Morning Trading Notes February 5: Cryptocurrency collapse continues, stocks stabilize to start the new trading week

February 5, 2018, 6:25 am EDT

The cryptocurrency crash that started last week continues into Monday as the Bitcoin bubble continues to burst. Bitcoin and Ethereum are both down another 4% today breaking under 8,000 and 800 respectively. News that major US banks are no longer allowing customers to purchase cryptocurrencies using credit cards is the latest in a wave of regulatory decisions, warnings and crackdowns that have made the cryptocurrency market less attractive to speculators that it was a few months ago.

Stock markets are spending Monday trying to pick up the pieces following Friday’s big declines. The market has been long overdue for a big correction but it’s still a bumpy ride. Asia Pacific and continental European bourses have continued to lose ground overnight, but US markets have started to stabilize. So far in the US, hammer and doji candles have been forming indicating that selling pressure has started to fade and bargain hunters may be stepping in. Action around the US market open at 9:30 am EST will give a better indication of whether the correction has run its course or still vulnerable to another wave of selling pressure.

Jerome Powell takes over as Fed Chair today and so far trading in currency and treasury markets has been steady. The US Dollar index remains stuck below 90.00 with most of the major pairs holding steady. The Japanese Yen is attracting some interest with USDJPY breaking under 110.00 despite indications that the Bank of Japan plans to remain dovish from Governor Kuroda overnight. The Euro could be active mid-morning with ECB President Draghi set to speak at 11:00 am EST.

Tonight the Australian Dollar could be active with the RBA set to hold its first meeting of the year. While no moves are expected on interest rates, the statement could be closely scrutinized with traders looking for indications of when Governor Lowe may be planning to start raising interest rates, particularly after the Bank of Canada raised rates for a third time last month. Australian inflation fell to 2.0% from 2.3% last month but overall, inflation pressures have been rising. Speculation around the street of late has been that the RBA could raise rates a couple of times this year, starting in a few months.

The economic data calendar this morning has been dominated by Service PMI reports from around the world. Australia, China and Germany have come in better than expected while the UK disappointed. The US report is due at 10:00 am EST with the street expecting the ISM reading to rise to 56.5 from 56.0.

Earnings season in the US and Canada today takes a break but there are still a lot of companies left to report results on both sides of the border in the coming days and weeks. Metal stocks could attract some interest with gold, silver and copper all bouncing back overnight. Crude oil is steady today with WTI near $65.00 and Brent trading near $68.00.

 

This article is intended as general market commentary, based on sources considered to be reliable but could contain unintended errors. Commentary, estimates and charts are provided for information, education and entertainment purposes. They are not as and should not be construed in any way as investment advice. The authors assume neither liability nor credit for returns from readers’ trading or investment activity. We do not accept any remuneration from companies mentioned in this report. The authors or related parties may enter or exit short term trading positions in markets mentioned in this report at any time without notice. Some of the charts used in this commentary are based on Forex and Contracts for Difference (CFD) markets; leveraged products which carry a higher degree of risk and may not be suitable for all investors. CFD trading is not available in the United States of America. Copyright 2018 The Fundamental Technician, all rights reserved.

 

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