Turkish Interest Rates; Bitcoin Spike Down
eToro | Jan 24, 2017 11:02
Today's Highlights
Russian Intervention
Turkish Interest Rates
Bitcoin Spike Down
Please note: All data, figures & graphs are valid as of January 24th. All trading carries risk. Only risk capital you can afford to lose.
Market Overview
It seems DJ Trump, like a new born horse, is on wobbly legs so far. The markets have decided to give him a grace period, after all these are some radical changes he wants to make and his cabinet hasn't even been fully sworn in yet.
We're seeing equities declining slightly across the globe as long term investors search for safer ground. Gold was seen as high as $1220 this morning and the USD/JPY has been testing 112.50, a sure sign that risk is coming off the table very slowly.
Just as I'm writing, we are seeing a strong dollar swing. Things could change very quickly if people start getting the feeling that a strong dollar is back on the table. Let's see where this goes.
Intervention from Russia
One of the most volatile currencies of the past few years has been the Russian ruble. Of course, the Russian Government led by Vladimir Putin is not very pleased with this, especially because when the currency strengthens too fast it makes it difficult for Russian exporters.
The issue is that the currency for too long has been tied to the price of oil. Now that oil has stabilized above $50 a barrel and the USD/RUB is threatening to break below 59 rubles to the dollar, the Ministry of Finance is considering stepping in.
This morning, Bloomberg put out an article that makes an intervention look even more likely.
However, on Friday the Bank of Russia put out a statement saying that there is no way they will intervene to soften the ruble and that the troubles of the exporters are none of their concern.
The USD/RUB is moving quickly at the moment, so we need to consider the following two things.
1. Is there an argument between Putin's government (the ministry of finance) and the central bank (Bank of Russia)? If so, in an argument who wins? The Central Bank is normally the entity that would perform this type of intervention, but in Putin's Russia, well, we'll see.
2. Is the Bank of Russia simply lying through their teeth? Always remember the Francogeddon of January 2015, when the Swiss National Bank intervened in the markets causing some of the largest currency swings in modern history. The SNB was quoted just two weeks before as saying that nothing would change.
Turkish Interest
Even more volatile than the ruble is the lira. The Turkish economy has been on a roller coaster ride since before the war broke out in Syria. Now that they have a President who is very close to taking supreme power over the country and turning it into a dictatorship, the USD/TRY is bouncing around like a Mexican Jumping Bean, and has been more volatile than even the peso.
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Today the Turkish Central Bank is expected adjust to their interest rates in order to stabilize the sinking currency.
Just to get a picture of how fast this is moving, take a look at this chart of the last 6 months where we can see it going from 2.90 liras to the dollar all the way up to 3.90, an incredible loss of value and an incredible trading vehicle.
The announcement will come at 11:00 AM GMT, so keep an eye on the TRY at that time.
Bitcoin Oops
Early this morning in China, when the west was still sleeping, we saw a plunge of about $30 in the price of bitcoin. A full recovery came just a few hours later, but this is certainly a cause for concern...
If we're going to see the full implementation of bitcoin, we're really going to need to see some price stability. I mean, it's fine when things go up, but a move down like this is going to make a lot of investors nervous.
At this point, our clients who are holding for the long term are wondering if it's time to take some profits off the table, while the short term traders want to wait until the price breaches $925 before getting back in.
This leaves us with the most likely range of $120, from $800 to to $920 a coin. Personally, I wouldn't short bitcoin, it's already a high risk asset and going short only adds to the risk, but at the moment, we have only 93% buying. So at least 7% of the BTC network in eToro are going there.
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