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Currency Wars

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It’s been a while since we’ve used the term “currency wars” to describe the foreign exchange market but over the past 48 hours, this issue has once again been thrust into the limelight of global politics.

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For those of you who are new or have “just come for the cryptos” this is important, so let’s recap.

On and off for the past few decades, we’ve seen many different attempts from world leaders to influence the currency markets. For the most part, it’s better for a country to have a weaker currency because then more countries will be attracted to buy their products.

If a washing machine made in Japan costs ¥25,000, it will be easier for someone from Germany to buy it when the yen is cheap against the Euro.

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It seems Steven Mnuchin’s comments about a weaker Dollar have sparked massive controversy. Especially since the Dollar did plunge in response. Let’s take a look at the charts and some of the responses below.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

Dollar Blowback

Japanese Washing Machines

Unconnected Crypto

Please note: All data, figures & graphs are valid as of January 26th. All trading carries risk. Only risk capital you’re prepared to lose.

Traditional Markets

The weirdest response by far was from Donald Trump who said that he read Mnuchin’s exact statement and the market had simply misinterpreted what he was trying to say.

This is a complete 180 degree turnaround from the US President and his treasury secretary. At the beginning of the year, Trump was trying to weaken the buck while Mnuchin was talking it up. Now they’ve gone and done a complete role reversal and at this point, it’s hard to tell who’s the good cop, or if there even is one.

On point, as usual, was the Governor of the European Central Bank Mario Draghi who said in much more elegant words that the United States was now involved in manipulation of their own currency. It seems the US government is taking quite a hypocritical stance. The Trump administration often labels other countries as currency manipulators.

Here we can see the US Dollar whipsawing at the time of the statements from Draghi (blue) and Trump (purple).

As the Dollar continues to weaken, we can see the commodities gaining. All commodities traded on eToro are up over the last few days on the sliding buck.

One of the most fun pairs to trade now is the USDJPY. As we mentioned a few weeks ago, the pair has been showing a rather stable trading range over the last year from about 108 to about 114.50.

The cool thing about the above chart is that the fundamentals match up nicely. Even though the Bank of Japan might be planning to ease their monetary policy, they really can’t afford for this graph to go too much lower. Because if it does, the Yen could get too strong and they’ll start to have trouble selling washing machines.

Crypto Drop

When I started writing today, the crypto market was showing a bit of a drop across all the top coins. By now it looks like the drop is getting a bit more significant…

It’s important to note that the futures contracts from the CME group will close today. The volumes that have been traded there are still rather small but there does seem to be concern among cryptotraders that Wall Street may be trying to manipulate the price.

In my opinion, it is still too early for Wall Street to try and take any such action using the Bitcoin Futures. So far they have rightfully shown extreme caution in regards to this asset as they still don’t fully understand it. That’s not to say that they won’t try to pull a fast one later on, but I think the first few settlements should go through smoothly.

At this point, cryptotraders have nothing to fear but fear itself. The currency wars happening now on the global stage shouldn’t have any effect on crypto market.

Wishing you an excellent weekend.

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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2 Comments

2 Comments

  1. amg893

    January 26, 2018 at 9:36 pm

    Thanks Mati – great article. Just got a few questions. Do you know when the all the comtracts for CME expire? Also do you think the crash on the 17th has anything to do with the CBOE contracts? Thanks mate

  2. Mati Greenspan

    January 29, 2018 at 11:20 am

    Hi AMG. The CME contracts expired on Friday the 26th. If there is any correlation it would probably be more psychological than anything else. Wall Street is taking a very cautious approach to the new bitcoin related assets and volumes are still incredibly light. So I wouldn’t expect them to be moving the markets much at this stage.

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Analysis

Crypto Update: Bitcoin Tests $10,000 amid Correction

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The altcoin-triggered correction continued in the segment overnight amid the renewed sell-off in global stocks, with a slight bounce in Asian trading and a subsequent dip after the European open. The major coins are all down by more than 5% since yesterday, but for now, the momentum of the move is not worrying, and most importantly the leadership of the rally is holding up relatively well.

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Bitcoin bounced off the key $10,000 level, the $200 support zone held in Litecoin, Monero is still in its consolidation pattern above $280, and only Dash showed deterioration since yesterday, but the long-term picture remains encouraging even in Dash’s case.

LTC/USD, 4-Hour Chart Analysis

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The above-mentioned levels in the technically strongest coins are not even the last line of defense for bulls, as the preceding strong rally left several key levels behind which could serve as the basis of the next leg higher.

Also, we expect the currently negatively diverging coins, led by Ethereum and Ripple, to start showing strength as the short-term momentum reaches oversold territory, and good entry points might be close both for traders and long-term investors.

BTC/USD, 4-Hour Chart Analysis

BTC touched the $10,000 support level, but for now, the technically more important $9000-$9200 zone is not in danger, and the short-term momentum indicators are already neutral thanks to the correction.

That said, more downside is likely in the coming days, but investors and traders should be looking for reversals to enter new positions, as we expect the uptrend to continue, with targets ahead at $11,300, $13,000 and $14,250.

Ethereum Provides a Glimmer of Hope

ETH/USD, 4-Hour Chart Analysis

Although bears are still in control regarding the short-term picture in the second largest coin, this morning ETH didn’t hit a significant new swing low, and that could be the first sign of relative strength, with the $845 support not far above the current price level, and the MACD indicator is already near oversold territory.

Despite the slightly positive sign, short-term traders should remain defensive concerning the weaker coins, while long-term investors should still accumulate the currencies on the dips.

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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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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