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Trump Administration Takes Hard Line as NAFTA Talks Underway

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The Trump administration took a hard line in renegotiating the North American Free Trade Agreement (NAFTA) on Wednesday, demanding major concessions aimed at restoring the U.S. trade balance with Canada and Mexico.

First Round of NAFTA Talks Begin

On Wednesday, representatives from the U.S., Canada and Mexico descended on Washington, D.C. for a three-day meeting. Negotiations began when all three countries tabled texts that one U.S. official said would form the backbone of the next agreement. American officials say it is the first time in U.S. history that their country is renegotiating a completed comprehensive agreement.

The U.S. team is led by Trade Representative Robert Lighthizer, Canada by Foreign Affairs Minister Chrystia Freeland and the Mexican side by Economy Minister Ildefonso Guajardo Villarreal.

Negotiators face a particularly ambitious timeline for reaching a deal. They want to get it done before the Mexico election next summer, although both U.S. and Mexican officials have said they would like to conclude negotiations before the end of the year. Trade veterans say such a timeline is unprecedented.

Trump Team Comes Out Swinging

It is clear from the very beginning that President Trump is not interested in “a mere tweaking” of the trilateral pact, according to Lighthizer.

“We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement,” Lighthizer said.

The Trump administration says it is looking for much tougher rules of origin, including a requirement of “substantial U.S. content” for automobiles. Lighthizer says he is prepared to use each country’s trade dependence on the U.S. as a tool for winning concessions.

The U.S. is also looking to shake-up NAFTA’s dispute settlement mechanism to allow more anti-dumping duties on its trade partners. Canada says it is willing to walk away from the table if the Americans scrap the trade dispute settlement mechanism. The “Chapter 19” provisions currently set forth under NAFTA require a bi-national panel for reaching a decision.

NAFTA’s Economic Footprint

North American trade has quadrupled since NAFTA came into force. In 2016 alone, trade between the U.S., Canada and Mexico was valued at $1.2 trillion. According to the U.S. Chamber of Commerce, North American trade has supported nearly 14 million U.S. jobs, with nearly 5 million attributed to NAFTA.

However, not all industries have benefited equally. Footwear, textiles and plastics – industries that were protected before the deal – are generally thought to be losers from the U.S. perspective. The Trump administration blames NAFTA for a direct loss of roughly 700,000 domestic manufacturing jobs.

Although NAFTA came into force in 1994, it would take an additional 12 years to eliminate all tariffs. While analysts contend that a renegotiation is sorely needed, it’ll be hard to come by without major political ramifications.

From the standpoint of investors, the NAFTA renegotiation is another source of uncertainty. Market participants can therefore expect a drawn-out debate. It’s also clear that the U.S. president is under growing pressure to follow through on his mandate. This makes NAFTA a critical piece of legislation for the White House.

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 771 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Analysis

GBP/USD Price Prediction: Cable Could be Hit Harder This Week

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  • Big fundamental data points will play a massive role in the direction of GBP this week.
  • GBP/USD downside targets are eyed at 1.2800 and then the range of 1.2750-1.2650.

It is another week where GBP takes the spotlight with a raft of key economic data points being released from the UK. This comes after an extremely volatile week where GBP/USD finished another close in the red. In an already delicate time for the UK and its domestic currency, given the Brexit palaver, this slew of key fundamental data is only going to see volatility rising.

Recap Last Week

Cable last week came under quite a large amount of selling pressure, which was initially kicked off due to weaker PMI data. Britain had produced soft construction and services PMI data, which triggered the bears to get into action. Furthermore, the Bank of England released their monetary policy decision, where they left rates unchanged; however, officials were very much dovish. They slashed their growth forecasts, citing Brexit damages. GBP managed to reverse this initial spike to the downside, after Carney essentially hinted rate rises could still come. The market read between the lines following his comment: “There is upside for UK economy if there is clarity on Brexit deal sooner”.

Critical Data Points This Week

On Monday, UK will release its GDP figures, which are expected to cool across the board. This is not too much of a surprise, given lacklustre economic data points that have been released already this year, including falling retail sales and a drop-in consumer confidence to around weakest levels in more than fives years. PMI sectors are close to recession and most recently the BOE downgraded its growth forecasts. Elsewhere, later in the week, eyes will also be on the retail sales and CPI numbers, both of which are expected to cool. Should all above-detailed data come in soft, then expect further selling pressure to continue for GBP this week.

Technical Review – GBP/USD

GBP/USD weekly chart.

