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Cryptocurrency

The possibility of another state-run cryptocurrency undermines the acceptance of the Bitcoin. This is all on the back of the Petro coin, which instigated the idea that a state-run cryptocurrency could work well. Remember, that Petro is basically a commodity backed coin and Venezuela could certainly do that. Similarly, Iran holds a lot of oil, so it would make sense for the country to adopt the same framework. But in order to make their coin more popular, the regulators would have to adopt a tougher stance towards other cryptocurrencies.

Yesterday's announcement by Russian finance minister; the country has no objections if private investors would create Russian cryptocurrency opened the door for private investors to introduce their coins under the regulatory environment. So what we have is two clear industries propping up; countries looking to introduce their own currency which could be bak by commodities and private individuals introducing their coins under the government regulation.

We knew that the ICO market wasn't going to stay in its current format for long and the regulatory environment is making things difficult for scammers.

Going back to Bitcoin, we think this may be another pullback however the break of this month's low could change the game. However, in a market with so much price manipulation and asymmetrical information, it is sometimes hard to see the real reasons behind these market moves.

NZDUSD (0.7293): The New Zealand dollar was seen consolidating near the 0.7333 level but the rebound in prices at this resistance level failed. At the time of writing, NZDUSD is seen posting a decline off the resistance level. This could potentially indicate a decline toward 0.7160 level of support in the near term. Alternately, a close above 0.7333 on a daily basis could indicate a continuation to the sideways range in the NZDUSD.

GBPUSD (1.3943): The British pound had initially weakened on the day as the currency pair posted an intraday low to 1.3856 before recovering to close the day on a higher note. Price action suggests that the support level around 1.3902 will stall the declines in the near term. Overall, GBPUSD continues to trade within the triangle pattern posting a consolidation over the medium term. A strong breakout to the downside, below 1.3902 is required for GBPUSD to resume the declines towards 1.3611 - 1.3589.

EURUSD (1.2302): The EURUSD managed to post a modest rebound yesterday closing on a bullish note. However, the gains look to be short lived as price action earlier this morning shows a reversal. This coincides with the rally to the resistance level at 1.2363 - 1.2333 level. As long as the resistance holds, EURUSD could be seen posting further declines targeting the immediate support at 1.2090 - 1.2070 region. Price will of course need to close below the previous lows at 1.2213 from February 9th.

Data from the UK showed that the second revised estimate was lowered to 0.4% down from the first estimate of 0.5% for the quarter. This brought the annual GDP in the UK to 1.4% on the year missing estimates of 1.5%. The business investment for the quarter was also revised to show a flat print, compared to the initial estimates of 0.5%. The British Pound was seen falling on the news.

Later in the day, the New Zealand quarterly retail sales data showed a 1.7% increase on the quarter ending December 2017. This was stronger than expected as retail sales increased from 0.3% in the third quarter.

Looking ahead the data will cover the final inflation estimates for the month of January. Canada will also be releasing the inflation figures. Economists forecast a 0.4% increase on the month, which would reverse the 0.4% decline from the previous month. A number of Fed officials will also be speaking which includes Dudley, Mester and Williams.

Sunrise Market Commentary

• Rates: Consolidation ahead of the weekend?
  Core bonds corrected somewhat higher yesterday. A thin eco calendar, the end of the US’s supply operation and the weekend ahead suggest more consolidation today. The very long end of the US yield curve underperforms. The US 30-yr yield is testing 3.22% resistance, the neckline of a huge triple bottom.
• Currencies: USD rebound slows amid lack of data
  The USD rebound slowed yesterday in line with US yields. The eco calendar is thin today, but several Fed members speak. The dollar nears first intermediate resistance. It needs some high profile news to trigger a test, but this news probably won’t be available today. EUR/GBP is holding a sideways range as the UK government tries to bridge division on Brexit

The Sunrise Headlines

• US markets ended close to unchanged with the Dow Jones outperforming (+0.66%). Risk sentiment turned positive overnight with China (flat) underperforming.
• China’s insurance regulatory agency took control of hard-charging, acquisitive Anbang Insurance Group, saying it is needed to avoid a collapse of the firm following suspected illegal activity and the downfall of its chairman.
• The Trump administration’s policies will raise US wages without causing broader inflation, Treasury Secretary Mnuchin said in an interview, brushing aside signs that investors are growing nervous about rising prices.
• Theresa May's senior ministry agreed their demands for a trade deal but the EC pre-empted their decision by deriding what had already leaked out as "not compatible" with European Council guidelines.
• Technical work has begun to determine if Greece requires debt relief after its expected exit from a bailout programme later this year, ESM Regling said.
• Japan's core consumer inflation was steady in January (0.9% Y/Y) in a sign a strengthening economy has yet to prompt companies to raise prices, a challenge policy makers have yet to overcome despite years of massive stimulus.
• Today’s eco calendar contains final EMU inflation data. ECB Coeuré, Fed Mester and Fed Dudley are scheduled to speak. The Riksbank releases Minutes of the previous meeting.

