● Ban on Crypto Derivatives in UK Goes into Effect Monday
● Euro Breaking Higher
● Gold Plummets as Financial Markets Head to Risk-Appetite
As always, thanks again for picking up this week’s edition of Overbit Weekly Round Up. Although 2020 might have felt like it would never end, we are already closing out the first week of 2021. As we reflect on the first week of the new year, we’ll take a major look at the traditional markets and any recent trends or stories that may be developing.
Our first story takes place in the UK, where regulators have tightened their grip on derivative products for retail traders. According to a report by Coindesk, the UK’s financial regulatory body, the Financial Conduct Authority (FCA) banned the sale of derivatives back in October. This legislation has come to fruition, it seems, as the law went into effect on Wednesday, 6 January.
This is a similar move to other countries like the United States, where financial regulatory bodies attempt to ‘protect’ retail investors from high-risk products. As Coindesk reported, the FCA “considers the products to be ill-suited for retail consumers due to the potential harm they pose”.
As one would imagine, this new law is being criticised throughout the crypto space on the grounds that the law does not offer institutions and individuals the same type of financial access. Some argue these unfair laws will simply drive users to black-market kinds of sites, where there is little to no regulation to protect the users. Nevertheless, it seems that our thesis of governments versus cryptocurrency is holding up a week into 2021.
Our next story of the day moves across the pond from the UK and into the Eurozone, where we take a look at some developments for the EURUSD forex pair. To kick off the new year, it seems the Euro continues to break up higher. At the time of writing, EURUSD sits at 1.23368. This price is just a few hundred pips above the massive hurdle of 1.2300, a price that EURUSD had not been above since April of 2018.
Although vaccine developments on the European front have been successful as of late, this run by the Euro seems to have much more to do with the US dollar than the Euro itself. US Democrats claimed the Georgia Senate election Tuesday, 5 January, thus ensuring a ‘blue wave’ come February in the United States. Such a result seems to have not been expected, as markets expressed some significant volatility across the board on Tuesday and Wednesday.
Nevertheless, it seems that the trend of investors fleeing the dollar and into risk-on assets will continue. That being said, it’s easy to imagine the Euro continuing to rip upwards against in the new year, perhaps pulling into the next significant resistance at 1.25.
To close out today’s edition, we look at a broad look at the traditional market, where an increased risk appetite seems to dominate the scene. The US Dollar exhibited some strength to start the day on Wednesday, 6 January, as the DXY rebounded almost 1% from 89.209 to 89.802. However, it seems the desire for risk outweighed the demand for greenbacks, as USD finished the day with losses against most of its major rivals.
Major rivals in the forex world fared quite well on the day. The EURUSD forex pair traded above 1.2300 after hitting 1.2344, as the pound managed to hold ground despite persistent coronavirus concerns.
Closing out this week of Overbit.com’s Weekly Round Up, we’re seeing increased risk appetite weighing on safe-haven assets as well, as Gold (XAUUSD) plummeted from $1956 to $1900, before snapping back to $1923. On a high level, it seems the switching between risk-on and risk-off has weighed on Gold for months now, as it has sat in a 15% range since August, and we’ll continue to monitor the situation.