Photographer: Tomohiro Ohsumi/Bloomberg
Bitcoin, the digital currency that has turned into the new “gold” among investors and traders around the world, is in for two big tests. The first test is simple, and involves Bitcoin’s price chart. The digital currency must overcome the barrier of the $5000-mark, which it already crossed last night before pulling back towards the $4800-mark. Milestone numbers are important for traders following price and volume charts, as they confirm/reject market momentum.
The second test is more complicated. It involves the actions of big governments that have been following with great unease the rising in popularity of Bitcoin and other cryptocurrencies that threaten to abolish their monopoly in creating money and collecting seigniorage income.
Back at the end of July, the SEC ruled that cryptocurrency “IPOs” or Initial Coin Offerings (ICOs) are investments, and therefore, should be subject to the same rules as regular stocks.
That ruling sent all major cryptocurrencies sharply lower, before rebounding towards new highs.
|Bitcoin Investment Trust Shares (GBTC)
Apparently, traders and investors thought that this ruling could eventually be positive for cryptocurrencies, as it will limit the supply of new digital currencies coming to the market. Thus, the new high reached overnight for Bitcoin.
Now comes the National Internet Finance Association of China (NIFA) to warn investors that ICO projects are a threat to the stability of China’s financial sector.
China and Asia are among the biggest markets for Bitcoin and any warning from Asian governments, especially from the Chinese government, shouldn’t be taken slightly.
That could, perhaps, explain the big sell off in most digital currencies on Saturday, though it is still too early to determine whether the sell-off was technical or fundamental.
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Are we toward a sharp swing this week? The rare event that hasn’t happened in 90 years
After two weeks of busy events, the trading week on Wall Street is expected to open today will be relatively calm, after the reporting season is almost completely behind us.
Two major players will continue to employ investors this week.
The first factor is the political uncertainty in the US administration, which continues to supply headlines at a dizzying pace.
The second factor is the recent turmoil in the foreign exchange markets, mainly on the European exchanges.
The most interesting measure for the week will probably be the S&P 500, which has recently converged in a very narrow range.
Pay attention to the closing prices for the index for the last 13 trading days:
2474, 2473, 2473, 2470, 2477, 2478, 2475, 2472, 2470, 2476, 2478, 2472 and 2476.
In the past 90 years there hasn’t been such a long sequence of ranging in such a narrow range, that is, the current stagnation is unprecedented.
This increases the likelihood of very sharp move soon.
Short positions on the VIX index, known as the Fear Index, which measures the standard deviations on the index’s shares, are at the all-time high at the beginning of the week, according to the weekly CFTC report.
A combination of these data increases the likelihood of a sharp movement in the near future.
The trading on Wall Street ended yesterday with a mixed trend.
The Dow Jones Industrial Average rose above the psychological level of 22,000 points, a level that kept it up until the end of trading, this is mainly due to Apple’s report of a 12% rise in net profit to $ 8.72 billion, and revenue rose 7.2% to $ 45.41 billion.
The company overtook its profit forecasts and reached the forecast range of revenues.
The company sold 41 million iPhones in the quarter, in line with expectations.
The ADP survey for the private sector published yesterday indicated an addition of 178,000 new jobs in July, lower than the analysts’ forecasts of 190,000 jobs.
The survey is a preview of the official employment report to be released on Friday, which is expected to indicate an addition of 180,000 new jobs last month, after adding 187,000 new jobs in June.
The unemployment rate is expected to fall from 4.4% in June to 4.3% in July.
In China, the services sector PMI fell to 51.5 points in July, below expectations
The oil prices are falling this morning.
The price of a barrel of WTI oil is down by 0.3% to $ 49.42, and the price of a barrel of Brent crude is down by 0.4% to $ 52.16.
The Wall Street markets closed in a positive direction yesterday led by Blue Chip shares, and the Dow Jones Industrial Average continued to hit record highs after positive US financial reports,which eased the impact of disappointing macroeconomic data.
The Dow Jones Industrial Average rose by 0.3%, closing at a record high for the fifth day in a row.
The S&P 500 Index (-2,476.35 + 0.24%) and the NASDAQ (+6362.94 + 0.23%) climbed by 0.2%.
US private consumption rose in June by the most moderate pace in five months, and inflation remained below the Fed’s target, according to data released by the US Department of Commerce.
The Manufacturing Activity Index retreated to 56.3 points in July from 57.8 in June. The ISM study US construction spending fell in June by 1.3%.
The Brexit is here: A fifth American bank moving his activity away from London.
After JPMorgan, Citigroup, Goldman Sachs and Morgan Stanley, Bank of America doesn’t wait for Brexit and moves the European headquarters to Dublin.
At the end of the week Bank of America announced that it had chosen Dublin as the new destination for its European headquarters.
In this way, he became the fifth American bank to announce that he would be taking his action from London and the first American bank to choose Ireland as a preferred target.
The announcement came after the Bank of England ordered the international financial institutions operating in the U.K at the beginning of the month to submit plans detailing the steps to be taken towards the Brexit, which will come into effect in March 2019.
They also announced the transfer of activity from London: JPMorgan Chase, Goldman Sachs Morgan Stanley and Citigroup.
The European stock indexes fell sharply last week.
The DAX plunged by 3.1% to a three-month low, led the trend, but the French CAC, which lost 2.25%, was not far behind.
The main reason for the pressure on the European stock markets was the strengthening of the Euro, which jumped by 1.75% against the US dollar to a two-year high.
It was a matter of time before the strengthening of the Euro began to erode the performance of European equities, especially with the export companies, which are particularly large on the German stock exchange.
However, the inferiority of stocks in Europe relative to the US stock market is not expected to be prolonged, first of all the circumstances of the strengthening of the Euro are based on the improvement in the European economy.
Another factor that supports investment in Europe compared to the US is the fact that US price hikes are spread among fewer shares than in Europe.
Over the past year, 70% of all shares in the S&P500 index have risen, compared to 80% of the BE500 index, although the S&P500’s yield was 5% higher than the European index.
A change in the ECB’s messages, as well as a loss of confidence in Trump’s capabilities to do something significant have led the Euro to strengthen since April at 10.1% against the US dollar.
Unlike the US, where the share of exports in GDP is low, the strengthening of the Euro constitutes a significant frontal wind for the economy, with the negative effects of the appreciation expected to be seen in European companies’ reports as early as next quarter.
Because of this, the European indices fell sharply in the last month and returned to their levels on the eve of the elections in France.
For the same reason Draghi made sure to note clearly in his announcement that the ECB’s monetary policy also depends on the financial conditions in the Euro zone.
In fact, the strong Euro and its effects on growth, firm profits and inflation is the main card that Draghi can pull out of the sleeve if German pressure continues.
Therefore, even if the process of reducing the quantitative easing will begin soon, it is expect very clear messages from the ECB regarding the interest rate in the Euro zone will remain at its level for a long time to come.
The trading on the European markets opened today with a slight rise, following gains on Asian stock markets and a positive trend in Wall Street futures after a mixed closing yesterday.
as mentioned, the Asian markets are also trading with gains, with Shanghai Stock Exchange leading the gains in the east.
Major technology stocks are leading the positive trend.
The market is waiting for announcements by central banks in Japan and Europe that are expected on Thursday.
The two banks are expected to present their monetary policy for the coming period and the assessments are intended to reduce the expansionary policy.
The oil prices are going down this morning.
The WTI is down by 0.3$ trading at $ 46.3, and a barrel of Brent oil is traded for $ 48.72.
Oil inventories rose by 1.6 million barrels last week, and ahead of the release of the weekly report, as analysts expect a 3 million barrel drop.