pause in the marketing of new equipment. The reason? A sharp drop in sales prices by 75%. And the reasons for such a plunge are actually quite simple. China’s ban on bitcoin and mining is the last straw for many miners. The entire shadow economy is suffering from this drop, but is this the beginning of the bear market?

As we mentioned earlier, the only major crypto to make a decent rebound is Dogecoin. The creators of Doge have proposed an upgrade to the blockchain. This would drastically reduce the fees applied to transactions. These are currently 1 DOGE. The developers propose to reduce them to 0.1 DOGE. This would promote the use of Dogecoin as a viable payment method that could compete with other more traditional payment solutions. Elon Musk approves of the update, calling it a “significant improvement” and again publicly supporting Doge. With all this good news, will Doge soon be back on top?

On the Forex side, we also saw some nice correctional moves following the bearish moves in the USD and JPY that we talked about in last week’s outlook. The corrections came and went, and it was quite a complex market for traders to navigate the week. Patience has been the name of the game as we head into the last few days of June trading where volatility could be the order of the day! 

Looking ahead to next week: what moves should we be watching for?

USDJPY: A return to the bottom of the bullish channel ahead? 

USDJPY has not tested the bottom of its bullish channel for a very long time. After a false breakout from the top of this channel, USDJPY could well fall and retrace some of the previous bullish moves.

EURCAD: The end of the bullish move? 

The odds may well be in favor of a bearish move for EURCAD, after the breakout from the previous bullish channel in which the price was contained for the past 2 months. EURCAD has made a retest break of this channel, and could continue its fall until the next technical support. 

EURAUD: Bearish confluence? 

EURAUD could also fall next week, after a fakeout of the bottom of the uptrend channel followed by a breakout of the uptrend channel (a breakout that could start a reversal). The fakeout has trapped buyers and sellers, and the price is now free to make its real move. The uptrend was showing real signs of running out of steam with the failure to create a new high. The price could then fall to the next technical support and correct this upward movement.

Please note that these analyses are based on price action elements only and are in no way trading or investment advice.

Fundamentals to watch for this new trading week:

The big news of the week will be published on Thursday and Friday, the first two days of July. Between the news and the volatility at the beginning of the month, there may be plenty of trading opportunities.

Here is the news to watch for this week: 

Thursday, July 1st: 

ALL – OPEC Meetings: These meetings bring together representatives from the 13 OPEC members and 11 other oil rich countries. They discuss a range of issues concerning the energy markets and, most importantly, agree on how much oil they will produce. If there is a surprising announcement regarding oil production in the near future, the markets could have a reaction (especially the currencies of the most oil dependent countries like Canada). 

USD – ISM Manufacturing PMI: a leading indicator of economic health that is not expected to have a huge impact on the market this time around, as the USD may well wait for the NFP to make its real moves.

GBP – BOE Governor Bailey Speaks: As the head of the central bank, which controls short-term interest rates, he has more influence on the value of the nation’s currency than anyone else. His decisions are closely watched, and in the event of an unexpected decision the markets are capable of quickly catching fire. 

Friday, July 2nd:

USD – NFP (Average Hourly Earnings + Non-Farm Employment Change + Unemployment Rate). This first Friday of the month is synonymous with NFP day for the USD pairs. The major indicators of the country’s economic health are released, and investors react massively to the outgoing numbers. If they are better than expected and the economic health of the US is very good, then the market will gain optimism and the USD will be strong. Conversely, if the numbers come out worse than expected, then pessimism takes over the market, and the USD is weak, which can send the value of other instruments like gold soaring.

Note: Recent US employment figures were again disappointing and worse than expected. 

Quote of the week – Psychological Preparation

“With a fixed mindset, you believe you are who you are and you cannot change. This creates problems when you’re challenged because anything that appears to be more than you can handle is bound to make you feel hopeless and overwhelmed.”

-Travis Bradberry

To move forward, you must accept that you don’t know everything and that you will never know everything. Life is a continuous learning process, and trading is proof of that. Every day, the market provides challenges for traders who must constantly adapt and improve to become/stay profitable. This unique trading environment, a probabilistic environment where nothing is certain in the short term, will lead you to change by maximizing your strengths and minimizing your weaknesses. Successful trading requires a radical change in your outlook on many issues. These points are not the same for every trader because every human being is different, and this is one of the reasons why every trader has to find his own plan that fits his own personality. Adjustments are made daily, and you will continue to evolve day by day. Stay determined, believe in yourself, and trust the process.  

Have a great trading week everyone!