Crypto sell-off on fears of China restrictions
It was a sea of red across most assets today as investors continued to worry about inflation. Most of the sell-off was in the cryptocurrency industry where the prices of most currencies including Bitcoin and Ether dropped by more than 10%. Bitcoin broke the $40,000 support while Ether dropped below $3,000. This happened after Chinese officials warned about the speculative nature of digital currencies. According to Reuters, most of them have started cracking down on companies that provide these services. Also, the prices dropped after Larry Summers, the former Treasury Secretary criticized the Federal Reserve for its complacency in leaving interest rates low and expanding its balance sheet at a time when the economy is bouncing back.
US futures dropped ahead of the important minutes by the Federal Open Market Committee (FOMC). The minutes are expected to show the rationale it used when it left interest rates unchanged in the past meeting. Futures tied to the Dow Jones fell by more than 270 points while those linked to the S&P 500 and Nasdaq 100 index fell by more than 0.80% and 1.20%, respectively. This is even after robust corporate earnings by key retailers like Lowe’s and Target. Lowe’s revenue rose to $24.42 billion while Target made more than $24.2 billion. The numbers came a day after strong results by Home Depot and Walmart.
The British pound rose against the US dollar after the relatively strong UK inflation data. According to the Office of National Statistics (ONS), the headline consumer price index rose by 1.5% in April on a year-on-year basis. This was more than double where they were in March this year. In the same period, core CPI that excludes the volatile food and energy prices rose by 1.3%. Taken together, these numbers paint a picture of an economy that is firing on all cylinders. Last week, data showed that the economy staged a 2.3% recovery in March. And yesterday, data showed that the unemployment rate dropped to 4.8% in March.
ETH/USD pair bombed lower today after attempting to bounce back on Tuesday. The pair fell to 2,846, which was the lowest level since May 3. The pair moved below the 25-day and 15-day moving average on the four-hour chart. At the same time, the Relative Strength Index (RSI) and MACD continued to decline. Therefore, the pair may keep falling as sentiment in the crypto industry wanes.
The BTC/USD pair declined sharply as China started a crackdown on the currencies. The pair dropped to 38,525, the lowest level since February. On the four-hour chart, the pair has moved below the 25-day and 50-day EMAs. Most importantly, it has dropped below the support at 40,000, which was an important psychological level. The Relative Strength Index (RSI) and other oscillators have also continued dropping. Therefore, the pair may keep falling as bears target the next psychological level of 35,000.
The EUR/USD pair was little changed today after the mild EU inflation data. On the four-hour chart, the pair is slightly below the year-to-date high of 1.2245. The price remains above the short and longer-term moving averages while the moving average of the oscillator is above the neutral line. The pair may keep rising as bulls target the next key resistance at 1.2245.