NO END IN SIGHT FOR WORLD’S STOCKS AND CRYPTOCURRENCIES CARNAGE
Yesterday, the US stock market dropped sharply led by technology. Nine of the eleven industries declined too. The contagion spread across the world with the Shanghai index, Nikkei and DAX declining by 2%, 1%, and 0.85% respectively. Wall Street is set for a lower open, with the Dow, S&P and Nasdaq set to open lower by 0.80%, 0.85%, and 1.15% respectively. The current declines are attributed to a number of factors such as the slowed growth, lowered corporate guidance and the prospect of high-interest rates.
Cryptocurrencies continued the slump started a week ago. In the past one week, the market capitalization of currencies tracked by Coin Market Cap has fallen from more than $220 billion to the current $146 billion. The decline started after the hard fork of Bitcoin Cash. This is a process in which a new currency is created by tweaking the original currency. The reason for the decline is the lack of investor confidence in the currencies. This is because no investor wants to own a cryptocurrency which will be diluted when forking happens. The price of Bitcoin declined to $4475 while that of Ethereum and Litecoin dropped to $133 and $45 respectively.
The sterling was little changed today as traders continued to wait for a decision on Brexit. Today, Jacob Rees-Mogg, the Conservative MP who has called for the impeachment of Theresa May called for patience after his plan stalled. This was a relief to May, who is facing increased pressure from conservatives. She has been criticized for giving the European Union too much in her proposed deal. Data from the Confederation of British Industries (CBI) showed that the country’s manufacturing sector rebounded in November despite the ongoing uncertainties. A net 10% of companies reported that orders had improved in the month, which was better than the expected minus 6%.
The GBP/USD pair was in consolidation mode today as traders waited for a definitive decision on Brexit. The pair reached an intraday high of 1.2882, which was little moved from yesterday’s close. On the four-hour chart below, the pair’s price is along the 15 and 30-day moving average. This consolidation means that traders are waiting patiently for news. This implies that the pair could move in either direction.
After yesterday’s consolidation, the EUR/USD pair started moving down today. It reached an intraday low of 1.1415. This was lower than yesterday’s close of 1.1472. Yesterday’s consolidation is a likely indicator that the pair had reached a top. The 15 and 30-day EMA indicators have started to reverse. This has happened with increased volumes as shown below. This is an indication that the pair will likely continue the downward trend.
The BTC/USD pair dropped sharply to an intraday low of 4211. This was the lowest level since October. The pair’s price is below all the major moving averages as shown below. Volatility has risen sharply as evidenced by the Average True Range (ATR) indicator. The RSI is at 10 on the 6-hour chart. While the pair could recover, in the short term, it will likely head lower as sentiment falls.