Reading: Escalation Overflow

Mati

Escalation Overflow

Mati Greenspan | Jun 19, 2018 | 18:00

Mati

Escalation Overflow

Mati Greenspan | Jun 19, 2018 | 18:00


Financial markets appear to be reacting to the latest escalation in the trade war between the U.S. and China.


eToro - Trump China Tradewars

It now appears that the United States may have the upper hand due to the wide trade imbalance between the two nations. Indeed, it would be very difficult for the Chinese to find $200 billion worth of US imports to curtail.

eToro - Tariffs

Under the circumstances, I guess you could say that markets are holding up pretty well, as we’ll see below. Even though the declines are sizeable, this doesn’t come close to the volatility we saw in February.

President Trump’s approval ratings are now as high as they’ve ever been despite outrage over recent hardline anti-immigration actions that saw authorities separating more than 2,300 children from their parents.

eToro - Trump approval rating

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Stocks Minor Sell-off
  • What Brexit Negotiations?
  • Crypto Off the Lows (Focus on ETC)

Traditional Markets

Looking at the financial markets today it seems there is a bit of fear creeping in.

The Chinese stock market is down 3% and the Japanese market isn’t far behind with losses of 2.5%. Though these are quite substantial movements for any stock index, by putting things in context on the long-term chart we can see that it’s not the end of the world.

Please notice how in February, before the whole trade tensions began, the stocks experienced a much sharper sell-off.

eToro - Traditional Stock Market

On this chart of the VIX we can also see that even though volatility spiked yesterday, it’s still way below the levels seen in early February.

eToro - CBOE VIX

What is becoming more pronounced lately is the domination of the US Dollar. The Greenback seems to be rising against just about everything over the last few months.

eToro - USD 3 Months

Here we can see the strength of the British Pound against the Buck since the Brexit referendum in 2016. We’re testing a critical level now at 1.3200.

eToro - GBPUSD Chart

Please don’t make the mistake of thinking that this has anything do with the recent UK government uncertainty either. No matter the level of pressure Theresa May is under, the fate of the Pound may be more reliant on what happens with the US Dollar than on anything else.

As we can see above, the Euro and the Pound have both been pretty weak this quarter. To illustrate this further, take a look at the EURGBP, which hasn’t moved much over the last year.

eToro - EURGBP Chart

Crypto Bounce

Digital assets pricing is up 2% to 4% across the board as the market shows exceptional resilience to the FUD.

Bitcoin itself has bounced noticeably above the support of $6,100 per coin and is trading above $6,700 this morning.

Outperforming the market by far is Ethereum Classic, which has seen some remarkable progressions lately in usability and liquidity. ETC is up 8% over the last 24 hours, which is more than any other widely circulating cryptocurrency.

For the first time ever, we can see that Google searches for Ethereum have surpassed those of Bitcoin Cash, the other famous hard fork coin.

eToro - ETC Interest over time

Most interesting is the search trends in South Korea, where ETC now trumps BTC.

eToro - ETC Search Trends

Looking at the long-term graph, we can see that at $15.33 per coin we’re well off the lows of $12.50, yet nowhere near the highs seen at the beginning of 2018.

eToro - ETC Price Chart

Let’s have an amazing day ahead!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Best regards,

Mati Greenspan
Senior Market Analyst

Connect with me on…

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Twitter: https://twitter.com/matigreenspan
LinkedIn: https://www.linkedin.com/in/matisyahu/
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Images courtesy of eToro


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