Currencies: USD Rebound Slows Amid Lack Of Data

USD rebound slows amid lack of data

The recent rise of US yields and of the dollar petered out yesterday. Ifo Business Climate eased more than expected, but still indicated strong growth at the start of 2018. German yields declined after the release, but so did US ones. The reaction of the euro was negligible. US jobless claims printed near the cycle low, but didn’t help the dollar. US equities also failed to provide a clear guide for USD trading. Some dollar caution returned to the market. EUR/USD rebounded above 1.23 and finished at 1.2330. USD/JPY dropped back below 107 (close at 106.75).

Asian indices are showing gains of up to 1.0% overnight with mainland China underperforming. Japan January CPI (1.4%% Y/Y )printed slightly higher than expected, but the measure ex fresh food and energy stayed very low (0.4% Y/Y). The yen lost a few ticks after the release, but this was probably due to an overall bid for the USD. US Treasury secretary Mnuchin tried to ease markets’ inflation fears. In an interview, he said that the Trump policy will be able to raise wages without inflation. USD/JPY nears the 107 level. EUR/USD returns to the 1.23 area.

There are few important data today. The details of Q4 German growth are interesting, but a bit outdated and so is the final EMU CPI. Many Fed members will speak as markets are looking forward to the hearing of Fed Chairman Powel before Congress next week. Yesterday, we advocated some ST consolidation on the ST USD rebound. We hold on to that view. LT US yields are near (10y)/testing (30y) key resistance. It needs probably high profile news for a break. In this context, the recent USD rebound might slow. First resistance for the trade-weighted dollar comes in at 90.57. First support in EUR/USD is coming on the radar (1.2206/1.2165). However, it might be too early for a test. US equities area a wildcard for USD trading. Of late there was a tentative inverse correlation between US equities and the dollar.

Sterling declined temporary yesterday after the downward revision to UK Q4 GDP (0.4% Q/Q from 0.5%). However, the move didn’t go far. EUR/GBP basically hovered in the mid 0.88 area as recent BoE hints on a rate hike and political noise on Brexit kept each other in balance. The meeting of UK PM May with her top Ministers resulted in a confirmation of the ‘three basket approach’ which the EU sees as cherry picking. So, for now the stalemate in the negotiations will probably persist. We expect more range trading of EUR/GBP in the 0.88 big figure.

USD trade-weighted (DXY) USD rebound stalls ahead of first resistance

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Daily Pivots: (S1) 148.34; (P) 149.16; (R1) 149.78; More...

In the bigger picture, the case for medium term reversal continues to build up on loss of medium term momentum as seen in 4 hour MACD. Also, firm break of 146.96 will indicate rejection by 55 month EMA and add to that case of reversal. In that case, deeper fall would be seen to 38.2% retracement of 122.36 to 156.59 at 143.51 and then 61.8% retracement at 135.43. Meanwhile, break of 156.59 will extend the rise from 122.36 to 61.8% retracement of 195.86 to 122.36 at 167.78.

Daily Pivots: (S1) 131.15; (P) 131.77; (R1) 132.25; More....

Downside momentum in EUR/JPY is still a bit unconvincing. Nonetheless, near term outlook remains bearish as long as 133.05 resistance holds. Sustained trading below 132.04 cluster support (23.6% retracement of 114.84 to 137.49 at 132.14) will indicate larger trend reversal on bearish divergence condition in daily MACD. In such case, deeper decline would be seen for 38.2% retracement at 128.38 first. However, rebound from 132.04 will retain near term bullishness. Break of 133.05 minor resistance will turn bias back to the upside for 137.49 again.

In the bigger picture, bearish divergence condition in weekly MACD indicates loss of medium term upside momentum. Sustained break of 132.04 will be the early sign of long term reversal and should bring deeper fall back to retest 124.08 key support level. Meanwhile, break of 137.49 will resume the up trend from 109.03 to 141.04/149.76 resistance zone.

USDCAD climbed sharply above the 1.2685 level during Thursday’s trading session and posted a new 2-month high near 1.2755. However, the price ended the day slightly above its opening level and struggled below the 38.2% Fibonacci retracement level of the down-leg with the high of 1.3800 and the low of 1.2060. The technical indicators now support that the short-term bias is bullish.

Looking at the daily timeframe, the 20-simple moving average posted a bullish crossover with the 40-SMA, suggesting a strong buying interest. Moreover, the price rebounded on the 20-SMA and recorded five green days in a row.

From the technical point of view, the MACD oscillator is rising in the positive territory and jumped above its trigger line, while the Relative Strength Index (RSI) is endorsing the scenario for upside movement as it is approaching the overbought zone.

Should the market continue the upside tendency, the 38.2% Fibonacci at 1.2723 could provide nearby resistance before the 1.2910 resistance level come into view.

To the downside, immediate support could come from the 20-SMA at 1.2522 ahead of the 23.6% Fibonacci of 1.2470. Further below, the focus would shift to the 1.2250 key level.

Regarding the medium-term picture, it is worth mentioning that the price successfully surpassed the 40-week SMA, signaling further gains.

USDCAD is trading nicely bullish, after a base was found for corrective wave 2 at the 1.2446 level. Current strong rally can be part of wave 3, the strongest and steepest wave, that is also usually the longest. Wave 3 can so approach levels near the 1.297 region, before a new temporary retracement as wave 4 shows up. At the 1.297 area, the upper base channel line and the Fibonacci ratio of 161.8 can offer resistance.

USDCAD, 4H