CNY
Yuan fuelling the bitcoin resurgence?The cryptocurrencies have been back in the news recently, in light of Bitcoins astronomic resurgence. Although it would be naive to believe that any one thing can be the driver behind the 150% increase over the past few months, significant parallels however can be drawn with what has been going on in China.
Now, I don't want to bore you, but for those who don't know; Chinese nationals can 'only' transfer out of the country the equivalent of $50,00 per year. With China's economy in somewhat of a downward spiral the government are increasingly keen to keep as much money as possible within its economy rather than it being held, invested or spent outside of China.
There have been a number of high profile attempts to try and circumvent the restriction, which have had varying degrees of success. The abuse of China UnionPay is the one currently under the Ministry of Public Security’s microscope. Via the use of Union cards in Macau; the former Portuguese enclave has become a hotbed for the use of unregulated POS (Point Of Sale) systems. Chinese nationals can use these vendors to ‘purchase an item’ but in reality receive cash as a result of the transaction. My point is that with these capital controls gaining momentum, a parallel can be drawn with the increase in the price of Bitcoin.
As a side note - expect Macau based casino revenues to be detrimentally affected, compounded by other measure being taken by Beijing to restrict the decadence of high profile officials on the island. ( OTC:WYNMY & Galaxy are two Macau based casino behemoths if you’re interested in that side of things).
I am ultimately quite bearish in the short-term with the cryptocurrency having already failed to break the November 2014 highs with my target being the 0.5 fib level (circa $360) with 0.618 fib level ($310) presenting a favourable buy opportunity.
It's pointless me regurgitating articles so I have put a link to it below (South China Morning Post). I have also put links to a few more articles that I found both useful and interesting when putting this analysis together.
Sources:
Bloomberg:
www.bloomberg.com
Deutsche Welle:
www.dw.com
South China Morning Post:
www.scmp.com
Abeconomics Continues to Fail – EURJPY ImplicationsThe proof is in the pudding, well it is in the globalized failing of quantitative easing.
Abeconomics is no different. Japan Prime Minister Shinzo Abe will continue to feel pressure as his "three arrows" economic policy fails to push consistent economic expansion.
Japan's economy shrank 1.6 percent on an annualized basis with falling exports and contracting consumer spending to blame. The calls for additional stimulus can be heard loud and clear, but the Bank of Japan (BoJ) will further risk market fragmentation if additional easing is lumped into the already giant program.
According to the continuous contract of Japanese yen futures, Japan's currency has declined over 33 percent since 2011. This has not garnered the growth Wall Street expected it to outside of asset prices. As the BoJ erodes the purchasing power of the yen, import prices are increasing and it is stifling consumer spending. Tax increases are almost a no-go for the same reason.
Since Abe was elected in 2012, Japan has only been able to grow by two percent. That's only a few tenths lower that the U.S. during it's quasi-monetary policy, now in its seventh year.
Near-term outlook for EURJPY:
The EURJPY has been rejected from resistance at 138.79 twice before its current retracement lower. Price action is hinging on support of 137.75, and a close below will signal further downside.
Dynamic resistance can be found at 137.55 and 13.30, or the 50 and 72-EMA respectively. Price action support won't be seen until 136.93, which corresponds to the near-term uptrend line. A challenge of 136 is probable.
If traders look to take the pair higher, a break of 138.79 could cause a momentum push higher after challenging the descending trend line. This could push the pair up to 139.90.
In the longer-term:
However, the BoJ could begin to talk the yen lower whether due to poor economic data or the fact that China's decision to devalue the yuan has implications throughout the region. A weaker yuan could force the Japanese central bank to weaken the yen further to try and gain an additional competitive advantage.
The People's Bank of China (PBoC) will look to shake the yuan's tether to the U.S. dollar, and future devaluations are in the cards. The BoJ could go tit-for-currency-war-tat.
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Some sort of Equilibrium is needed.Technical
- Bullish Cypher has formed. Its parameters are 78.6,61.8,178.6,70.7/78.6 respectively.
- Looks like a head and shoulder will be formed in the future
- MACD and RSI shows indication of no supply
- The big green candles do tell me there's high demand.
- Beware of Parabolic whipsaw
- Use S1 for entry if you missed the 70.7 Fibonacci level
Fundamentals
- At 2.00 am GMT daylight, MI inflation expectations are announced. It has a medium effect on the market.
- However, the HSBC flas manufacturing PMI for CNY will have a high impact on the pair which is scheduled 45 min after.
- I will expect some sort of panic during the news release. The lower prices will probably be tested.
- US data too, watch out for manipulation.
Good Luck and Happy Trading :)
