Ethereum Path To Fresh Increase: Are Bulls Running Out Of Steam?

Titan FX

Economic

Cryptocurrency

Summary:

Ethereum found support near $3,100 and corrected some losses.

Key Highlights

Ethereum found support near $3,100 and corrected some losses.

ETH traded below a key bullish trend line with support at $3,680 on the daily chart.

Bitcoin price must settle above $100,000 to start a fresh increase.

XRP could gain bullish momentum if it clears the $2.50 resistance.

Ethereum Technical Analysis

Ethereum declined heavily from $4,100 like Bitcoin. ETH traded below the $3,500 and $3,350 support levels before the bulls appeared near $3,100.

Looking at the daily chart, the price remained well above the 100-day simple moving average (red) and the 200-day simple moving average (green). A low was formed at $3,092 and the price recently started a recovery wave.

There was a move above the 23.6% Fib retracement level of the downward move from the $4,105 swing high to the $3,092 low. Immediate resistance is near the $3,600 level.

The 50% Fib retracement level of the downward move from the $4,105 swing high to the $3,092 low is also near $3,600. The next major resistance is near the $3,720 level. A daily close above the $3,720 resistance zone could start another steady increase.

In the stated case, the price may perhaps rise toward the $3,880 level. The next stop for the bulls may perhaps be to $4,000 or a new all-time high.

On the downside, Ethereum might find support near the $3,220 level. The next major support is $3,150, below which the price could slide toward $3,100. Any more losses might call for a move toward the $3,000 level.

Looking at Bitcoin, there was a steady increase above the $95,000 level, and the price might continue to rise toward the $105,000 level.

Economic Releases

US Initial Jobless Claims – Forecast 218K, versus 220K previous.

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Justin

Economic

Forex

BENGALURU/BEIJING (Dec 26): The World Bank raised on Thursday its forecast for China's economic growth in 2024 and 2025, but warned that subdued household and business confidence, along with headwinds in the property sector, would keep weighing it down next year.

The world's second-biggest economy has struggled this year, mainly due to a property crisis and tepid domestic demand. An expected hike in US tariffs on its goods when US President-elect Donald Trump takes office in January may also hit growth.

"Addressing challenges in the property sector, strengthening social safety nets, and improving local government finances will be essential to unlocking a sustained recovery," Mara Warwick, the World Bank's country director for China, said.

"It is important to balance short-term support to growth with long-term structural reforms," she added in a statement.

Thanks to the effect of recent policy easing and near-term export strength, the World Bank sees China's gross domestic product growth at 4.9% this year, up from its June forecast of 4.8%.

Beijing set a growth target of "around 5%" this year, a goal it says it is confident of achieving.

Although growth for 2025 is also expected to fall to 4.5%, that is still higher than the World Bank's earlier forecast of 4.1%.

Slower household income growth and the negative wealth effect from lower home prices are expected to weigh on consumption into 2025, the Bank added.

To revive growth, Chinese authorities have agreed to issue a record three trillion yuan (US$411 billion or RM1.84 trillion) in special treasury bonds next year, Reuters reported this week.

The figures will not be officially unveiled until the annual meeting of China's parliament, the National People's Congress, in March 2025, and could still change before then.

While the housing regulator will continue efforts to stem further declines in China's real estate market next year, the World Bank said a turnaround in the sector was not anticipated until late 2025.

China's middle class has expanded significantly since the 2010s, encompassing 32% of the population in 2021, but World Bank estimates suggest about 55% remain "economically insecure", underscoring the need to generate opportunities.

Source: Theedgemarkets

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Justin

Economic

The first day of trading on the Guangzhou Futures Exchange saw prices for the solar-making material on the most-active June contract rally to their upper limit of 44,000 yuan a ton after producers pledged to cut output. The market ended 7.7% higher at 41,570 yuan a ton. A total of 331,253 lots changed hands, over 90% of them for June.

The bourse is offering seven contracts for delivery starting from June. The margin requirement is 9% of the contract value. Prices will be allowed to rise or fall by 7% from the previous settlement, after a swing of 14% was allowed on the first day.

China is the world’s biggest producer of polysilicon, used in solar panels, and the industry is struggling with a huge surplus that has seen prices tumble nearly 90% over the past two years. Like other parts of the solar supply chain, far too much capacity has been built relative to demand, which has slashed profitability.

Polysilicon makers have responded by reducing output, including unspecified cuts announced this week by two of the biggest producers Tongwei Co. and Xinjiang Daqo New Energy Co.

China is betting on clean tech to drive economic growth, and the Guangzhou exchange has found success trading other green materials such as lithium, used in electric vehicle batteries, which launched last year. Polysilicon options contracts will be added on Dec. 27.

Source: Bloomberg

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Brookings Institution

Economic

Markets are focused on the European growth model, which is suffering after Russia’s invasion of Ukraine. The damage caused by the loss of access to cheap Russian energy is material, but there is a deeper, structural reason why Europe lags the U.S. in the post-COVID recovery. Lack of fiscal union and debt overhangs mean countercyclical stimulus is insufficient after every adverse shock, which is why Europe also lagged the U.S. recovery after the global financial crisis. Fiscal union will require hard compromises on debt and transfers, without which the risk is high that the eurozone heads for Japanification, where high debt is sustainable—amid low growth—only due to central bank yield caps.

