USD/JPY bears have entered the market, causing a break in near-term support and raising the possibility of a move to test 135.50. Meanwhile Bitcoin falls by 7% to touch $20k.
The Japanese yen experienced a significant drop against the US dollar on Friday following the Bank of Japan’s decision to maintain its current bond-yield curve control policy settings and leave interest rates unchanged.
Haruhiko Kuroda, in his last meeting as BOJ Governor, kept policy settings steady, which was expected given the yield band adjustment made in December.
The incoming Governor Kazuo Ueda has emphasized the need for maintaining the current ultra-easy policy until inflation shows sustained signs of exceeding BOJ’s 2% target.
Although Ueda attempted to cool speculation about earlier-than-expected normalization of policy rates, financial markets anticipate possible policy tweaks due to distortions caused by the yield curve control policy and inflation at a four-decade high.
The next BOJ meeting on April 27-28 will be Ueda’s first meeting as chair. Ueda has suggested that he has ideas on how to exit the massive stimulus but emphasizes that monetary tightening is only possible if there are significant improvements in Japan’s “trend inflation.”
In terms of technical charts, USD/JPY struggles to break through resistance levels such as 137.00-138.20, including the 200-day moving average and December high of 138.20.
The failure to sustain gains above resistance levels indicates that USD/JPY’s six-week rally might be losing momentum unless it breaks below support at around 135.25 from mid-February horizontal trendline.
The immediate focus for markets is US job data expected later today with growth rate likely slowing down from January’s figures while unemployment remains near five-decade lows of 3.4%.
Bitcoin Falls By 7%
The already volatile crypto market suffered an unexpected dip on Thursday, when Silvergate – a bank integral to the digital currency industry’s rapid growth suddenly shut its doors.
This caused Bitcoin and Ether prices to plummet by 7%, with BTC briefly touching $20k again as Ethereum dropped below $1,450.
Bitcoin 5-day price movement
Despite this news being anticipated last week when SEN closed down operations, cryptocurrency investors were unfazed as evidenced by the minimal decline seen during Wednesday’s trading session.
Analysts observed that markets had already taken into account these developments prior and did not attribute any significance to further market movement.
On Thursday, SVB Financial’s announcement that it will raise over $2 billion to offset losses on bond sales caused a further drop in cryptocurrency prices.
In response, Silicon Valley Bank has clarified its minimal exposure to crypto markets however the Silvergate event still looms large in investors’ minds and casts an ominous shadow around cryptos as they seek ways to recover their losses.
Despite experiencing some major turbulence in the form of regulatory crackdowns and news surrounding Silvergate, bitcoin and ether have proven to be relatively resilient; even dropping by only single digits on Thursday compared to the much more drastic plunges taken by SVB and Silvergate.
The cryptocurrency industry is feeling the effects of Silvergate’s recent closure, as there are not enough suitable alternatives to take its place.
Although Signature Bank has put forth Signet – similar in nature to SEN – it recently announced that they plan on scaling back their exposure due to current events.
This could significantly delay or impede capital inflows and potentially bring about liquidity issues and an increased risk for concentration within the market.
With large US institutions not taking the lead, America risks losing its edge in global markets due to crypto exposure.
According to analysts, this could result in fewer banks offering liquidity and increased risk concentration – issues which regulators are actively working against protecting.
With the US taking a backseat in its regulation of cryptocurrencies, Europe is quickly becoming an integral part of this trade.
Data shows that euro volumes for bitcoin have risen significantly over the past week, while liquidity on USD exchanges has decreased as providers play it safe and observe market movements carefully.
Unfortunately, lower options to exchange coins could lead to increased price volatility.
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