Mon, Jan 27, 2020 @ 04:18 GMT

Chinese stocks & yuan tumble as two cities locked up on coronavirus outbreak

    Chinese stocks tumbled sharply today, with Shanghai SSE closed down -2.75% to 2976.53. Worries over the new coronavirus intensified today as two major cities were shut down. Wuhan, a city with 11m population, is believed to be the source of the outbreak. All urban transport were shut down at 0200GMT earlier today. Hours later, a neighboring city Huanggang, with 6m population, was also locked down. Cases are already reported outside of China, including Thailand, Japan, South Korea, Taiwan, Hong Kong and the US. But WHO refrained from declaring a global emergency yet, pending the decision for today.

    With today’s sharp decline and firm break of 55 day EMA, the rise from 2733.92 should have completed at 3127.16 already. More importantly, corrective rebound from 2733.92 might have finished too. Deeper fall should be seen back to 2857.32 support. Break will suggest that fall from 3127.16 is the third leg of the corrective pattern from 3288.45. In this case, retest of 2733.92 low should be seen next.

    USD/CNH’s rebound today also confirms short term bottoming at 6.8452. Stronger rebound could now be seen back to near term channel resistance (now at 7.0062). As long as this resistance holds, another fall will remain in favor through 6.8452 at a later stage.

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    SNB Jordan: Negative interest rates and intervention still necessary

      SNB Chairman Thomas Jordan maintained today that negative interest rates are necessary for the Swiss economy. The board is aware of the side effects, and “that is the reason why we changed the threshold”, referring to raising the deposit limit before the charging -0.75% interest. He added, “that gives us the freedom to maintain negative rates for longer and also to cut the rate if necessary.”

      Jordan also reiterated that the Franc is still “highly valued” and interventions are also necessary. But he emphasized that “we don’t manipulate Swiss Franc exchange rate… never intend to weaken the franc for any advantage”.

      Yesterday, SNB Governing Board Member Andrea Maechler said there is no change in the monetary policy after US Treasury put Switzerland back into currency manipulator watchlist. She added, “we are doing monetary policy for Switzerland.”

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      UK Leadsom wants both a trade deal with US and digital tax

        UK Secretary of State for Business, Energy and Industrial Strategy Andrea Leadsom said the government is still pushing for digital tax despite repeated objections by the US. At the same time, it’s just one particular issues which will not stand in the way of a UK-US trade agreement.

        She told Talk Radio: “The United States and the United Kingdom are committed to entering into a trade deal with each other and we have a very strong relationship that goes back centuries so some of the disagreements that we might have over particular issues don’t in any way damage the excellent and strong and deep relationship between the U.S. and the UK,”

        “There are always tough negotiations and tough talk but I think where the tech tax is concerned it’s absolutely vital that these huge multinationals who are making incredible amounts of income and profit should be taxed and what we want to do is to work internationally with the rest of the world to cover with a proper regime that ensures that they’re paying their fair share.”

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        ECB to stand pat, reveal details of strategic review

          ECB rate decision and press conference is the major focus for today. No change in monetary policy is expected. That is, main refinancing rate will be held at 0.00%. Deposit rate should be kept at -0.50% too. Pace of asset purchase program should also be unchanged at EUR 20B per month.

          Forward guidance should also be unchanged as “the Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.”

          President Christine Lagarde might acknowledge in the press conference that recent data have shown some stabilization. But momentum of recovery, in particular in the manufacturing sector, has been weak. The board will remain cautious and risk to growth and price remain tilted to the downside.

          Most attention will likely be on the details of the strategic review to be announced at the meeting. While this would be lengthy exercise, we expect the market to be particularly interested in the revision of inflation target. There have been talks that the current inflation target as “below but close to 2%” can be revised in favor of a symmetric target.

          Here are some suggested previews on ECB:

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          Australia employment grew 28.9k, unemployment rate dropped to 5.1%, AUD rebounds

            Australia employment grew 28.9k to 12.98m in December, much better than expectation of 14.0k. Full-time jobs dropped slightly by -0.3k to 8.83m. Part-time jobs rose 29.2k to 4.15m. Unemployment rate dropped -0.1% to 5.1%, better than expectation of 5.2%. Participation rate remained steady at 66.0%.

            ABS Chief Economist Bruce Hockman said: “Trend unemployment rate decreased slightly to 5.1 per cent, its lowest level since April 2019. While there has been stronger growth in part-time employment over the past year, the underemployment rate is still where it was last December, at 8.3 per cent.”

