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DOES BITCOIN REALLY HAVE A FAIR VALUE?

08:54 23.01.2018

Bitcoin is inflating and deflating from day to day like a bubble. Nowadays there are a lot of questions about Bitcoin and one of them is what its fair value is.

 

Economists and analysts are trying to create their own formulas to count Bitcoin's value. So let’s look how they tried to do it.

 

There are two parameters of a currency's fair value measurement. To measure the fair value, it is needed to identify a store value and an exchange value. Mostly, all economists who believe that Bitcoin has a value, make their calculations based on these two figures. Currency strategist at the Bank of America Merrill Lynch David Woo is one of them. Woo tried to compare Bitcoin to silver as a store of value but failed. The value was not determined. And later analysts of the bank declared that a true value for cryptocurrencies may be impossible to assess.

 

Then Bitcoin also was compared to gold. Nowadays, the total amount of Bitcoin is much less than that of gold. However, real fans of Bitcoin believe that it will surpass gold in total value.

 

There is another approach to this issue. Analyst of Credit Suisse Damien Boey estimated the Bitcoin fair value at $6,000. How did he count? He took into account the size of Bitcoin's network and the yield spread on BBB-rated bonds. So Bitcoin rises as more people use the network. He found out that Bitcoin price has a negative correlation to BBB credit spreads – the difference between the yield on BBB-rated debt. The price of Bitcoin depends on a financial policy of a government as well.

 

In the next approach, economists were taking into account the distributed system of the currency. They gave value to Bitcoin because of its transactional system. But they concluded that it was wrong to assess the value based on convenience of payments because now Bitcoin is rarely used for buying anything. So economists came to the dead end again.

 

However, we should not miss an opinion that Bitcoin does not have any value at all. For example, Richard Turnhill, a strategist for BlackRock Financial, the world largest money manager, world-class investors Warren Buffett from Berkshire Hathaway Inc. and Jamie Dimon from J.P. Morgan Chase & Co. said that Bitcoin is a bubble that can rise in a short-term, but it will burst anyway.

 

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Conclusion

 

When economists start to estimate Bitcoin, they meet 2 main problems. Firstly, Bitcoin is rarely used for buying anything. It is impossible to estimate its exchange value because nowadays transactions include only buying and selling Bitcoin, Bitcoin is not exchanged for anything else because of the permanently changing price. The total number of bitcoin transactions over the past year added up to less than one-tenth of 1 % of total e-commerce transactions. Secondly, considering a store of value, analysts met another problem. They compared cryptocurrency with silver and gold, but if we can hold metals, we cannot hold Bitcoins. Numbers of metals and cryptocurrency are not compared as well. Cryptocurrencies do not have underlying value like metals. Bitcoin cannot be guaranteed by an issuer because there is not any.

 

That is why, we can come to the conclusion that the value of Bitcoin is created by users: as much as people believe in cryptocurrency, as much it increases.

 

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EUR/USD: "PENNANT" PATTERN

09:35 23.01.2018

 

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The main trend is still bullish, but there's an opportunity to have a bearish correction because of the last "Triple Top" pattern. So, we should keep an eye on the nearest support area at 1.2194 - 1.2164 as the next intraday target.

 

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There's a "Pennant" pattern, so the pair is likely going to test the closest support at 1.2164 in the coming hours. If a pullback from this level happens little later on, there'll be a moment to have another bullish price movement.

 

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GBP/USD Daily Analytics

09:39 23.01.2018

 

1516700065-5fec09125b1dc41ae1e1ea01e2bb5

 

Bulls faced with resistance at 1.4011, so there's a "V-Top" pattern. The main intraday target is the nearest support at 1.3895 - 1.3834. This area could be a departure point for an upward price movement in the direction of the next resistance at 1.3944 - 1.4011.

 

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There's a developing bearish correction, so the market is likely going to test the closest support at 1.3834 during the day. Meanwhile, if a pullback from this level is on the table, bulls will probably try to achieve another resistance at 1.4011 - 1.4089.

