It’s a Shake Up
For the first time in a long while, things are getting interesting across all the financial markets. From stocks to bonds, to currencies and commodities and even crypto.
Even though the volatility levels are far from historic, this type of increased movement across assets can easily lead to something greater. So it pays to keep abreast of the weather and if a storm does emerge be ready to take swift action in your portfolio.
eToro, Senior Market Analyst
Dollar Strength on Weaker Bonds
Two Major Speeches Today
Crypto Premiums are Flattening
Please note: All data, figures & graphs below are valid as of January 30th. All trading carries risk. Only risk capital you’re prepared to lose.
The big talk is about bonds. I know this is not the most comfortable subject for most of us but when it’s causing a sell-off in the stock markets, this is the time to pay attention.
Most specifically, investors are watching the Yield on the 10 Year US treasury bonds, which reached a multi-year high yesterday.
Investors have right to be worried because bond yields can be compared to tectonic plates under the Earth’s surface. When they move slowly and gradually it’s quite normal, but when they make any sudden adjustments they can cause Earthquakes and Tidal Waves.
Concerns over the lack of demand for Apple’s latest iPhone sent shares of the larges company in the world notably lower, which also weighed on the major indexes.
Between the rising bond yields, falling Apple, and the sell-off in the China 50 yesterday, stocks on Wall Street ended their poorest performance so far this year. Of course, they’ve been rising at a record-setting pace so if this little sell-off does end up reversing it will only look like a minor blip on the charts in a few weeks time.
We also need to keep a close eye on the US Dollar, which has been gaining a lot of strength so far this week. Here we can see the slide in the Dollar index since Trump’s inauguration. The fall below 90 points was a sure sign of weakness but nothing ever moves in a single direction for too long.
No doubt those on the buy side have been sitting out for a while and are now ready to get in at the reduced price. Also, take a look at the 200-day moving average (yellow line). If we do see a rally in the Dollar there’s certainly plenty of room to grow.
As I’m writing, I can see the European Markets have just opened with a sizable gap down. Not a very positive sign there.
Two Speeches Today
First up is Mark Carney from the Bank of England who will be grilled today in the House of Lords at 3:30 PM London Time.
The Pound seems to be going back and forth between reacting to updates about Brexit and reacting to updates from the economic side. Over the last few days, we’ve seen Theresa May’s government get even weaker as her cabinet ministers still don’t seem to be on the same page as to what type of Brexit they really want.
Today Carney’s questioning will very likely pivot back to the matter of inflation. Lawmakers will test his confidence to gauge whether or not he really believes in the aggressive forecasts the BoE has been putting out lately.
The Pound Sterling has been showing incredible signs of strength lately and has been one of the strongest performing currencies so far this year. Of course, as we mentioned above, nothing ever moves in a single direction for too long, especially when volatility is rising.
Here’s the chart of the GBPUSD. As we can see a retracement could be due on the technical side and a move back to support could ultimately be a sign of further strength.
Also today, we’ll hear the State of the Union speech from Donald Trump. Despite the high profile nature of this speech, I would be very surprised if it ends up having any real impact on the markets. Still, Donald is an entertaining speaker so we’ll definitely be watching.
Though the crypto-markets have been relatively calm, they’re still a lot more volatile than any of the other assets mentioned above. For example, the sell-off of 1.5% in the Nikkei 225 this morning is kind of a big deal.
Meanwhile, Ripple has fallen 3.8% yet somehow still seems tame when compared to the action over the last few weeks.
As we’ve discussed in these updates several times, this calm is a blessing for the markets as it allows brokers, exchanges, and even blockchains to scale up and prepare for any further surges that we might see.
In the meantime, I wanted to give an update on the premiums in East Asia. As we’ve noted before, cryptotraders in South Korea and Japan are used to paying 25% to 30% more per coin than the rest of the world. imho, this was one of the major contributing factors of the recent pullback.
I’m pleased to report that the premiums have been drastically reduced. At the time of this writing, Japan is overpaying by just 6% and South Korea’s premium is down to 7%.
The volumes also seem to have stabilized. Though we’re not seeing any surges and certainly no signs of FOMO, there also isn’t any FUD. At the time of this writing, Japan is up at 42% volumes, though it does seem that Korea is still lagging behind.
Something that does seem to be concerning the market though is the increase of Tether volumes. Virtually in-existant two months ago, USDT now takes more than 10% of bitcoin volumes.
One thing I can tell you with a fair amount of certainty, this is going to be a very interesting week for all markets.
As always, let me know if you have any questions, comments, or feedback and please continue to share your thoughts and opinions. It’s extremely helpful.
Wishing you an amazing day ahead.
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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.
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