European Update – Bitcoin surges after breakout

Chinese PMI boost short-lived

We appear to be seeing some profit taking on Tuesday, following a strong start to trade on Monday on the back of some encouraging Chinese PMIs.

Markets in Europe are mixed, with the FTSE 100 the outperformer among the indices, buoyed by a softer pound. US futures look a little flat, with the boost from the data proving short-lived. Perhaps this isn’t surprising, considering that this is just one month of data that may be an outlier. Sentiment can also quickly shift which can make the PMIs more volatile than other indicators. Still, at a time when everyone is worried about the global economy and a trade war between the world’s two largest economies, some good news and reports are always welcome.

Talks between the US and China also appear to be progressing well, which may have contributed to the improved sentiment among Chinese businesses. The negotiations may be taking longer than Trump envisaged but the most important thing is that terms are agreed and tariffs removed which in turn removes a huge amount of risk and uncertainty for the global economy.

EUR/USD – Euro under pressure, investors eye U.S. durable goods orders

Another day, another inconclusive vote

It’s now 10 days (again) until the UK possibly – but probably not – leaves the European Union and MPs can still not agree on what that means. A second day of indicative votes in Parliament, this time with only four options on the table, failed to find a majority in support of any model or plan. Not the ideal scenario when the default remains leaving with no deal on 12th April – an option MPs strongly oppose – and the most likely option is a long extension, something I’m sure the public won’t be thrilled about. It really is a mess.

EURGBP Daily Chart

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The inability of MPs to get behind anything is not rattling traders though, with the pound remaining volatile but still not heading south. If that happens, it would suggest the prospect of no deal has dramatically increased, which some are claiming it already has. If this is true then traders confidence in it being avoided may have left the pound very vulnerable. It’s now back to the cabinet, which is reportedly meeting for five hours this morning to discuss the next step, which – to the bewilderment of many – is expected to be more votes on the same proposals on Wednesday.

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Bitcoin surges to four and a half month high

It feels like a blast from the past when I look at a bitcoin chart this morning, with the cryptocurrency – which has been in consolidation mode and rather boring since November – soaring more than 20% in under an hour. If there was a catalyst for the move then it’s a well-kept secret right now which suggests there may be something more technical at play.

Bitcoin Daily Chart

Source – Thomson Reuters Eikon

Every time we’ve traded around $4,200-4,400 since late November, priced has peaked and headed south. Interestingly though, we have seen a series of higher lows in that time – which means traders are buying the dips higher each time. Whatever the catalyst was for the move above $4,400 this morning, the move was likely exacerbated by a combination of excited bulls and panicking sellers. The volatility may well remain in the coming days which will keep things interesting and if we can hold above $4,400 then it could be a near-term bullish signal, with $6,000 being notable resistance above.

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