The Week Ahead – Bitcoin

The Week Ahead – Bitcoin

Previous week: 27 February 2017 – 03 March 2017

Australian GDP q/q—1 March 2017 8:30 am

Australian GDP for the fourth quarter of 2016 came in at 1.1% which was an improvement on the third quarter which was -0.5%. The expectation was for growth of +0.7%.

Bank of Canada BOC Rate Statement and Overnight Rate—1 March 2017 11pm

Bank of Canada kept interest steady at +0.50% which was totally expected. It was a non-event.

Crude Inventories—Wednesday 1 March 2017 11:30pm

US crude inventories increased +1.5 million barrels last week, making it the 8th consecutive week of inventory build. US oil rig count increased another 7 to 609 from 602.

 

Coming week: 06 March 2017 – 10 March 2017

RBA Cash Rate and Rate Statement—Tuesday March 7th 2017 11.30am

Expectations are for interest rates to be kept unchanged at 1.50%. Although the Australian economy has picked up somewhat, I feel that it still requires a stimulative environment to ensure growth does not falter.

Crude oil inventories—Wednesday 8th March 2017 11:30pm

The fight between the Sheikhs and Shale continues.

ECB Minimum Bid Rate + Press Conference with Mr Mario Draghi

Consensus is for no change in monetary policy out of the European Central Bank. However, I am of the opinion that the European economy is improving and that will influence the tone the ECB will take. With that, I would not be surprised that the ECB hints that they may be tightening that monetary policy in due time. Tightening their monetary policy is in line with the Fed’s tightening stance.

Non-farm employment change + Unemployment rate + Average hourly earnings—9.30pm Friday 10 March 2017

It’s the first Friday of the month and that means Non-farm payrolls day. Expectations are for 185k jobs created (227k last) and for unemployment rate to drop another tenth of a percent from 4.8% to 4.7%.

Trade Ideas

Long EUR/USD?

When looking at the weekly chart of EUR/USD, we do see support comes in at the 1.05 to 1.0550 range. This is seen from the 3 weekly bullish pinbars formed at the 1.05 zone. Buying at 1.0550 with a 75 pips stop and targeting 1.08 or higher would give good reward to risk ratio.

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Fed members came out in droves this last week to jawbone the idea that March rate hike is highly likely. This has caused the market to massively increase their implied probability of a March hike which now stands at 79.7%. It stood at 26.6% just last week.  With all the hype of a March rate hike, EUR/USD does not seem to buy into that notion and was well bid on Friday all through to the close.

Consensus is for no change in monetary policy out of the European Central Bank. However, I am of the opinion that the European economy is improving and that will influence the tone and direction the ECB will take. The EU inflation rate (y/y) has been tracking upwards almost every month ever since it made a low of -0.2% in April 2016. It is currently at 2% (February 2017). The unemployment rate in the European Union made a high of 11% in March 2013 and had been steadily decreasing ever since. It currently stands at 8.1% (February 2017). Given the fact that the inflation rate is currently at 2% and that the ECB’s mandate is to keep inflation under 2%, is it not the right time to start tightening monetary policy to maintain their price stability mandate. Or is it? We see steady improvements made in price stability and the labour market.

 

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With that, I would not be surprised that the ECB hints that they may be tightening that monetary policy in due time. Tightening their monetary policy is in line with the Fed’s tightening stance.

http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

http://www.tradingeconomics.com/euro-area/inflation-cpi

http://www.tradingeconomics.com/european-union/unemployment-rate

 

Thoughts of the Week

BTC/USD

A picture speaks a thousand words. After breaking through $1000, bitcoin continues its march upwards. News agencies are getting all excited that bitcoin is now worth more than an ounce of gold. Will a bitcoin be worth more than a share of the Dow? The rally in Bitcoin, and now Ethereum, are testimonies on how much faith people place into fiat currencies that are issued by governments backed by trust of the people.

The amount of money printing done by the Federal Reserve, as reflected by the quantity of assets they hold, is just staggering. The amount of debt accumulated by the United States is just as shocking. The moral injustice of politicians borrowing from future generations to pay for the desires of today is just appalling and shows no sign of abatement.

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https://fred.stlouisfed.org/series/WALCL

https://fred.stlouisfed.org/series/GFDEBTN

 

 

 

 

 

The Week Ahead - Sheikhs vs Shale