The Federal Reserve's Pursuit of a 'reverse Wealth Effect' is Undermining Crypto

• USD/JPY extends Friday’s losses to challenge two-week uptrend.
• Chatters over BOJ’s rate hike gain momentum as dovish leader Haruhiko Kuroda nears retirement.
• US Dollar’s failure to cheer hawkish Fedspeak adds strength to the pullback moves.
• Risk catalysts, BOJ and the Fed’s preferred inflation gauge eyed for clear directions.

USD/JPY holds lower grounds near the intraday bottom of 135.77 as the Yen buyers keep the reins ahead of this week’s Bank of Japan (BOJ) monetary policy meeting. With this, the quote prints a two-day downtrend as traders anticipate hawkish signals from the Japanese central bank as the utter dove Governor Haruhiko Kuroda nears his retirement looming in April.

During the weekend, Reuters reported that Japan's government is set to revise a decade-old joint statement with the Bank of Japan (BOJ) that commits the central bank to achieve its 2% inflation "at the earliest date possible," Kyodo news agency reported on Saturday, citing government sources.

Following that, BOJ’s former deputy governor Hirohide Yamaguchi said, “Bank of Japan (BOJ) must make its monetary policy framework more flexible and stand ready to raise its long-term interest rate target next year if the economy can withstand overseas risks.”

However, the latest comments from Japan’s Chief Cabinet Secretary Hirokazu Matsuno challenges the USD/JPY bears while pouring cold water on the face of hawkish expectations from the BOJ. “The government hopes to continue working closely with the Bank of Japan (BoJ) to achieve sustained economic growth and price stability, based on the agreement made in the joint statement,” said Japan’s Matsuno.

On the other hand, the US Dollar Index (DXY) prints the first daily loss in three, down 0.20% intraday near 104.55, amid cautious optimism in the market. In doing so, the DXY struggles to justify the recently hawkish comments from Federal Reserve Bank of Cleveland President Loretta Mester and New York Federal Reserve President John Williams. The reason could be linked to Friday’s downbeat prints of the preliminary US PMIs for December, as well as the Fed’s 0.50% rate hike.

Elsewhere, the US Treasury yields portray recession amid hawkish Fedspeak and hence challenge USD/JPY bears amid a sluggish Asian session.

Looking forward, USD/JPY traders should pay attention to the risk catalysts, as well as BOJ-linked chatters in the market ahead of Tuesday’s Monetary Policy Meeting. Even if the Japanese central bank isn’t expected to alter the current monetary policy during this meeting, the hints for future moves could be enough to please the bears.

Technical analysis

A two-week-old rising wedge formation restricts immediate USD/JPY moves between 134.85 and 138.30.

Additional important levels

Article Source： FXSTREET

Bitcoin price declined heavily and traded below $17,000. BTC is consolidating losses and remains at a risk of more losses below the $16,500 support.

• Bitcoin started a fresh decline below the $17,200 and $17,000 support levels.
• The price is trading below $17,000 and the 100 hourly simple moving average.
• There is a key bearish trend line forming with resistance near $16,800 on the hourly chart of the BTC/USD pair (data feed from Kraken).
• The pair could continue to move lower unless it clears the 100 hourly SMA.

Bitcoin Price Tumbles

Bitcoin price restarted a fresh decline from the $18,400 zone resistance zone. BTC gained pace below the $17,500 and $17,200 support levels. The bears even pushed it below the $17,000 level and the 100 hourly simple moving average.

It tested the $16,500 support zone. A low is formed near $16,541 and the price is now consolidating losses. It climbed a few points higher and traded above the $16,700 level.

Bitcoin price is now trading below $17,000 and the 100 hourly simple moving average. On the upside, an immediate resistance is near the $16,800 zone. There is also a key bearish trend line forming with resistance near $16,800 on the hourly chart of the BTC/USD pair.

The first major resistance is near the $17,000 zone and the 100 hourly simple moving average. It is near the 23.6% Fib retracement level of the downward move from the $18,387 swing high to $16,541 swing low.

Source: BTCUSD on TradingView.com

A clear move above the $17,000 resistance might call for a move towards the $17,500 resistance. It is close to the 50% Fib retracement level of the downward move from the $18,387 swing high to $16,541 swing low. The next major resistance is near $17,800, above which the price might gain pace and rise towards the $18,000 level.

More Losses in BTC?

If bitcoin fails to clear the $17,000 resistance, there could be more downsides. An immediate support on the downside is near the $16,600 level.

The next major support is near the $16,500 zone. A downside break below the $16,500 support might call more losses. In the stated case, the price could decline towards the $16,000 support in the near term. Any more losses might send the price towards $15,500.

Technical indicators:

Hourly MACD – The MACD is now losing pace in the bearish zone.

Hourly RSI (Relative Strength Index) – The RSI for BTC/USD is now above the 50 level.

Major Support Levels – $16,600, followed by $16,500.

Major Resistance Levels – $16,800, $17,000 and $17,500.

Article Source： CRYPTONEWS

• NZD/USD prints mild gains to keep Friday’s recovery moves between 50-SMA and 100-SMA.
• Impending bull cross on MACD, sustained bounce off monthly support line keep buyers hopeful.
• 200-SMA, monthly resistance line act as additional trading filters.

NZD/USD grinds higher towards 0.6400, around 0.6385 by the press time, as buyers flirt with the 50-SMA during early Monday.

In doing so, the Kiwi pair defends the previous day’s rebound from the 100-SMA, as well as the recovery moves from an upward-sloping support line from November 17.

Given the impending bull cross on the MACD, as well as the quote’s repeated hesitance in breaking the 100-SMA, NZD/USD is likely to overcome the hurdle of 0.6392 level comprising the 50-SMA.

