Speculators and users of Bitcoin will today have an opportunity to see whether Bitcoin price is influenced by global market news. In what is being described as the “most import NFP day” this year, markets are eagerly anticipating the US Non-Farm Payroll figures at the start of the US trading session.
From the analysis pages of xbt.social, earlier today:
Bitcoin price charts are in a bearish technical condition as price declines below both the 20-period and 200-period moving averages in the medium-term 4-hour chart.
The shorter-term Bitcoin charts have all made a push higher from a low earlier today. It is not yet clear if the wave is merely corrective – prior to more downside – or if the bottom is in and price is now pushing higher. We need more price action to determine the wave structure, and a global data release may be the catalyst.
Today is a big day in global markets. Its NFP Day – US Non-Farm Payrolls – a key metric in measuring the health of the labor force: the change in the number of employed people during the previous month, excluding the farming industry. July NFP was +222k and a strong (improving) figure today will increase market expectations that the Fed will increase rates in September. The data release will see many shifts across bond, forex and commodity markets as participants reposition in expectation of a stronger US dollar.
The key thing to remember is that the dynamic is based on expectations – it is thoroughly rooted in market psychology -and has nothing to do with what the Fed will eventually do. The Fed may be well aware of the terminal threat of deflation that a rates rise will initiate – and they may simply be pulling the market by its nose-ring – with no intention of raising rates this year. On the other hand, it is also plausible that the Fed is willing to take the risk of increasing rates with some other tactic up its sleeve. Central banks have often made the wrong policy call at exactly the wrong moment.
If today’s NFP figures are positive, then it will imply more certainty of a rates hike, and therefore a stronger US dollar. Dollar-tied forex pairs will move accordingly, with the euro weakening, the yen weakening, the Australian dollar weakening, etc. Dollar strength also has the effect of pushing commodity prices down: gold, oil, wheat, etc. Money could start flowing from foreign investments back into the US economy and with it all markets are affected: foreign equities and bonds should experience disinvestment (especially the emerging markets) while US stocks could rally.
A disappointing NFP release will have unknown effects but presumably see markets unchanged in the uneasy “new normal” status quo.
The effect (or not) on the Bitcoin chart will be interesting. Bitcoin is not tied to the US dollar in any way, so movement in the US dollar index does not have a direct proportional effect on the Bitcoin exchange rate. Contrast this to the dollar/yen exchange rate: the yen is linked to the dollar via the US dollar index, as well as the two currencies’ relative weight in the IMF’s global SDR. Changes in one currency’s value affects the other’s relative value and the outcome is visible in their charts.
Bitcoin has no such links and floats freely in the market – it is merely priced in fiat currency by the centralized exchanges. Let’s see what happens today – it will be an indication of Bitcoin’s global role and of the extent to which the largest Bitcoin players think Bitcoin is useful during the coming economic upheavals.
The near-term outlook for inflation is muted and the falls in energy prices over the past few months will continue to bear down on inflation at least until the middle of next year. Nonetheless, a range of measures suggest that medium-term inflation expectations remain well anchored. – BoE Governor Carney
Bitcoin is at the edge of a precipice. Buyers can pull price higher and back above the 4-hour 200-period moving average, but if seller grasp the opportunity we could see Bitcoin back in medium-term decline. The US NFP data release and its implication for global interest rates and US dollar strength, may prompt large Bitcoin speculators to show their current stance in relation to the successor of fiat currency.
Bitfinex orderbook depth and Buy/Sell Volume:
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