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China has Trump by the Bonds

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It’s earnings season on Wall Street and everyone is focused on the big banks.

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Wells Fargo, Blackrock, and JP Morgan Chase will all report their fourth-quarter earnings today and the results will not be good.

Trading volumes have been incredibly low in the last half of 2017, both due to reduced fears about the economy and because many high-frequency traders have already moved to the crypto market.

It doesn’t matter though. At this point, the banks could plausibly report the worst losses in the history of capitalism and still see their stock go up.

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Investors and analysts will be listening closely, and physically salivating, to the banker’s projections. Tax cuts are coming and investors want to know how much money the banks think they can make from it.

Tell us a sweet fairy tale of wonder and enchantment so we can sleep better at night and forget all about these historically high stock valuations.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

German Breakthrough (Euro)

China has Trump by the Bonds

Ripple’s Deal with MoneyGram

Please note: All data, figures & graphs are valid as of January 12th. All trading carries risk. Only risk capital you’re prepared to lose.

It’s a Breakthrough

Angela Merkel just reached a groundbreaking deal with her rivals the SPD party to form a grand coalition in the German Government. Everybody is excited and the Euro is flying. BUT… we’re not out of the woods just yet.

The SPD party will still need to vote on this and many of her members might prefer to see new elections rather than join Merkel’s government. So we’ll see how this plays out.

Enough of that though. Let’s take a look at the Euro-dollar, which is now trading at it’s highest level since 2014…

The DAX on the other hand seems less than excited. It’s been near it’s highest ever levels since November so this little tidbit was not enough to push it through the roof.

Bonds in Geopolitics

As we’ve been discussing earlier this week, the bond markets have been seeing some mild selling action. In a normal market, this wouldn’t be worrying but because the word ‘sell’ has become so rare on Wall Street lately it is making headlines.

What made bigger headlines though was that China was considering to stop buying bonds from the United States. These reports were later refuted by Chinse authorities and have since been tossed in the category labeled ‘fake news’.

It is interesting though. Bonds are how countries lend money to one another so the bond market can be seen through the lens of foreign debt. China is one of the US’s largest creditors at the moment. So if they stop buying, or worse, start to offload some of their bonds the US could be in a heap of trouble.

What’s suspicious here is the timing. Donald Trump has big plans and they won’t be cheap. After decreasing corporate taxes his income has now been stunted. So increased expenses and reduced income means that you need to borrow.

Trump is also ramping up his rhetoric against China. It was an essential part of his political victory in the elections and he’s itching to call them out on several issues already. So this bit of ‘fake news’ does actually come as a reminder or even a warning. Mess with the dragon and you will get burnt.

What’s Ripple’s Deal?

Ripple rejoiced yesterday as those who hodled through the Korean FUD were rewarded with a breakthrough in global payments relations.

Even though it’s only a pilot, just the fact that a major payment system like MoneyGram will be testing Ripple’s network is incredibly big news and even gives investors a taste for more news to come.

The great thing for hodlers is that the pilot will reportedly be using Ripple’s XRP tokens. This has been a soft spot for Ripple skeptics who say that Ripple’s success does not necessarily mean success for XRP since they could potentially form payment networks without these specific tokens.

The price shot up more than 20% within the first hour of the news.

The news comes at an excellent time as far as technical analysis is concerned and could potentially provide a floor for the price movement.

Here, take a look at the rally, and pullback. The level of $1.5 per token was a significant breakout level on the way up and now seems like a valid support level for the massive pullback.

Of course, cryptocurrencies are incredibly risk so it always pays to diversify and use proper money management as I’m sure many of our new clients have learned recently.

Let me know if you have any questions, comments or feedback. Have an amazing weekend ahead!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 32 rated postsSenior Market Analyst at Etoro.com.




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3 Comments

  1. ronaldo18

    January 13, 2018 at 7:28 am

    clear analyses, thx.

  2. snow4me

    January 15, 2018 at 2:50 am

    Adoption is kill in the crypto market because it leads to credibility. I wondered why it took so long for Money Gram to do this… how much $$$ flows to Mexico alone in a weeks time?

  3. snow4me

    January 15, 2018 at 3:14 am

    MGI is moneygrams ticker. Gonna stick my big toe in that water tomorrow morning.

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Altcoins

Cryptocurrency Market Enters Corrective Phase as Majors Retreat from Recent Highs

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The cryptocurrency market declined across the board Thursday, as bitcoin, Ethereum and the rest of the major altcoins retreated from recent highs.

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Crypto Market Backpedals

After peaking above $518 billion on Saturday, the market capitalization for all cryptocurrencies has fallen to $469 billion, based on latest data from CoinMarketCap. That represents a decline of more than 9%. Trade volume across all digital assets approached $24 billion over the past 24 hours.

The latest drop in total coin value seems to have coincided with broader uptake in bitcoin, the world’s most popular cryptocurrency both in terms of market cap and trade volume. Bitcoin now accounts for more than 39% of the total market,  a near seven-point increase over last month’s lows.