 

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THE STABILITY OF THE BOJ POLICY

10:42 23.01.2018

Today is the day of the Bank of Japan meeting. The BOJ announced its Outlook Report. The key point is that the Bank kept its monetary policy unchanged. This meeting showed almost solid consent -  eight to one member voted to leave interest rates at the same level of -0.1%. At the same time, the members claimed that quantitative and qualitative monetary easing (QQE) with yield curve control (YCC) program will be continued. The Bank is promising to buy Japanese government bonds so that 10-year JGB yields will remain around 0%. The Bank is going to “continue expanding the monetary base until the year-on-year rate of increase in the observed CPI exceeds 2% and stays above the target in a stable manner”.

 

So the BOJ claims that it is going to continue with the current loose policy. However, there are speculations around this report, investors are expecting policy normalization soon. We can see it on a USD/JPY pair 4-hours chart. Despite the news about the unchanged Japanese monetary policy, USD/JPY is falling, the lowest price from the time of the announcement was 110.63.

 

Technical analysis shows that USD/JPY is dangerously close to the support line from the 2016 low in 110 area. Very close to this area there is 100-week MA. These strong support levels will hold initial selling pressure.  On the upside, the main obstacle is at 111.70 (200-day MA, 50-week MA).  

 

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EUR/USD Daily Analytics

12:29 23.01.2018

 

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There's an "Engulfing" pattern, which has been formed at the last high. So, the pair is likely going to test the 34 Moving Average, which could be a departure point for another upward price movement.

 

1516710518-4c959c0eab8ce980a00705f765181

 

The 55 Moving Average acted as support, so there's a "High Wave" pattern. In this case, we could have a local upward correction. Nevertheless, bears are likely going to test the 89 MA afterwards.

 

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USD/JPY Daily Analytics

12:32 23.01.2018

 

1516710518-de0352193d844c2e41e07f18137c3

 

There's a bearish "Harami", which has been formed on the upper "Window". So, the market is likely going to test the lower "Window" in the short term.

 

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The 89 Moving Average has acted as resistance once again, so there's a "Harami" pattern. Therefore, the market is likely going to continue moving down in the coming hours.

 

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EUR/USD Daily Analytics

12:39 23.01.2018

 

1516711102-66f07ff26fffd1acd2289b908723c

 

There's a pullback from 4/8 MM Level, so wave [iv] might have been formed. Therefore, we're likely going to have an upward impulse in wave [v] of 5 in the coming days. The main intraday target is 6/8 MM Level.

 

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As we can see on the one-hour chart, there's a possible triangle in wave [iv]. If correct, wave [v] is going to begin anytime soon.

 

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EUR/USD: TRIANGLE IN WAVE [iV]

12:39 23.01.2018

 

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There's a pullback from 4/8 MM Level, so wave [iv] might have been formed. Therefore, we're likely going to have an upward impulse in wave [v] of 5 in the coming days. The main intraday target is 6/8 MM Level.

 

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As we can see on the one-hour chart, there's a possible triangle in wave [iv]. If correct, wave [v] is going to begin anytime soon.

 

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USD/JPY: BEARISH "HARAMI"

12:32 23.01.2018

 

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There's a bearish "Harami", which has been formed on the upper "Window". So, the market is likely going to test the lower "Window" in the short term.

 

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The 89 Moving Average has acted as resistance once again, so there's a "Harami" pattern. Therefore, the market is likely going to continue moving down in the coming hours.

 

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EUR/USD Daily Analytics

05:50 24.01.2018

Technical levels: support – 1.2270; resistance – 1.2390.

 

Trade recommendations:

 

Buy — 1.2310/20; SL — 1.2300; TP1 — 1.2390; TP2 — 1.2430

Reason: expanding bullish Ichimoku Cloud with rising Senkou Span A and B; a golden cross of Tenkan-sen and Kijun-sen with rising Tenkan-sen; the prices are supported by Cloud, Tenkan-sen and Kijun-sen and a market is ready to go higher.

 

1516773032-5974574d0f06c411e972e24d898d2

 

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GBP/USD Daily Analytics

05:52 24.01.2018

Technical levels: support – 1.4000; resistance – 1.4070.