            Australian Dollar recovers as markets push back expectation of February RBA rate cut, due to the upside surprises in job data. ANZ said the data reinforce RBA’s view that the economy appears to have reached a “gentle turning point”. it will be difficult to see RBA easing in February even though rate cuts are more likely than not over the course of 2020. CBA said RBA would now likely cut by 25bps to 0.50% in April, instead of February.

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            WTI oil dives as IEA forecasts 1m bpd surplus in first half 2020

              Oil price dropped sharply overnight after International Energy Agency (IEA) Executive Director Fatih Birol said there would be a surplus of as mush as 1m bpd of oil in the first half of the year. He said, there is an “abundance of energy supply” in oil and gas. And it’s the “reason that recent incidents we have seen – with the Iranian general killed, Libya unrest – didn’t boost international oil prices.”

              WTI’s fall from 65.38 resumed by taking out 57.35 support and hits as low as 55.60 so far. Such decline is seen as a leg inside the sideway pattern from 66.49. With 55 day EMA firmly taken out not, further fall should be seen to retest 50.84 key support level. Strong support should be seen from there to bring rebound. For now, break of 59.56 resistance is needed to indicate completion of the decline. Otherwise, near term outlook stays bearish in case of recovery.

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              How to benefit when BTC price goes down?

                Intro

                It is no secret that Bitcoin is volatile, as all cryptocurrencies are! The trick is, knowing when prices will move and what to do when the inevitable movement comes. Sounds simple, right?

                There are many investors out there that have heavily backed Bitcoin and expect the price to keep rising. But what if the value of a coin was not reaching the heights you expected to? Is this something to be overly concerned about?

                Since Bitcoin’s arrival on the global stage, it has experienced many highs and lows. Massive swings which happen regularly which can last days, span a few hours or move big, without warning, in the space of a few minutes.

                This article will explore why Bitcoin moves in the way it does and we will also look at how we can benefit from a downward price movement on the original, world-famous, digital asset.

                At CryptoRocket (www.cryptorocket.com) you can trade over 30 digital assets including the following Bitcoin pairs:

                BTC/USD, BCH/BTC, ETH/BTC, LTC/BTC, NEO/BTC, XMR/BTC, ZEC/BTC

                Volatility

                Volatility can be described as something liable to change drastically, quickly and without warning. This description is accurate when we are putting the definition next to Bitcoin.

                Traditional stock volatility is measured by the volatility index which was created by the Chicago Board Options Exchange in 1993. Also known as the VIX, what it does is represents a real-time market index showing the expected next 30 day movements with a focus on how volatile a stock might be. A useful tool for stock traders….

                Bitcoin does not have such a tool for Crypto investors to make use of. What we do know however is that Bitcoin is volatile and can move up to ten times as much as USD in a single trading day.

                So why is Bitcoin so volatile and what are the reasons behind it?

                One of the key reasons is that, although, in its 10th year, it is still relatively new technology. With new technology, new consumers need to get to grips with it and understand what the product is and how it functions. There are people out there, dare I say the older generation who can be more resistant to change when it comes to technology. This is evident when you look at statistics in supermarkets and which age groups are more willing to use self-checkout technology when purchasing their goods.

                People need time to adjust and adapt to change. Some people take longer than others, but in terms of how long currency and cold hard cash has been around, Bitcoin is still a new product and some people will need a little more encouragement to use technology as opposed to cash and banks.

                Bitcoin price is heavily affected by the news and media, especially when it comes to geopolitical events. In times of crisis within a country, new Bitcoin investors can surge within that country. This is especially true when examining the Cypriot banking crisis in 2013. The EU bailed out Cypriot banks but this came with terms and conditions. The cost of bailout was around the $20Billion mark yet the EU would only give Cyprus $13Billion. This meant that Cyprus would have to raise the further $7Billion themselves and they realized this by levying a tax on deposits.

                The tax was 6.75 percent from insured deposits of €100,000 or less, and 9.9 percent from uninsured amounts above €100,000. What this tax achieved was massive distrust in the banks from Cypriots and many Russians who live in Cyprus. The distrust in banks made trust in decentralized currency flourish. Bitcoin prices spiked thanks to this bailout.

                Many celebrities who have spoken out against Bitcoin and as influential people, this can truly have a knock-on effect on the value of a coin. Also, major incidents such as the closure of Silk Road harmed the price of Bitcoin. The FBI and Interpol shut down Silk Road in 2013 resulting in a life sentence for creator Ross Ulbricht. Many Bitcoin users lost trust in Bitcoin at this time and looked to sell as governments use rhetoric to suggest making Bitcoin follow some sort of compliance and regulation.