The weekly chart view remains firmly bearish, following on from the last two consecutive weeks of losses. In terms of the daily, price action is currently trying to break down near-term demand. This can be observed between 1.3000 down to around 1.2915. Should the bears manage to convincingly break and close below, then eyes will be on a retest of 1.2800 to the downside. GBP/USD last traded down there on 17th January. Further downside targets would be the 1.2750-1.2650 range, where the next major area of demand can be seen. Shorts would likely be off the cards near-term if the price manages to break and close back above the psychological 1.3000 mark.

GBP/USD daily chart.

In terms of direction this week, it is very much going to be dictated by the above-listed key economic data points. The bears will likely capitalize on the described downside targets, only if the numbers disappoint market participants.

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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4.6 stars on average, based on 123 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Bitcoin

Davos: What’s Bitcoin’s Role in Trump and China’s ‘New World Order’?

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According to Investec CEO Hendrik du Toit, despite U.S, President Donald Trump and China’s President Xi Jinping not coming face to face at Davos this week, the event is still encapsulated by their simmering economic battle.

The chief of the global investment firm suggested that Davos represents a thrashing out of the coming ‘new world order’ – with the U.S. and China fighting for a seat at the head of the table.

Amid these talks some still found time to throw FUD on Bitcoin and cryptocurrency in general. But putting aside price predictions for the moment, just what is crypto’s role in this new world order? The answer probably has nothing to do with its role as a digital currency.

New World Order at Davos

Du Toit told was quoted as telling CNBC reporters on Thursday morning that:

“The big uncertainty is the U.S.-China trade negotiation which is not really about trade, it’s about a new world order.”

Henrik also made allusions to China’s recent slump in GDP growth, which just hit the thirty year low of 6.6%. As many former communist nations have discovered in the past thirty years, it’s easier to record growth when you don’t have much to begin with. Now China is up in the big leagues, and it’s not entirely clear how the country will adapt to its new surroundings. Du Toit continued:

“And if we get a dysfunctional world order having come from a space which was very, very good business over the last 20, 30 years since communism fell, then there may be some big hits along the way and there may be some big challenges.”

Keeping Score

China’s GDP growth rate is still almost three times that of the U.S, and the trade deficit between the two nations saw China record a $350 billion surplus at the end of the year in 2018. Exports to the U.S. rose 11.3% last year, compared to the measly 0.7% increase in U.S. goods shipped to China.

However, few statistics tell the whole story, and according to financial analyst Gary Shilling, the trade deficit is a clear sign of American dominance, as he recently posited:

“The thing is…we (the U.S) are the buyer, and they’re the seller – and when you’ve got plenty of goods and services, it’s the buyer who has the upper hand. And besides, where would China sell all this stuff if it wasn’t to American consumers?”

Shilling went so far as to say that Donald Trump currently has the upper hand in the trade war, and that U.S. economic dominance would continue to eclipse China – specifically due to Trump’s ‘America first’ policies.

“I think ultimately we’re going to see more imports of American goods into China; they are going to be less aggressive on exports; they’re going to steal less technology, they’re going to demand less technology for the cost of doing business in China. I think it’s going to shift in America’s favour, but the transition is rough.”

Weaponizing Bitcoin

Shilling’s take encapsulates a best-case scenario – one where the growing number of Chinese troops terraforming the South China sea, and the constant theft of U.S-patented technologies don’t cause global tensions to boil over.

But if they did boil over there’s every reason to assume that cryptocurrency, and Bitcoin in particular, would have a major role to play. However, that role may be its last on the world stage.

Estimates towards the end of 2018 placed over 80% of Bitcoin’s mining power in China. Given the Chinese government’s tendency to simply take things they like, any conflict between them and the U.S. would likely see Bitcoin weaponized, and its ‘distributed’ ledger commandeered.

A recent Forbes article suggested as much, and claimed that China’s Bitcoin’s dominance posed a real threat to American tech, finance and economy. Furthermore, many nations have already taken steps to curb that dominance:

“While U.S. regulators are wrapped up in their own turf wars, other nations are moving fast to create a welcoming regulatory environment for cryptocurrency.”

That includes the U.K and the European Union, both of which have taken steps to increase the popularity of cryptocurrency and blockchain within their respective regions. It might terrify the banksters to see blockchain spread around the Western world, however, the shadowy figures at the levers of governmental control are already attempting to leverage blockchain technology in their favour.

