STOCK AND CRYPTOCURRENCY MARKET DECLINE RATTLES INVESTORS
STOCK MARKET DROP
Global stock market prices plummeted lower this week, erasing yearly gains, as investors feared a combination of rising wage earnings and a steady stream of interest rates hikes in 2018 would start to hurt company profits. The Dow Jones Industrial Average suffered its largest ever points drop on Tuesday, while the Nikkei225 slumped over 1,500 points, marking the biggest single day loss in the Nikkei225 since 1990. Risk-off sentiment remained high, as volatility to the downside accelerated, with sellers outweighing buyers, although investors bought a select amount of financial sector stocks from already depressed level.
BITCOIN ERASES GAINS
The value of Bitcoin briefly traded below the $6,000 mark, erasing fifty percent of its value since the start of 2018, amidst growing concerns about cryptocurrencies from high street banks and regulators. The broader cryptocurrency market also came under heavy selling pressure as authorities in the U.S, South Korea and India issued warnings on the danger of digital currencies. Dash, Ripple, Ethereum and Litecoin also suffered substantial double-digit declines in early week trading, before making a marginal recovery from overstretched levels.
The BTCUSD pair is strongly bearish while trading below the $8,600 level, further declines towards $7,100 and $5,900 still remains possible.
Should price-action on BTCUSD hold above the $8,600 level we may see a correction towards $9,100 and $10,050.
BOE BULLISH ON RATES
The Bank of England kept interest rates on hold at 0.50 percent as expected this week, however, Bank of England policymakers surprised most market participants with bullish commentary on future UK interest rate hikes. The BOE Minutes suggested that UK interest rates will have to rise faster than the Bank of England had previously expected, as UK policymakers gave a decidedly upbeat assessment of the global economy. The British pound raced higher against a basket of currencies following the BOE Policy Statement, with the GBPUSD and GBPJPY pairs looking to erase weekly trading losses.
The GBPUSD pair remains bullish while trading above the 1.4000 level, further upside towards 1.4100 and 1.4180 may occur.
Should price-action on the GBPUSD pair trade below the 1.4000 level, key technical support is located at the 1.3930 and 1.3775 levels.
COMMODITY CURRENCIES FALL
Commodity currencies came under heavy selling pressure this week, as the risk-off trading sentiment spreading through financial markets hurt the value of commodities, such as Iron Ore, Gold and Palladium. The price of West Texas Intermediate and Brent Oil fell sharply lower, hurting the Canadian dollar's value, as the Canadian economy remains highly correlated and dependent to the price of Oil. The AUDUSD and NZDUSD pairs also slumped lower on the broader commodity market decline, with both the Reserve Bank of Australia and Reserve Bank of New Zealand talking down the need for immediate rate hikes in the first half of the year.
The USDCAD pair remains bullish while trading above the 1.2450 level, further gains towards 1.2650 and 1.2840 appears likely.
Should price-action on USDCAD pair start to trade below the 1.2450 level, sellers may push back towards the 1.2350 and 1.2280 levels.