Blue Wave Confirmed, Bitcoin Tops $36k
The Democrat Party finalised their ‘blue wave’ after effectively taking control of the Senate for the first time since 2015. With both Jon Ossoff and Raphael Warnock winning seats in the Georgia runoff, it gave Republicans and Democrats a 50-50 split of the senate. And under such circumstances it is the Vice-President-elect Kamilla Harris who will cast the tie-breaking vote to give Democrats the 51 required votes for their majority.
Yet it is an unusual day in American politics. Vice President Mike Pence certified the election results, despite Trumps pleads not to. And hundreds of pro-Trump supporters stormed capitol hill in an attempt to overturn the election results, prompting police and the National Guard to be called in to defuse the situation. President-elect Joe Biden has likened these actions as an ‘insurrection’ and not a protest.
Once again, commodity currencies NZD/USD and AUD/USD led the stampede against a weakening US dollar as traders continued to bet on a global economic recovery in 2021. NZD/USD reached a high of 0.7315 and now resides just beneath the 73c handle, AUD/USD sits around 78c and both are around 2.5 year highs.
Cryptocurrencies were broadly higher and bitcoin (BTCUSD) topped $36k as its relentless bullish trend marched higher. Yet with bitcoin trading at just dizzy heights and one of the least affordable financial assets around, traders are also snapping up ethereum (ETHUSD) and ripple (XRPUSD) which are much lighter on the pocket.
Today’s Calendar Events (Times are GMT+11 Sydney)
ISM Non-manufacturing (services) is the main economic calendar event in the early hours of tomorrow. Considering that manufacturing has PMI has accelerated to a 2.5 year high (and the markets liked it) then we would expect another positive reaction from markets if services PMI is also strong. AUD/USD and NZD/USD are trending higher on the back of global recovery hopes, but US indices also warrant a look for traders reacting to the news. Of course, the reverse is also true as a surprise weak print could send indices, AUD and NZD lower.
AUD/USD: Higher on Global Recovery Hopes
The Australian dollar hovers around the 78c handle and near 2.5-year highs. The daily and weekly trends have remained firmly bullish since its March 2020 low, and we see the potential for it to move higher. Hopes of a global recovery as vaccines are rolled out have underpinned bullish strength in recent weeks, although we note the rally has paused around the April 2018 high.
The hourly chart has found support around the 10 and 20-period eMA’s, prices are accelerating away from the bullish trendline and the price action is bullish overall. Yet at current levels we’d either want to see a retracement or breakout before entering a bullish position.
- The bias remains bullish above the trendline / 0.7762 low, but the 0.7780 can also be used to aid risk management.
- Bulls can either wait for a break above 0.7820 to signal a bullish breakout or wait to see if prices retrace closer to the trendline before considering long positions.
- A break of the trendline suggests a counter-trend move is underway on the daily charts.
Bitcoin (BTCUSD): Bulls Eye Fresh Highs (Again)
Bitcoin (BTCUSD) bulls continue to dominate the game, with overnight price action breaking through 36,000. Prices are consolidating just below its latest record highs to show compression is underway. And we note an elongated bullish candle which suggests a strong swing low sits at 34,330. However, as the previous record high at 33,653 has also provided support, it remains a pivotal level and acts as part of a support zone between 33,653 – 34,330.
- The bias remains bullish above the rising trendline / 34,330 low
- Bulls can consider longs with a clear break above 36,500
- A break beneath 33,635 assumes a counter-trend move against the daily trend is underway.
EUR/NZD: Bears Break Below Key Support
Key support broke overnight to see EUR/NZD sit at its lowest level since February 2020. Given the bearish structure on the weekly and daily chart, the bias remains for further losses.
Interestingly, the structure appears to be within the fifth wave of a 5-wave impulsive move lower. And the 161.8% Fibonacci projection from the end of wave 1 to wave 2 suggests wave 5 might stall around the Feb 2020 lows.
- Bears could fade into minor rallies below 1.6950 with a view to target 1.6785
- A break back above 1.6950 invalidates the near-term bearish bias, although technically the structure remains bearish below 1.7130 high.