Structural drivers of European weakness

Eurozone underperformance vis-à-vis the U.S. is nothing new. The global financial crisis in 2008 set the stage for a decade of underperformance, with GDP in absolute (Figure 1) and per capita terms (Figure 2) falling increasingly behind the U.S. The distinction between headline and per capita growth is important, because U.S. outperformance often gets linked to faster immigration. That is clearly not the principal driver, as U.S. outperformance remains substantial even in per capita terms.

Structural Drivers of Eurozone Underperformance_1

Structural Drivers of Eurozone Underperformance_2

Instead, the lack of fiscal union is the true—and structural—reason for eurozone underperformance. Together with debt overhangs in Italy, Spain, and increasingly France, this means there is insufficient stimulus after every shock because the currency union descends into wrangling over how to pay for stimulus when bad shocks hit. Figure 3 shows how this played out during the 2008 crisis and the COVID-19 shock. In both cases, the eurozone general government deficit widens less than elsewhere (Figure 3), while indebtedness also rises by less (Figure 4). Of course, joint EU debt issuance during the COVID-19 pandemic marks a big step forward, but that joint issuance was a one-off and is highly contentious. As a result, because countercyclical stimulus will remain too small, permanent scarring and hysteresis will keep arising from what should be cyclical disruptions.

Structural Drivers of Eurozone Underperformance_3

Structural Drivers of Eurozone Underperformance_4

Hard compromises are needed in the eurozone North and South to make fiscal union happen. An equitable fiscal union means countries should enter with similar levels of government debt. That condition is clearly not met in the eurozone, where debt stands at 40% and 60%, respectively, in the Netherlands and Germany, while it lies at 110%, 140%, and 100% in France, Italy, and Spain, respectively. As our most recent blog post noted, there is ample private wealth in high-debt countries that could be taxed to reduce public debt levels. Such a tax could be made progressive, i.e., could be linked to household incomes, and would signal to financial markets that debt reduction is now a policy priority, which in and of itself would help preserve market access in bad shocks without having to rely on emergency bond purchases by the European Central Bank (ECB).

Political resistance to wealth taxes is high, of course. This resistance reflects popular perception that the probability of crisis is low, which is true as long as the ECB stands ready to cap yields whenever bad shocks hit. The ECB acted this way mid-2022, when rising inflation drove global yields up, and has since introduced its new transmission protection instrument (TPI). The TPI allows the ECB to cap yields with no ex post conditionality, unlike Draghi-era outright monetary transactions (OMT) with IMF-style conditionality, which TPI has de facto replaced. Prospects for fiscal union are therefore—unfortunately—inversely linked to the role the ECB plays in sovereign debt markets: The ECB keeps debt crises at bay, at the cost of making needed reforms less likely.

Heading for Japanification

Without a grand bargain on debt and fiscal union, the eurozone is at serious risk of Japanification. This is an equilibrium of low growth and high debt, where only central bank yield caps ensure debt is sustainable. Already, the profile of ECB sovereign bond buying resembles that of the Bank of Japan much more than that of the Fed (Figure 5), with cumulative purchases—measured as the share of outstanding government debt—exhibiting the same upward step function as in Japan (Figure 6), in contrast to the Fed, where sovereign bond holdings have a more cyclical and stable pattern. The growing role of the ECB in debt markets risks locking the eurozone into the low-growth equilibrium that has prevailed in Japan for a long time. Structural Drivers of Eurozone Underperformance_5

Structural Drivers of Eurozone Underperformance_5

Structural Drivers of Eurozone Underperformance_6

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Cohen

Economic

Key players, worth trillions of won in corporate value — including subsidiaries of major conglomerates — are aiming to go public in 2025. However, according to market watchers on Thursday, it remains uncertain whether they can revive the current slump in market sentiment.

LG CNS is among the most anticipated initial public offerings (IPO) of 2025. The information technology subsidiary of LG will commence its IPO process next month, starting with demand forecasting for institutional investors. The offering is projected to raise up to 1.19 trillion won ($812 million), making it the largest public offering in three years since LG Energy Solutions.

Lotte Global Logistics, a logistics subsidiary of Lotte, plans to proceed with its stock market debut upon receiving the Korea Exchange's review results later this month. The company is targeting a market capitalization of 1 trillion won.

Other companies cautiously timing their IPOs, including Kbank, Seoul Guarantee Insurance (SGI) and DN Solutions, are also preparing for public offerings during the first half of 2025.

The subdued end-of-year IPO market has bolstered the interest of companies in pursuing IPOs next year.

In the first quarter of this year, newly listed stocks posted an average first-day return of 119.93 percent. This figure dropped to 65 percent in the second quarter and further declined to 22.99 percent in the third quarter. By November, the trend has reversed entirely, with newly listed stocks recording a 9.58 percent loss.

