The runoff elections today in the US state of Georgia are the most important events that will determine the US policies for the next four years. There are two seats for the US Senate available and the Democrats need to win both of them in order to have a majority in the Senate. If those seats go to the Republican party they can effectively block any legislation proposed by the Democrats. Trump has been rallying his troops in Georgia to maximise the number of voters in the election and in order for the democrats to have full control of both houses of the parliament they would need to win both seats. If Republicans maintain the control of the Senate any future aid packages to help the economy suffering from the effects of coronavirus are likely to be significantly smaller than those created by the Democrats alone. Therefore, should at least one of the seats go to a republican the outcome would be USD positive and should create headwinds for those markets that have benefitted from short positioning in the USD. One interesting market at the moment is Bitcoin (BTCUSD). During the times of USD weakening, BTCUSD has been running higher with substantial momentum. However, historically USD strength has made it difficult for this market to maintain upward momentum. This is why the Georgia elections create trading and investment opportunities in Bitcoin (and in cryptocurrencies in general). Let’s look at BTCUSD in more detail below. Today’s economic calendar is light when it comes to significant risk events. The only events worthy of mention are the US manufacturing PMI and the OPEC JMMC meeting. See our economic calendar for times and details. By reading further you agree with our disclaimer at the bottom of this page and acknowledge that we do not provide investment advice.

At the time of writing BTCUSD is almost 7 times higher than it was in the low of March 2020. All new bitcoin millionaires can forward their Thank You letters to the US legislators who decided to dilute the USD by over 2000 billion dollar coronavirus aid package in the spring of 2020. DXY, the US Dollar index has since then fallen from 102.93 to current levels of 89.70. This equates to a 12.8% drop in the value of the US Dollar, which in historical terms is a significant move. At the same time, the wider acceptance of Bitcoin among the institutional investors, among other things, has fed the move and has led some to conclude that it makes sense to diversify holdings from gold to Bitcoin. It seems that Bitcoin, together with other cryptocurrencies, has indeed assumed some of the role in investment portfolios that gold used to have. Both assets in a way are non-yielding currencies but Bitcoin is deemed to have a higher potential in terms of capital gain.  Open a VIP Black account with us. There are no per trade execution or monthly fees on our VIP Black accounts. 

If the short USD trade is now too crowded and traders had priced in a larger economic support package from the US then a win for the Republicans could turn the USD trend and bring inflows into the currency. The recent increase of volatility in BTCUSD suggests that traders are taking money off the table as they prepare for this risk. Bitcoin has had strong gains recently and could be therefore vulnerable to strength in the USD. Since October last year volatility in BTCUSD, as measured by the ATR, has increased more than three-fold. This indicates weakness among the bulls and indicates the bears could bring the cryptocurrency to lower levels. This would provide trading opportunities on both short and long side as well as new investment opportunities to those that play the long game in the cryptocurrency space. We will take a look at the BTCUSD technicals in today’s video. Join our Telegram Channel (https://t.me/TIOmarkets_Announcements) to receive an alert when the video is released.

Recent macroeconomic data releases

  • UK Final Manufacturing PMI 57.5, 57.3 expected
  • Canadian Manufacturing PMI 57.9, 55.8 previous

Important macroeconomic data releases this week

  • US ISM Manufacturing PMI, 56.6 expected
  • OPEC JMMC Meetings

You may access the times and dates in the economic calendar here.

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Trade Safe!

Janne Muta
Chief Market Analyst
TIOmarkets.com

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