Hash Wars

How much would it be worth to China and the U.S. to gain control over Bitcoin’s ledger? In the previous century we saw the world’s nations sacrifice not only money and resources, but also a majority of their male adult populations for a slice of whichever pie was being baked at the time.

While many major cryptocurrencies can be commandeered for just a few thousand dollars per hour, Bitcoin would cost $261,379 per hour to control according to independent data. The Ethereum Classic blockchain can currently be bought for $4,275 per hour via cloud-mining marketplaces like Nicehash, but control of BTC wouldn’t be sought in that way.

More likely both nations would get to work on building the largest mining farms they could, made up of as yet unseen super-computers from various R&D labs hidden around the country. A digital battle for control of Bitcoin would ultimately be decided by which nation could develop their computational tech the quickest.

America needs YOUR Bitcoin!

Such a scenario would see the sharpest minds in silicon valley employed as government agents in much the same scenario as mathematicians and codebreakers during the second world war. By the end, the Bitcoin blockchain would be illegitimate and abandoned; and the lasting legacy of BTC would be as a bit-part player in the much larger engagement that was World War 3.

Looking Ahead

Not all the noises coming out of Davos this week were so ominous. The CEO of Nasdaq, Adena Friedman, recently offered the possibility that cryptocurrency could still be the global currency of the future.

Meanwhile, Circle CEO, Jeremy Allaire, suggested that if humanity is to survive the digital age, it will require the resilient and decentralized tools which crypto and blockchain provide.

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 145 rated postsGreg Thomson is a full-time crypto writer and digital nomad. He eats ICOs for breakfast and bleeds altcoins. Wherever he lays his public key is his home.




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Analysis

GBP/JPY Price Prediction: Cable Jumps Over 150 Pips With Room for Another Squeeze Higher

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  • GBP/JPY saw decent gains on Wednesday, receiving a helping hand from Brexit and BOJ fundamentals.
  • Brexit optimism helps GBP higher, while BOJ remain dovish, adding pressure to JPY.

GBP/JPY jumped to its highest levels seen since 14th December 2018. The session high print was observed at 143.56, with the pair having gained over 150 pips. In terms of the reasoning, it was heavily attributed to fundamental factors, both for Britain and Japan.

Bank of Japan Dovish Tone

In the very early hours of European trading, the Bank of Japan (BOJ) released its monetary policy decision. As anticipated, the central bank maintained much of a dovish tone to its rhetoric. Policymakers slashed their inflation forecasts, while maintaining their huge stimulus programme. Governor Haruhiko Kuroda noted strong and growing risks to the economy, including trade protectionism and faltering global demand.

The BOJ added that, “Such downside risks concerning overseas economies are likely to be heightening recently, and it also is necessary to pay close attention to their impact on firms’ and households’ sentiment in Japan,”

As such, there were no changes made to monetary policy this time round. It is likely going to be a challenge for the Bank of Japan to discuss policy normalization or even an exit strategy for the moment, given as they themselves highlight that global economic risks are rising. This tone added to the broad JPY weakness observed across the board.

Renewed Brexit Optimism

The rally seen for GBP today was sparked following the Labour Party publicly saying they will back a postponement proposal. This essentially could hold off any decision on Brexit until the end of the year, extending Article 50. Elsewhere, the European Commission commented on the news wires, noting they will do their best to avoid a hard border in Ireland.

These fundamental developments were huge drivers in the aggressive move north for GBP/JPY. The Brexit news as detailed was supportive for the pound, whereas the BOJ commentary was largely digested as a JPY negative.

Technical Review – GBPJPY

GBP/JPY 1-hour chart.

Upside momentum looks set to maintain it course. With that in mind, it is worth knowing the next major barriers for the bulls. Looking via the daily chart view, the next area of resistance is not seen until 143.95. This was the 13th December high, which would be closely watched, as it could produce a double top formation. If the bulls have enough steam behind their run higher to breakthrough, then eyes will be on 145.50.

GBP/JPY daily chart.

In terms of the 60-minute chart view, price action is supported by an ascending hourly trend line. This has been running since the early hours of trading on 22nd January. A failure of this holding could see a drop back down to 142.20, hourly support. Further south, if selling pressure picks up pace, then a demand zone can be seen down at 140.80-50 range.

To conclude, the bias remains bullish near-term for a decent run up a the 13th December high area, 143.95. Longs may be off the cards if the hourly ascending trend line is breached, but this remains intact at the time of writing.

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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4.6 stars on average, based on 123 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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