                Strategies to capitalize in downward movements and how to benefit

                As prices can rise, they can also crash and as investors, it is important to understand why and how we can manage this effectively. In 2018, the price of Bitcoin collapsed 61% – from an $8,300 high to $3,200 low in just six months showing just how much price can swing in a short period.

                There are a few things that can be done to capitalize on Bitcoin value taking a downward turn.

                For a start, a holder could straight up sell their Bitcoin and then buy again when the price reaches a severe low. Or low enough in the consumers’ opinion to make it worth buying before making an upturn.

                Traders can take advantage of a Bitcoin downturn by ‘going short’ or selling Bitcoin, staking money that Bitcoin will have a downward price movement – often referred to as profitable shorting.

                Users can also use margin trading or trading with leverage to further inflate profits. Leverage allows the ‘average trader’ to get involved in potentially high-profit trades without having to invest vast swathes of capital.

                In today’s modern trading world, thanks to high leveraged trading, more people than ever can speculate on markets with relatively low capital with the potential for high returns.

                It is advised that before trading with high leverage to investigate further and develop a trading strategy. Where can you do this you might ask? Many brokers in the marketplace offer a free to use ‘demo account’ for traders to perfect a strategy, get used to the available instruments and become accustomed to the MT4 trading platform.

                Start trading with CryptoRocket (www.cryptorocket.com) and benefit from a downward movement by using a max leverage of 1:100 for your favorite Cryptocurrency pairs with over 30 on offer including BTC/USD.

                Review the performance of other Cryptocurrencies to give yourself an idea of how the market is behaving and where Crypto investors are putting their money.

                Use a range of analysis to help form an overview of what is happening in the market. Draw on various types of media including social media, follow influencers in the Bitcoin world such as the Winklevoss twins. However, be wary when sourcing your information. John McAfee recently claimed that Bitcoin HAS to reach the million-dollar mark by the end of 2020. Recently he claimed this was a PR stunt – proving it is vital to collect your information from a range of sources. Bitcoin price today is at $8,745.56 a long way to go to a million in 11 months!

                Conclusion

                We have learned that Bitcoin is undoubtedly volatile and prices can and do take downturns. But it is not all doom and gloom. If you are holding onto Bitcoin, don’t stress too much about a negative price movement, instead, harness that energy and trade short to protect your investment!

                Bill Gates once said that if he could find an easy way to short Bitcoin, he would do. This was highlighted by one of the Winklevoss twins on Twitter. Guess what, Bill? You can short Bitcoin at CryptoRocket (www.cryptorocket.com). What’s more, they will be there for you 24/7 to assist you with all your account set up to get you started on your shorting adventure!

                Good luck!

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                CAD dives after BoC, but outlook not overwhelmingly bearish

                  Canadian Dollar turned from being one of the strongest after CPI, to the weakest after dovish BoC. In short, BoC left the option of rate cut open. It noted in the statement “Governing Council will be watching closely to see if the recent slowdown in growth is more persistent than forecast.”

                  However, outlook in Canadian dollar is not overwhelmingly bearish, except probably against Dollar only, despite today’s sharp fall.

                  USD/CAD’s development now argues that correction from 1.3664 might have completed as a triangle at 1.2951, on bullish convergence condition in daily MACD. Sustained trading above 55 day EMA will solidify this case and target 1.3327 resistance for confirmation.

                  The case is building up for CAD/JPY that rise from 78.50 has completed with three waves up to 84.56, after hitting 61.8% retracement of 78.50 to 83.55 from 81.28 at 84.40. But 82.80 support is needed to trigger near term bearishness first. Otherwise, further rise could still be seen.

                  Despite the today’s rebound EUR/CAD is held below 1.4581 near term resistance so far. There is no indication of short term bottoming yet. And, even if 1.4581 is taken out, that could mean EUR/CAD is in the third leg of consolidation pattern from 1.4415. That is, larger down trend will remain in tact in that case.

                  AUD/CAD is also staying below 0.9038 resistance. Fall from 0.9150 is in favor to extend to retest 0.8835 low. For now, even in case of another fall, break of 0.8835 is not anticipated. Overall, consolidation form 0.8835 will likely extend further.

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                  BoC stands pat, left rate cut option open, revised down 2020 GDP forecast

                    BoC left overnight rate target unchanged at 1.75% as widely expected. The central bank said the Canadian economy has been “resilient” but indicators since October have been “mixed”. Globally, the economy is showing “signs of stabilization” with “positive” trade developments. But “there remains a high degree of uncertainty and geopolitical tensions have re-emerged, with tragic consequences.”

