Currency wars spill over to Crypto | Technical Outlook
Friday Wrap, where are the opportunities heading? Read the latest chart updates and market analysis in Edition #224 published 9 September 2022 👇
NEW - Update Highlights
Words to reflect from the late Monarch
Currency Wars spillover to Cryptocurrency
Technical Wrap: DXY, US100, BTC, ETH, XAU
“I know of no single formula for success. But over the years, I have observed that some attributes of leadership are universal and are often about finding ways of encouraging people to combine their efforts, their talents, their insights, their enthusiasm and their inspiration to work together.”
Queen Elizabeth II address to the United Nations General Assembly delivered on 6 July 2010.
Currency Wars spillover to Cryptocurrency
As relations with the US sour, China’s decision to drop the US dollar from trade with Russia and pay for Russian Gas in yuan (CNY) and rubles (RUB). While the swathe of economic sanctions levied against Russia effectively severs the country from the SWIFT banking system, its implication in speeding up the de-dollarisation of global trade is marked.
Despite the unintended consequences of these sanctions, it stands to reason that they have accomplished their stated aims of complicating Russian finances.
How does this affect Cryptocurrency?
It is clear Russia is now looking for substitutes, such as crypto, for cross-border payments. The Bank of Russia and the Finance Ministry went as far as saying, "It is impossible to do without settlements in cryptocurrency."
Putin recently shut down one of Europe's key energy sources, the Nord Stream 1 pipeline, and will not resume gas supply to Europe while Western sanctions remain in place.
Do we see a seismic shift in the global order?
Cracks appear at the seams. It seems globalisation is beginning to break down as normal cooperation between East and West is increasingly looked at through a lens of suspicion.
In other words, the Financial System would require a trustless and sanctions-resistant global currency that can suitably ensure a continuum of cross-border payments.
At the end of the day, the US is the number one liquidity provider. US dollars currently amount to the lion’s share of global trade volumes.
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US Dollar Currency Index, $DXY - Monthly (M1)
The US Dollar Currency Index looks to have produced a rejection at the 0.786 Fibonacci Retracement level and commenced corrective action—this is good for other markets as USD demand backs off a little.
Nasdaq 100, US100 - Daily (D1)
After rejecting the .618 ‘Golden Ratio’ Fibonacci retracement level, bearish expectations in the market picked up enormously.
Last week, institutional traders gobbled up $8.1 USD billion worth of 'put' options.
Options 101: What’s a put and call?
A put, or put option, is a derivative instrument that gives the holder the right but not the obligation to sell an asset, at a specified price, by a specified date to the issuer. Practitioners can interpret put options as a negative sentiment about the future value of the underlying asset. Call options function similarly and allow participants to gain exposure to potential gains in the future value of the underlying asset.
Prices of put and call options are impacted by:
Changes in the underlying asset price
The option strike price
Now indices appear to be holding their golden ratios, which can be viewed as reversal-like behaviour, just as rejections can allude to further selling to come.
Bitcoin vs. US Dollar, $BTC - Daily (D1)
Bitcoin reclaims US$ 20.5K and must attempt to flip the resistance zone back into support. If successful, then our bulls are still around.
However, plenty of work must be done before confirming a reversal.
Closing above US$ 23K assists in eliminating bearish bias moving forward.
Ethereum vs. US Dollar, $ETH - Daily (D1)
Bulls must confirm support at US$ 1,760
Otherwise, the 'Head and Shoulders' argument remains valid
Additionally, the ETH/BTC trading pair could absolutely send if price action manages to flip support around 0.08123/BTC
Ethereum vs. Bitcoin, ETH/BTC - Weekly (W1)
When everyone is talking about something, we should be extra cautious. The chances of being caught holding the bag are extremely high… read the latest On-Chain Report for an update on movements in supply on exchanges for BTC, ETH 👉
Mission Log | Recapping a recent trade idea
To wrap up, the Gold (XAU/USD) trade idea covered in the Monday Blues report landed a perfect entry.
NFA - Do NOT chase trades! Well done to those eing greener pastures, and patience for any who missed this one.
Gold Spot, $XAU - Daily (D1)
See you again for the next update.
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