Following that, the run-up could aim for the 0.6400 and the 0.6500 thresholds before the monthly resistance line, around 0.6535 at the latest, could challenge the bulls.

In a case where NZD/USD manages to keep the reins past 0.6535, June’s top at around 0.6575 and the 0.6600 round figure will be in focus.

Meanwhile, the 100-SMA level surrounding 0.6345 precedes the one-month-long ascending support line, mentioned previously, to restrict the immediate downside near 0.6335.

It’s worth noting, however, that a downside break of the 0.6335 support could quickly drag NZD/USD prices towards the 200-SMA level surrounding 0.6200. However, any further downside appears bumpy.

NZD/USD: Four-hour chart

Trend: Further recovery expected

Additional important levels

Article Source： FXSTREET

The anti-crypto rhetoric has been ramping up in the United States. The latest lawmaker to deride the entire ecosystem is Senate banking chairman Sherrod Brown who suggested a full-out crypto ban.

Brown is an ardent anti-crypto campaigner, just like his Senate colleague Elizabeth Warren. The pair has been actively working to quash the entire crypto sector in the United States.

Sherrod Brown is the chairman of the Senate Banking, Housing, and Urban Affairs Committee. Over the weekend, he told NBC that the Treasury and all federal agencies should join forces to take action against the crypto sector.

He even went as far as suggesting a crypto ban in the country, according to a report by The Hill on Dec. 18:

“Maybe banning it, although banning it is very difficult because it will go offshore and who knows how that will work,”

A Crypto Ban Won’t Work

Waving angry fists at Bitcoin and its brethren will solve nothing, and neither will banning the embryonic asset class. The primary reason FTX split into two entities was that there is no regulatory framework in the U.S.

Traders and investors were forced offshore to an unregulated exchange that ultimately collapsed. Developing a productive framework to ensure there are safeguards for crypto investors should be the main priority. Not bringing down the ban hammer as these bankers and Senators would like.

Brown commented that the cryptocurrency market is a “complicated, unregulated pot of money,” declaring that the issue was much larger than FTX.

Just like Senator Warren, Brown views crypto as a threat to national security. He also believes the entire sector is a swindle designed to scam unwitting participants.

Brown said he had spent much of his eight years as the Senate Banking Chair trying to “educate” his colleagues and:

“trying to educate the public about crypto and the dangers that it presents to our security as a nation and the consumers that get hoodwinked by them.”

Last week, Elizabeth Warren unleashed another of her tirades against the crypto industry. “Rogue nations, oligarchs, and drug lords are using crypto to launder billions, evade sanctions and finance terrorism,” she proclaimed.

Her proposed crypto bill aims to force blockchain architecture, such as nodes and validators to register as “financial institutions.”

Source: Shutterstock

Crypto Markets See Red

Crypto markets are still consolidating and have been largely inactive over the weekend. Total capitalization dipped below $840 billion during Monday morning’s Asian trading session.

As a result, markets are dropping toward their cycle low again, but there has yet to be another panic sell-off.

Article Source： CRYPTONEWS

China's yuan eased against the dollar on Monday as sentiment was impacted after reports of the country's first COVID-related deaths since strict prevention protocols started to be dismantled earlier this month. Yuan trades were sluggish as many market participants had to work from home and trade remotely amid the fast spread of the virus in major cities. The volume hit $6.3 billion as of midday, down from the normal half-day volume of about $15 billion.

Daily average dollar/yuan trade in the interbank market shrunk to about $20 billion last week, the lowest since April, when the financial hub of Shanghai imposed lockdowns. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.9746 per dollar, 45 pips, or 0.06% firmer than the previous fix 6.9791. In the spot market, the onshore yuan opened at 6.9700 per dollar and was changing hands at 6.9831 at midday, 81 pips weaker than the previous late session close.

COVID-19 developments and monetary policy divergence with other major economies, particularly the United States, have been major factors affecting the yuan's performance and market sentiment. The Chinese currency has lost about 9% to the dollar so far this year and is on course for the biggest annual drop since 1994, when China unified market and official rates. But some economists believe the yuan may reverse the weakening trend in 2023 as improved economic fundamentals could lend support. "Favorable factors such as improved growth expectations might still outweigh unfavorable ones such as deterioration in goods and services trade balances, and we continue to expect small appreciation of the USD/CNY over the 12-month horizon to 6.90," analysts at Goldman Sachs said in a note.

Senior leaders also vowed to focus on stabilising the $17-trillion economy in 2023 and step up policy adjustments to ensure targets are hit, according to a statement published by the official Xinhua News agency following the annual Central Economic Work Conference. Various officials pledged to keep financial market liquidity sufficient and implement proactive fiscal policy to underpin the economy next year. By midday, the dollar index fell to 104.62 from the previous close of 104.701, while the offshore yuan was trading at 6.9827 per dollar. The yuan market at 0402 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.9746 6.9791 0.06% Spot yuan 6.9831 6.975 -0.12% Divergence from 0.12% midpoint* Spot change YTD -8.99% Spot change since 2005 18.52% revaluation Key indexes: Item Current Previous Change Thomson 0.0 Reuters/HKEX CNH index Dollar index 104.62 104.701 -0.1 *Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint.

The People's Bank of China (PBOC) allows the exchange rate to rise or fall 2% from official midpoint rate it sets each morning. OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan 6.9827 0.01% * Offshore 6.8265 2.17% non-deliverable forwards ** *Premium for offshore spot over onshore **Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. . (Reporting by Winni Zhou and Brenda Goh; Editing by Christian Schmollinger) 

Article Source： zawya