                    BoC left the option of rate cut open, and said the “Governing Council will be watching closely to see if the recent slowdown in growth is more persistent than forecast.” Special attention will be paid to consumer spending, housing and business investment.

                    In the Monetary Policy Report, 2020 GDP forecast was revised down from 1.7% to 1.6%. But 2021 GDP growth is revised up from 1.8% to 2.0%. 2020 CPI projection was revised up form 1.8% to 1.9%. 2021 CPI projection was left unchanged.

                    Full Monetary Policy Report here.

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                    Canada CPI unchanged at 2.2%, matched expectations

                      Canada CPI was unchanged at 2.2% yoy in December, matched expectations. CPI common accelerated to 2.0% yoy, up from 1.9% yoy, beat expectation of 1.9% yoy. CPI median slowed to 2.2% yoy, down from 2.3% yoy, missed expectation of 2.4% yoy. CPI trimmed slowed to 2.1% yoy, down from 2.2% yoy, missed expectation of 2.2% yoy.

                      Full release here.

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                      UK business optimism at highest since 2014, largest positive swing on record

                        According to CBI survey, UK business optimism jumped sharply to 23% in the three months to January, up from -4% in October. That’s the strongest level since April 2014. the 67% quarterly swing was also the largest on record since 1958.

                        Anna Leach, CBI Deputy Chief Economist, said: “With business optimism improving at its fastest pace since 2014 and some of the squeeze on investment plans lifting, it’s clear manufacturers are entering the new year with a spring in their step. Firms are now planning to invest more in plants and machinery, which will ultimately help increase capacity and output.

                        “However, this boost to sentiment belies poor trading conditions over the past quarter, with output and orders still declining. If we are to build on this rebound in optimism among UK manufacturers, it is crucial for the UK and EU to establish a trade deal that supports growth in this sector.”

                        Full release here.

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                        Mnuchin: No deadline to phase 2 trade talks with China

                          US Treasury Secretary Steven Mnuchin said there is “no deadline” to phase 2 trade negotiation with China. “The first issue that we’re very focused on in the next 30 days is implementing phase 1, then we’ll start on phase 2. “If we get that done before the election, great, if it takes longer, that’s fine,” he said.

                          Mnuchin also added, “we could easily have phase two A, two B, two C, it doesn’t need to be a big bang, and we’ll take tariffs off along the way, so there is a big incentive for the Chinese to continue to negotiate and conclude various additional parts of the agreement.”

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                          Trump to announce very big middle class tax cut over the next 90 days

                            US President Donald Trump told Fox Business that the administration is planning a “very big” middle-class tax cut. He said, “we are going to be doing a middle-class tax cut, a very big one. We’ll be doing that. We’ll be announcing that over the next 90 days.”

                            On trade deals, “the China deal is amazing, we’ll be starting phase two very soon. The tariffs were left on Chinese goods because its good to negotiate for phase two.”

                            At the same time, “the European Union is tougher to deal with than anybody. They’ve taken advantage of our country for many years,” said Trump. “Ultimately it will be very easy because if we can’t make a deal, we’ll have to put 25 percent tariffs on their cars.”

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                            UK to introduce digital tax in April, US threaten retaliation with auto tariffs

                              UK Chancellor of the Exchequer Sajid Javid insisted that UK will go ahead with the induction of digital tax in April. He said, at panel discussion at the Davos forum, “It is a proportionate tax, and a tax that is deliberately designed as a temporary tax. It will fall away when there is an international agreement.”

                              At the same discussion, US Treasury Secretary Steven Mnuchin warned “We think the digital tax is discriminatory in nature… if people want to just arbitrarily put taxes on our digital companies we will consider arbitrarily putting taxes on car companies”. “We’re going to have some private conversations about that… and I’m sure the President and Boris will be speaking on it as well”.

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                              BoC to stand pat, CAD/JPY in consolidations

                                BoC rate decision is a major focus today, together with Canadian CPI. BoC is widely expected to keep policy rate unchanged at 1.75%. The central bank appeared to have downplayed some downside surprises in recent economic data. Risks of receded with US-China trade deal phase one and ratification of USMCA in US Congress. The test for resilience of the Canadian economy could be over for now, and need of insurance rate cut largely vanished. The next move would be very much data dependent.