"The overheated IPO market has lost its momentum and entered a cold spell (in 2024)," an industry official said. "Several companies that are financially and operationally strong prepared for listings in the second half (of this year), but many have postponed their public offerings due to weakened investor confidence."

In October, Kbank, an internet-only bank, delayed its IPO process for the second time, citing weaker-than-expected investor interest. DN Solutions and SGI, despite receiving preliminary approval from the Korea Exchange, have postponed submitting their securities registration statements, citing unfavorable domestic stock market conditions.

Whether IPO market sentiment will improve in 2025 remains uncertain. Recent political developments, including the botched imposition of martial law and the subsequent impeachment of the president, have further eroded investor confidence.

Market watchers believe LG CNS' listing next month will set the tone for the IPO market in the first half of 2025.

"Rising market volatility is causing retail investors to lose interest in the IPO market," Eugene Investment & Securities analyst Park Jong-sun said. "The trend of distinguishing between strong and weak stocks has intensified."

Source: Koreatimes

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Alex

Economic

Stocks

BENGALURU (Dec 26): Emerging Asian currencies were mostly lower against a resilient dollar and stock markets weaker on Thursday, as investors continued to focus on the Federal Reserve's rate cut path in a holiday-thinned trading week.

The South Korean won, which is among the worst performing Asian currencies this year amid domestic political turmoil and US President-elect Donald Trump's tariff threats, fell as much as 0.6% to it lowest level since March 2009.

The Thai baht fell 0.3% and China's yuan hovered near a 13-month low, not far from the psychologically important 7.3 per dollar mark.

The Indian rupee dropped to a lifetime low.

Poon Panichpibool, a markets strategist at Krung Thai Bank said the impact of Trump 2.0 policies could support the US economy and keep the dollar strong under the "US exceptionalism" theme, exerting more selling pressures on EM assets.

The won, baht and Malaysian ringgit are considered more vulnerable to Trump's policies because of the countries' export-driven economies and sensitivity to China's growth.

Panichpibool added that the Fed's policy rate outlook was also significant because of its potential impact on Asian central banks' monetary policy decisions and rate differentials between the currencies.

Last week, Fed policymakers lowered their rate cut projections for 2025 to 50 basis points from 100 basis points, and raised their inflation forecast.

Markets are now pricing in only about 35 basis points of easing for 2025, which sent US treasury yields surging, and the dollar near a two-year peak.

Higher US rates could create problems for emerging markets, including capital outflows, currency weakness, inflation and volatility.

The central banks in Indonesia,Thailana, and Taiwan kept rates steady last week to address currency and global economic uncertainty concerns, while the Bangko Sentral ng Pilipinas cut rates.

Among other currencies, the Philippine peso rose 1.1% and was on track for its best day since November 2023. The ringgit, the only Asian currency to log a yearly gain this year, rose 0.4%.

Equities in Kuala Lumpur gained 0.5%, while those in Manila, Singapore and Bangkok lost between 0.1% and 0.2%.

Markets in Indonesia were closed for a holiday.

Source: Theedgemarkets

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Owen Li

Cryptocurrency

Economic

(Dec 26): Bitcoin rose on Thursday after the digital asset’s stockpiler MicroStrategy announced a plan to issue more shares, a move that would allow it to buy even more tokens.

The digital asset was up 0.32% at US$98,747 (RM441,276) as of 11.30am in Singapore, off its intraday high of US$99,876.70. A broader gauge of cryptocurrencies comprising smaller tokens including Ether, Solana and meme-coin favourite Dogecoin was up 0.2%, recovering from losses on Wednesday.

“The announcement that MicroStrategy will issue more shares next year to buy more bitcoin is pushing up the prices,” said Sean McNulty, a director of trading at liquidity provider Arbelos Markets. “The market is being forward looking about MicroStrategy’s bitcoin buys, and that’s been the single biggest reason for market to go up. Watching MicroStrategy news is becoming a big part of my day.”

MicroStrategy Inc is seeking permission to increase the number of authorised shares of Class A common stock and preferred stock, according to a Dec 23 filing with the US Securities and Exchange Commission. Such a move would provide the company, which has transformed itself from a software maker into a bitcoin accumulator, more firepower.

MicroStrategy announced earlier this week it had purchased an additional US$561 million of the digital token at an average price near last week’s record high. That marked the seventh week in a row of purchases.

Bitcoin Gains On Microstrategy’s Plans To Issue More Shares_1

Bitcoin has risen 135% so far this year, exceeding returns from traditional investments such as global stocks and gold.

Some traders cautioned that markets could turn volatile in the coming day on massive expiries of open interest in bitcoin and Ether derivatives.

On Friday, a record US$43 billion of open interest including US$13.95 billion in bitcoin options and US$3.77 billion in Ether options will expire on derivatives exchange Deribit.

“Market makers could unwind their hedges and short bitcoin strikes which might make it a choppy market on Friday,” McNulty said.