H2 to see shift to fundamentals
As if the first half of the year hasn’t been tough enough on those relying on technical analysis to make money trading currencies, the second half looks set to see a move away from technicals with, mainly, political issues set to exert a greater influence particularly over the pound and euro.
The new Italian Government is unlikely to allow Brussels to continue to meddle in domestic matters and there are rumours that the coalition will revisit the plans that were first hatched during the campaign of a new currency that could be used purely for domestic matters.
The treaty that brought the common currency into being specifically disallows and member of the Eurozone from issuing any currency other than the euro, but the Italian Ministry of Finance would circumvent that rule by ensuring that the new currency does not hold a specific Government guarantee merely an implied one.
In the UK there are rumours circulating of another General Election to take place in the Autumn as the Prime Minister, Theresa May, now sees the issues of Brexit as having become insurmountable. This week’s data on inflation and growth will also go some way to confirming that the economy continues to falter.
Euro liquidity spreading to other currencies
At the advent of the euro in 1999, it was felt by banks that the sheer volume of trades that would be seen in the new currency would lead to a stagnation as liquidity out grew flow.
The growth in the global economy since that time coupled with the number of countries that see the euro as their own, means that although that event has taken twenty years to arrive it is finally with us.
The ordered state of the market in the single currency owes itself to the advances in technology in the first twenty years of the new millennium as much as growth in the liquidity the mere fact that the common currency now regularly trades to five decimal places is testament to the development of algo’s which now dominate the market.
It seems that just about every pip trades now, gaps must almost be considered a thing of the past, other than on a European Sunday night and the market is better for it according to users rather than speculators. Finding value with similar risk to G7 markets is an impossible take although the growth in volume seen by the CAD, AUD and NZD means that traders are starting to seek out value while maintaining a strong risk profile.
What does the Bitcoin base tell us?
In any FIAT market the incredibly strong support that has built around the low being made by Bitcoin again and again over recent weeks/month would have signalled a significant buying interest, possibly a hedge fund or even a Central Bank adding its support.
In what is an immature market which so far reacts in an “untraditional” manner, the reason for the continued support has more to do with the type of investor who is clinging on to his Bitcoins often in the face of strong selling into any rally.
It is what has been called FOMO, fear of missing out. There is clearly a hardcore of serious investors who see the merit in buying and holding Bitcoin and they support the market buying up small parcels at what they see as advantageous levels around $8k. However, any significant sale on the approach to this level may have a disastrous effect since the price is purely based on supply and demand and other than those with an interest to buy, there is no “official” interest in the fate of the “currency”.
In fact, there is nothing to say that Bitcoin won’t fade into oblivion as a new coin that is both more acceptable and less of a drain on natural resources to mine rises in prominence.