 

Trade recommendations:

 

Buy — 1.4000; SL — 1.3880; TP1 — 1.4070; TP2 — 1.5000.

Reason: bullish Ichimoku Cloud with rising Senkou Span A and B; a golden cross of Tenkan-sen and Kijun-sen with rising lines; a market reached new highs over 1.4000.

 

1516773032-5838ef800660551113de2aff99712

 

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USD/CHF Daily Analytics

06:38 24.01.2018

Recommendation:

 

BUY 0.9665 SL 0.961 TP1 0.973 TP2 0.9775 TP3 0.98

 

BUY 0.949 SL 0.9435 TP1 0.9555 TP2 0.964 TP3 0.973

 

On the daily chart, USD/CHF keeps forming the “Bat” pattern with a target of 88.6%. For now, bulls and bears are fighting for 78.6% of the wave XA. If bears manage to conquer it, the decline will continue. On the other hand, rebound from the current support will increase the possibility of a pullback.

 

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On H1, USD/CHF there may be a formation of a “Widening wedge”. To do that bulls will need to return the pair to resistance at 0.9665.

 

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GBP/USD Daily Analytics

06:47 24.01.2018

Recommendation:

 

BUY 1.3935

 

SL 1.388

 

TP1 1.405 TP2 1.415 TP3 1.425

 

On the daily chart, GBP/USD is trading in an uptrend. The pair reached 161.8% of the AB=CD pattern. This increases the possibility of a pullback. On the other hand, a successful test of resistance at 1.4050 will allow talking about the continuation towards the convergence area of 1.4250-1.2495.

 

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On H1, there’s a “Spike and reversal with acceleration pattern”. A break of support at 1.3935 will create grounds for correction to 1.3815 and 1.3745. At these levels, buyers will become more active.

 

1516776436-2cf183d9aa99dd882e50bd88c66a5

 

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EUR/USD Daily Analytics

12:57 24.01.2018

 

1516798553-d30f89abe23ba20f82c1876edaa4b

 

The main trend is still bullish, so the market is likely going to test the nearest resistance at 1.2358 - 1.2456. If a pullback from this area happens, there'll be an opportunity to have a decline towards the nearest support at 1.2322 - 1.2272.

 

1516798553-24348dbdb9577b063ab1ee23758b4

 

There's no any reversal pattern, so the pair is likely going to test the next resistance at 1.2358 - 1.2398 during the day. This area could be a departure point for a bearish correction towards the closest support at 1.2358 - 1.2322.

 

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GBP/USD Daily analytics

12:59 24.01.2018

 

1516798553-291336963fc27e79a5f8477d21200

 

Bulls faced with resistance at 1.4089. Nevertheless, the market is likely going to test the next resistance at 1.4129 - 1.4206 soon. If a pullback from these levels happens little later on, we could have a downward correction.

 

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There's a new local high. Meanwhile, if a pullback from the nearest resistance at 1.4129 happens, there'll be an opportunity to have a bearish correction towards the closest support at 1.4089 - 1.4027.

 

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GBP/USD: POUND IS REACHING TARGETS

06:47 24.01.2018

 

Recommendation:

 

BUY 1.3935

 

SL 1.388

 

TP1 1.405 TP2 1.415 TP3 1.425

 

On the daily chart, GBP/USD is trading in an uptrend. The pair reached 161.8% of the AB=CD pattern. This increases the possibility of a pullback. On the other hand, a successful test of resistance at 1.4050 will allow talking about the continuation towards the convergence area of 1.4250-1.2495.

 

xuacyv67yqibkjjr3msy.png

 

On H1, there’s a “Spike and reversal with acceleration pattern”. A break of support at 1.3935 will create grounds for correction to 1.3815 and 1.3745. At these levels, buyers will become more active.

 

x4uvbta61cx8tyztku51c.png

 

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EUR/USD Daily Analytics

13:03 24.01.2018

 

1516798901-e0274efb35225c656524e2fbd75dd

 

There's no any reversal pattern so far, but we could have a local bearish correction in the coming hours. Nevertheless, the market is likely going to continue moving up afterwards.

