Dollar edges up, euro breathless as Brexit deal may be near

The dollar edged up on Friday, on track for a weekly gain against a basket of currencies, as the passage of a bill to temporarily extend U.S. government funding raised investors’ optimism that a tax reform bill would also pass.

The euro inched down 0.1 percent to $1.1766 EUR=, around its lowest levels since Nov. 22, as traders waited to see if British Prime Minister Theresa May has finally clinched an elusive deal with Irish and EU officials on how they would run their post-Brexit land border on the island of Ireland. 

An agreement would remove the last obstacle for opening free-trade talks with the European Union. May is likely to meet European Union chief executive Jean-Claude Juncker before dawn (0600 GMT) in Brussels. 

The euro was on track to shed 1.1 percent for the week, but is still up nearly 12 percent so far in 2017. 

Forex traders were also awaiting the closely watched U.S. non-farm payrolls report later in the day, which is expected to show 200,000 new jobs were created in November, according to a Reuters poll.

The number of Americans filing for unemployment benefits unexpectedly fell last week to 236,000, data showed on Thursday. 

What Drives Bitcoin

FM NEWSLETTER

The media has been full of conversation regarding bitcoin bubbles, and crypto-mania, we are looking higher and see $14,000 plus over the next few months provided the September 15th low holds. 

We could even make an argument for extensions to just over $20,000.

We think that before we see those figures, we are looking for an interim top in the $6650-$7250 region. This will gives us an entry point at the $4000-5000 region.
 
We would like to remind you that these are general guidelines, whereas we look for more specific targets in real time as we analyze the market through the day.
 
All this should not be a surprise for those who track sentiment and know that a market can rally while bubble talk fills the news. At the same time, the people everywhere are slowly adopting bitcoin, and new crypto investors are being born every day.
If we are to believe rumors then Amazon could start accepting Bitcoin, and Apple and Google are building crypto payment systems into their browsers. Speculation is building upon expected mass adoption even while the ‘bubble maniacs’ warn.

Who is right? We don’t really care.

We do not try to be participators in sentiment but analyze it objectively, using the FM Wealth Management Wave analysis, with which we measure that sentiment with objective price measures.

So far, this method has kept us on the right side the bitcoin market, while taking profit at key long term targets, so we have funds to benefit during those inevitable deep corrections.

What Drives Bitcoin

So Bitcoin is worth over $6500? Yes, that was the price traders are bidding for Bitcoin at the time this article was written.

Fundamental oriented stock traders tend to use ratios like Price to Book, Price to Sales Price to Earnings or Price to Earnings to value stocks. If you attempt to apply any of the above mentioned methods, you will quickly realize that you are missing values to insert to your formula, because assets, earnings, cash-flow don’t exist. So, basically, you’re out of luck.

But you will argue that Bitcoin is not a security but a currency so what if we analyze it as a currency. Current accounts of sovereigns, balance of payments interest rate differentials are all methods we read about and yet they are all useless here.

Next up to bat would of course be the popular behavioral economics. So we have to ask does bitcoin have ‘utility’, that abstract concept that gives an good or asset a value? This is subjective.

We submit to you that since there is no means by which to value bitcoin, or any other crypto currency, it is possibly the most purely sentiment driven market in existence. While investors may give subjective reasons for its value, there is no valuation model that is widely accepted. There are analysts attempting to do this, but even if accepted, would they work? We don’t think so.

While there is currently no objective means of valuing crypto currencies, there are no shortage people calling for bubble bursts and of course claims that the crypto mania is akin to the tulip mania of 1636-1637. Furthermore there is no shortage of of analysts saying that bitcoin will one day reach astronomical values. John MacAfee claims it will reach US$500,000 or he’ll make a spectacle of himself on TV. Yet he uses subjective arguments to make his claims.

How is it possible for one to trade something purely sentiment driven, with no means to valuation? FM Wealth Management wave analysis, coupled with our Fibonacci method, is proving reliable in determining price ranges, targets and supports for sentiment driven markets.
We start by looking at the history of bitcoin and its boom and bust cycles. We’ve ‘color coded’ past corrections with red, signifying 80%+ price corrections. Orange signifies 50-79% corrections, and yellow are corrections that are 25-49%.

 
If history is a guide, those people calling for Bitcoin to reach six or even seven figures in the future must expect brutal corrections. In fact the corrections in the Bitcoin market makes a stock market correction look like a walk in the park. On the other side, those calling for the bitcoin bubble to burst should not make the assumption that even if bitcoin gets a 90% haircut it is the beginning of its demise.

Booms and busts cycles equity markets are normal, but those in crypto can be extremely volatile, and you should expect it to happen again. The real question is when? The retail investor would do well to avoid these large drops, which can sometimes be prolonged. Likewise, they would do well to take profit at times of high risk to lock in gains.

In The Currency Market

In the currency market, the dollar has been losing its luster as the euro zone and a few other countries have been slowly winding back stimulus. 

The European Central Bank, which is buying 60 billion euro ($71 billion) bonds per month to shore up euro zone economies, is expected to unveil a plan to wind down the asset purchase program in coming months. 

The euro traded at $1.1845, after having risen to as high as $1.19105 on Wednesday, its highest level since January 2015. 

The common currency has strengthened sharply against the safe-haven Swiss franc, having gained more than four percent in less than two weeks to 1.1488 francs. 

The British pound held near its highest in almost 11 months against a broadly weaker dollar ahead of the Bank of England's "Super Thursday", which could shed light on how soon interest rates could be lifted. 

Sterling has been supported in recent weeks by expectations the bank might finally be getting ready for a hike after a series of hawkish comments from policymakers, though Governor Mark Carney could be more cautious. 

The pound last traded at $1.3221 , near Wednesday's 11-month high of $1.3250. 

The yen stepped back from Tuesday's 1 1/2-month high of 109.92 yen per dollar to trade at 110.69 yen . 

Oil prices dipped as a rally that pushed up prices by almost 10 percent since early last week lost its momentum, despite renewed signs of a gradually tightening U.S. market.

While strong demand in the United States supported prices, ongoing strong supplies from OPEC producers restricted further gains. 

Brent crude futures slipped 0.4 percent to $52.17 per barrel, still not far from Wednesday's high of $52.93, its highest level in 10 weeks.