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Bitcoin made a strong move above $11,000 on Wednesday, eventually hitting a three-week high of $11,329. As we wrote Wednesday, bitcoin in particular seems to be benefiting from a myriad of market forces ranging from favorable regulations to improved investor sentiment.

At the time of writing, the cryptocurrency was worth $10,901.

Other major cryptos were also down at the start of Thursday trading, with Ethereum slipping 3.6% to $864.83. Ripple’s XRP token declined 2.7% to $1.04, while bitcoin cash fell 4.3% to $1,336.50.

Even Litecoin, a currency that has witnessed a 50% surge this week, fell more than 3% to $219.43.

Paul Singer Calls Cryptocurrencies a Huge Scam

Elliot Management, a multi-billion-dollar hedge fund headed by Paul Singer, recently came out with a report calling cryptocurrencies “one of the most brilliant scams in history.” It added that “FOMO (fear of missing out) has solidly trumped WTHIT (what the hell is this??).”

In the cryptocurrency world, talk is incredibly cheap, and arguments from authority don’t hold much credence. Although Elliott dedicated three pages to cryptocurrencies, there doesn’t seem to be a strong argument against cryptocurrencies. (Calling cryptos “nothing except the marketing power of inventors, financiers and others who love the idea of buying a black box…” is not an argument.)

That being said, the fund’s comments may have resonated with speculators who are already on the fence about re-entering the market. After all, the daily news headlines play a huge role in shaping investor sentiment, regardless of whether those headlines are true. This has been demonstrated time and time again by regulatory developments in nations such as South Korea and India.

As Singer’s comments clearly show, there’s still plenty of FUD (fear, uncertainty and doubt) driving the cryptocurrency market. This is unlikely to change soon even as bitcoin and the technology that underlies it enjoys greater mainstream adoption.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 161 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Technical Analysis: Altcoins Lead Markets Lower as Bitcoin Still Looks Strong

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All of the largest digital currencies are in the red today, following heavy overnight selling, a bounce in European trading, and another round of losses around the US market open. Ethereum is still in the worst short-term shape among the giants of the segment, and that’s in line with the slightly delayed cycle of the coin that we have been monitoring.

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The technical divergence between the leaders of the market and the laggards yesterday is still dominant with the 6 coins that spearhead the rally, BTC, LTC, NEO, Dash, Monero, and ETC, are still in much more bullish setups than the rest of the majors.

Bitcoin is also well below its recent rally highs after breaking down under the key $11,300 level, and a test of the $10,000 support now looks likely, while a move to the $9000-$9200 zone would still keep the rising trend intact.


BTC/USD, 4-Hour Chart Analysis

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The overbought short-term momentum readings are being cleared, and despite the slightly bearish volume patterns, we expect the coin to continue its new bullish cycle after the correction, with targets above $11,300 ahead at $13,000 and $14,250.

ETH/USD, 4-Hour Chart Analysis

Ethereum is now trading below the key $845 level as the correction continues, as we expected, and the coin remains stuck in the dominant declining trend, for now. We still expect a breakout in the coming weeks, but a test of the $740 level is possible before another rally. Further support below that is at $625 and $575 and we don’t expect a new low in the coin, so investors could still accumulate the coin near the main levels.

(more…)

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 107 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Analysis

Crypto Update: Monero Tests Rally High as Majors Pull Back

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The segment had a bearish Asian session, as a wave of selling hit the major coins following the US close that carried the market more than 5% lower. The still present short-term overbought readings that we noted yesterday likely played a part in the move, as the strong post-crash rally made the market slightly stretched.

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As the coins followed stocks lower during the volatility-driven crash two weeks ago, yesterday’s late-day decline on Wall Street might also have driven the dip in the segment. Amid the decline, several coins are showing relative strength, most notably Monero and Dash, which already have been in encouraging setups.

BTC/USD, 4-Hour Chart Analysis

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Bitcoin is hovering around the $11,000 level today in European trading, with the $11,300 support/resistance level being in focus. The short-term momentum indicators still not reached neutral territory and that might mean that further consolidation is ahead for the most valuable currency. Support below is found at $10,000 and between $9000 and $9200, while resistance is still ahead at $13,000.

Monero remains one of the strongest candidates for another leg higher in the coming days, as the coin quickly recovered from the overnight sell-off and it is still trading back in the short-term consolidation pattern, below the $335 resistance that it tested already today. With the coin clearly being in an uptrend, a rally towards $400 is likely in the coming weeks, while support levels are at $300, $280, and $240.

XMR/USDT, 4-Hour Chart Analysis

Losses Across the Board among Altcoins

DASH/USD, 4-Hour Chart Analysis

Not surprisingly, Litecoin, NEO, and Dash continue to outperform the broader market from a technical perspective, as correlations remain muted, still pointing to an intact short-term uptrend. ETC, the early leader of the rally is also holding up above the previous consolidation zone, with the $32-$34 zone also providing support for the coin.

Ethereum, Ripple, Bitcoin Cash, Cardano, EOS, and IOTA are still the laggards among the majors, as they continue to trade in the short-term correction that started last week. That said, the price action in the segment is still consistent with a new bullish cycle, and we expect the crucial support levels to hold.

Stay tuned for our detailed technical analysis later on today.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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