 

1516798901-4fa13122a3b2fe157125eac96c004

 

We've got a bearish "Shooting Star", which hasn't been confirmed yet. In this case, the 55 Moving Average is likely going to act as support. A pullback from this line will be a green light for another bullish rally.

 

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USD/JPY Daily analytics

13:06 24.01.2018

 

1516798901-0a73c57c34e95523ea03abbe7a162

 

The price has reached the lower "Window", but there isn't any bullish pattern. So, the market is likely going to continue moving down in the short term.

 

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All the last candles are bearish, so the isn't any reversal model. Therefore, the market is likely going to declining towards the next support area.

 

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USD/CHF: FRANC SAW A “BAT”

06:38 24.01.2018

 

Recommendation:

 

BUY 0.9665 SL 0.961 TP1 0.973 TP2 0.9775 TP3 0.98

 

BUY 0.949 SL 0.9435 TP1 0.9555 TP2 0.964 TP3 0.973

 

On the daily chart, USD/CHF keeps forming the “Bat” pattern with a target of 88.6%. For now, bulls and bears are fighting for 78.6% of the wave XA. If bears manage to conquer it, the decline will continue. On the other hand, rebound from the current support will increase the possibility of a pullback.

 

xeuymagk9h2unkxxiz523.png

 

On H1, USD/CHF there may be a formation of a “Widening wedge”. To do that bulls will need to return the pair to resistance at 0.9665.

 

xge6enzcj9py2m4k7wzgt.png

 

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Today will be released the Crude Oil Inventories data by The Energy Information Administration's (EIA), which measures the weekly change in the number of barrels of oil held by US firms. The level of inventories influences the price of oil.

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WHAT TO EXPECT FROM THE ECB MEETING?

08:37 25.01.2018

 

Today we are waiting for the news from the European Central Bank. The ECB press conference will be held at 15:30 MT time.

 

It is worth to say that last time in December the ECB left its monetary policy unchanged. So let’s see what we can expect from this meeting.

 

Most of the economists suppose that the ECB will not change the monetary policy again because of an obstacle - the continuing quantitative easing that it promised to hold until September 2018. However, we can say that this time the most interesting part of the conference is not interest rates, but comments of the bank President. First of all, Mario Draghi will face a huge number of questions over how fast the central bank is going to change its policy. Secondly, his address and comments will affect the EUR/USD pair. The pair was rising since the beginning of 2017 and recently achieved a new 3-year high. Such growth creates worries for the ECB because continuing rise of the currency is not good for the economy. That is why the ECB should gradually shift its stance to avoid a more destructive move in the future. And it is what economists are waiting from Draghi, they expect him to announce gradual policy changes. Although no one expects immediate changes in the ECB policy, traders will pay a lot of attention to the speech of the President. During the conference, the single currency will be vulnerable.

 

As for numbers, analysts from Danske Bank forecast the fall of the single currency to 1.20 in short-term, but not lower. However, it is expected to surge to 1.28 by the end of the year, if only inflation will grow to 2%.

 

So we can say that the ECB monetary policy will likely stay stable but the conference will affect the EUR/USD pair a lot. Considering future, economists are looking for policy changes in March/April meetings.

 

More forecasts on EUR/USD rate you can find

 

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EUR/JPY Daily Analytics

09:21 25.01.2018

Recommendation:

 

SELL 134.95 SL 135.5 TP1 134.3 TP2 133.7

 

BUY 136.2 SL 135.65 TP 137.2 TP2 138

 

On the daily chart, EUR/JPY is consolidating in the 135.00-136.40 area. A break of its upper border will increase the odds of advance to 127.2% of AB=CD pattern. The nearest support level is near 134.30.

 

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On H1, EUR/JPY is retesting the neckline of “Head and Shoulders”. A break below correction low will allow bears to count on the continuation of a pullback. On the other hand, advance above 136.20 will increase the risks of uptrend’s resumption.

 

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