                                Suggested previews on BoC:

                                CAD/JPY turned into consolidation after forming a short term top at 84.56 last week. At this point, further rally is still in favor as rise from 78.50 could extend to 85.23 resistance and above. However, structure of such rise is no clearly impulsive. 61.8% retracement of 78.50 to 83.55 from 81.28 was met without follow through buying. Upside momentum has been diminishing too as seen in daily MACD. Break of 82.80 support will suggest that such rise is completed, and turn outlook bearish for 81.28 support and below.

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                                Canada Trudeau: Passing the new NAFTA is our priority

                                  Canadian Prime Minister Justin Trudeau said he will unveil the legislation on January 29 to ratify the USMCA. He noted, “we are going to make sure we move forward in the right way and that means ratifying this new NAFTA as quickly as possible”. “Passing the new NAFTA is our priority,” said Trudeau. “There are too many businesses relying on access to the U.S. market … it’s extremely important that we move forward with ratification and it’s our intention to move forward with this.”

                                  However, the move by Trudeau’s minority Liberal government could be slowed down by main opposition. The Conservative Party spokesman Randy Hoback, “we definitely want to give it the proper due diligence to shine a light on some of the unique.” “I don’t think anybody has any intention of dragging anything out. We just want to make sure we do our job … there are some things in this deal that I think the business community isn’t aware of that we need to shine a light on.”

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                                  S&P 500 retreated on China’s Coroanvirus, but up trend not threatened

                                    US stocks closed broadly lower overnight on the arrival of China’s coronavirus. The Centers for Disease Control and Prevention confirmed the first case in the US. In China, a physician physician who investigated the outbreak said he has himself been infected. China’s Center for Disease Control and Prevention also warned that the new virus which killed nine people is adapting and mutating.

                                    S&P 500 closed down -0.27% at 3320.79. Despite the pull back, there is no threat to the uptrend for now. As long as 3214.63 support holds, current up long term up trend is expected to extend to 100% projection of 1810.10 to 2940.91 from 2346. 58 at 3477.39 next.

                                     

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                                    US Mnuchin to Italy and UK: Delay digital taxes or face tariffs

                                      US Treasury Secretary Steven Mnuchin urged Italy and UK to suspend their plans to impose digital taxes. Or “if not they’ll find themselves faced with President Trump’s tariffs.” The warning came after France agreed to delay digital tax imposition through the end of the year, as US and France would work out a permanent resolution.

                                      Mnuchin also said that the phase two trade deal may not be a “big bang” with all existing tariffs removed. Instead, “we may do 2A and some of the tariffs come off. We can do this sequentially along the way.”

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                                      EU to lose USD 10.8B exports due to US-China trade deal, Germany hardest hit

                                        The Kiel Institute for World Economy warned that US-China trade agreement is “significantly damaging” to the EU. Germany is “particularly affected”, and among the sectors, especially “aircraft and vehicle manufacturing.”  Gabriel Felbermayr, Kiel President, said, “the additional imports of US goods promised by China will divert imports from other countries.”

                                        As calculated by Felbermayr and trade expert Sonali Chowdhry, EU exports to China will probably be USD 10.8B lower in 2021 compared with a scenario in which the agreement and the tariff war between China and the USA would not have existed. The EU would then have to bear about a sixth of the overall trade diversion caused by the agreement.

                                        In absolute terms, the biggest losers in the EU are the manufacturers of aircraft (USD -3.7B), vehicles (USD -2.4B), and industrial machinery (USD – 1.4B). In terms of relative changes, the largest relative losses would again be in the aircraft sector (-28%), vehicles (-7%), and pharmaceutical products (-5%). “The affected industries are mainly located in Germany, but France has also been hit considerably”, says Felbermayr.

                                        Full release here.

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                                        German ZEW jumped to 26.7, highest since July 2015

                                          German ZEW Economic Sentiment rose sharply to 26.7 in January, up from 10.7, beat expectation of 15.2. That’s also the highest reading since July 2015. Current Situation Index rose to -9.5, up from -19.9, beat expectation of -12.4. Eurozone ZEW Economic Sentiment rose to 25.6, up from 11.2, beat expectation of 16.3. Current Situation Index rose 4.8 pts to -9.9.

                                          “The continued strong increase of the ZEW Indicator of Economic Sentiment is mainly due to the recent settlement of the trade dispute between the USA and China. This gives rise to the hope that the trade dispute’s negative effects on the German economy will be less pronounced than previously thought. In addition, the German economy developed slightly better than expected in the previous year. Although the outlook has improved, growth is still expected to remain below average.,” comments ZEW President Achim Wambach.

                                          Full release here.

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