Rising prices in Bitcoin and US stock markets have finally cooled down as the market’s attention turns away from President-elect Trump to US CPI data which will be released today and is expected to show an increase in the annualized rate.
- The ‘Trump Trade’ has finally begun to cool down after driving Bitcoin and all the major US stock market indices such as the NASDAQ 100 and the S&P 500 to new all-time highs. Bitcoin briefly traded above $90,000 yesterday, but all these assets have begun bearish retracements. This is partly due to the rally naturally needing a break, and partly due to the market’s attention turning towards two other factors:
- Stock markets outside the USA have fallen to their lowest combined market capitalisation in 3 months, driven lower by fears of President-elect Trump’s protectionist agenda which is extremely likely to involve the US imposing new tariffs on imports.
- There will be a release of US CPI (inflation) data today, which is expected to be stubbornly sticky after a year or so of dramatic falls from its high at around 9%. The month-on-month CPI is expected to be at 0.2%, just as it was last month. If that turns out to be correct, we will see annualized inflation rise from 2.4% to 2.6%.
- In the Forex market, the US Dollar is standing out, driven higher by the election of President Trump and the Republican victory in both Houses of Congress. The US Dollar Index has risen to a new 2-month high, and is threatening to make a bullish breakout beyond the key horizontal resistance level at 105.81 which is confluent with the upper trend line of the consolidating triangle chart pattern which has contained the Dollar for a long time. The greenback has been the strongest major currency since today’s Tokyo open, while the Japanese Yen has been the weakest, putting the USD/JPY currency pair in focus, although the values are relatively low so may not be relevant. The EUR/USD currency pair looks very bearish and traded at a new 1-year low yesterday and is close to reaching my definition of a stable long-term bearish trend worth following, while the GBP/USD, and USD/CHF currency pairs are continuing to trade at multi-month highs in the US Dollar, with the USD/CAD currency pair trading yesterday at a new 2-year high.
- Australian Wage Price Index came in a fraction lower than expected, at 0.8% over the quarter compared to 0.9%.
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