LAST WEEK
BTC and ETH clinched a second week of gains as investors digested the latest inflation data and cheered ECB’s comments hinting at a rate pause following its latest rate hike to bring the target rate to 4.0% last week, its highest level since the introduction of the euro in 1999, one week ahead of September’s FOMC meeting. BTC dipped below $25,000 last Monday before recovering and rallying toward $26,500 for the remainder of the week. The two cryptocurrencies were trading near $26,600 and $1,640 on Friday, up +2.7% and +0.3% over the week.
US Equities ended lower, enduring a second straight week of losses with S&P and Nasdaq
ending near 4,450 and 13,708 on Friday, shedding -0.16% and -0.39% over the week as markets digested the weakening August economic sentiment down to 69.5 – from 71.6 in July – and the latest CPI data while closely monitoring the auto-workers strike in Detroit that overshadowed the optimism of a rate pause during next week’s FOMC meeting. August Core CPI came out in line with market expectations at +4.3% year-over-year while headline CPI accounts for the recent surge in oil prices came out slightly hotter than expected at +3.7% year-over-year vs +3.6% expected and +0.6% month-over-month – the most significant monthly increase since June 2022.
US Treasuries eked out some gains last week with the 10Y yield hitting a high of 4.35% on Wednesday as the y/y and m/m headline CPI data came out slightly higher and revived fears of further tightening from the Fed, especially as rising energy costs could contribute to inflationary pressures and impact central bank decisions. While a change during September’s meeting seems unlikely with markets currently pricing in a 99% chance of no rate hike during this week’s September FOMC meeting, a rate hike later in the year could be considered with markets currently pricing in a 42% chance of a 25bps hike during December’s meeting according to CME’s FedWatchTool.
DXY wrapped up the week with small gains, hitting a high of 105.43 during Thursday’s session despite a difficult start of the week that saw the index dipping to 104.42 last Monday
Oil price clinched a third consecutive straight week of gains, boosted by the recent confirmation of the output cut extensions from Russia and Saudi Arabia and the better-than-expected economic data along with a resurgent oil consumption in China supporting the idea that demand will continue to grow in the coming months. The WTI rallied in every session of the past week, closing the week near $91.17 on Friday, from $87.18 the previous week.
BTC and ETH are edging higher today as markets eagerly await this week which will be packed with central bank meetings starting with the FOMC meeting and its rate decision on Wednesday followed by BoE and BoJ’s rate decisions on Thursday and Friday respectively. Friday’s Bank of Japan will be under the spotlight in Asia after Gov. Kazuo Ueda touched on the possibility of ending the negative interest rates paradigm. Investors will also keep an eye on the latest U.S housing data – building permits, housing starts, existing home sales, NAHB housing market index – as well as the corporate earnings from FedEx, and JD sports among others.
CLIENT PROFITS
We kept our long positions on large-cap coins, including XRP. The exposure to the market is 11% of the $AUM, the rest being in cash.
BTC
BTC clinched a second week of gains as investors digested the latest inflation data and cheered ECB’s comments hint at a rate pause following its latest rate hike bringing the target rate to 4.0% last week, its highest level since the introduction of the euro in 1999, one week ahead of September’s FOMC meeting. BTC dipped below $25,000 last Monday before recovering and rallying toward $26,500 for the remainder of the week. BTC was trading near $26,600 on Friday, up +2.7% over the week.
BTC has regained the $26,000 level it had been testing on many occasions since August 17 2023 and is now evolving near the $26,700 level, inching closer to the $28,000 it left on August 17.
We remain bullish in the very long term but remain bearish in the medium term. Bitcoin hit a 2023 high near $31,818 on July 13 but has struggled to reclaim its $30,000 level since July 23 and is now trading close to the $26,800 level with major supports near $24,800, $22,500, and $20,000 further below.
BTC’s 30-day Historical Volatility – HV- dropped to 33% this week from 41% the week before.
After ending June up +11.9% and July down -4.1%, BTC ended August down -11.3%. BTC’s performance for September is back in positive territory at +3.2% with the YTD performance for 2023 now of +61.7% – from 51.8% the week before.
ETH
Like BTC, ETH edged higher this past week for the second time in a row, ending the week near $1,640 on Friday, slightly up +0.3% over the week. ETH price experienced a volatile week with a difficult start on Monday but gained in every other session of the week to trade near $1,640 on Friday.
Price edged lower over the weekend but is gaining today and testing the $1,650 level with $1,370 and $1,100 further below acting as main supports. As mentioned in our previous reports the 200-day MA – near $1,800 currently – being a strong indicator of the overall trend, ETH confirming well below that level could put more downward pressure and fuel a move to the downside, which is currently shaping.
After ending June up +3.2%, and the month of July down -4%, ETH ended the month of August down -11.3% and the performance for September is almost flat, currently at -0.2%, and the YTD performance for 2023 is now +37.3% – from +29.4 % the week before.
OTHER MARKETS
US Equities ended lower, enduring a second straight week of losses with S&P and Nasdaq ending near 4,450 and 13,708 on Friday, shedding -0.16% and -0.39% over the week as markets digested the weakening August economic sentiment down to 69.5 – from 71.6 in July – and the latest CPI data while closely monitoring the auto-workers strike in Detroit that overshadowed the optimism of a rate pause during next week’s FOMC meeting. August Core CPI came out in line with market expectations at +4.3% year-over-year while headline CPI accounts for the recent surge in oil prices came out slightly hotter than expected at +3.7% year-over-year vs +3.6% expected and +0.6% month-over-month – the most significant monthly increase since June 2022.
S&P and Nasdaq ended the month of August down -1.8% and -2.2%. The performances for the months of September are currently -0.5% and -2.4% and the YTD performance is +16.8% and +30.9% – from +16.7% and +33.0% respectively as of last Monday.
As mentioned in our previous reports, the comparison between the rallying US Equities and the contracting Monetary Supply M2 could have put in perspective the timing of a possible correction in stock markets considering the divergence currently occurring in 2023 as we can See the graphs below. The divergence observed over the past weeks seems to have reduced with Stocks correcting this past month of August.
DXY
DXY wrapped up the week with small gains, hitting a high of 105.43 during Thursday’s session despite a difficult start of the week that saw the index dipping to 104.42 last Monday.
The index benefitted from the strong inflation CPI numbers in August of +0.6% compared to July is the most significant monthly increase since June 2022. The index closed the week up near 105.33, from 105.06 the week before.
DXY is currently near 105.15, evolving comfortably above the 104.7 mark and its 200-day MA – near 103 currently – acting as support and below, the 102 and 100.7 levels, before the 100-mark that could act as a psychological level before the 200-week ie 1000-day MA further below currently near 98.5. On the upside, the 105.6-mark acts as the nearest resistance and could be reached in the coming days. The index had another good week but is expected to remain volatile as other central banks could adjust their policies later in the year.
US TREASURIES
US Treasuries eked out some gains last week with the 10Y yield hitting a high of 4.35% on Wednesday as the y/y and m/m headline CPI data came out slightly higher and revived fears of further tightening from the Fed, especially as rising energy costs could contribute to inflationary pressures and impact central bank decisions. While a change during September’s meeting seems unlikely with markets currently pricing in a 99% chance of no rate hike during this week’s September FOMC meeting, a rate hike later in the year could be considered with markets currently pricing in a 42% chance of a 25bps hike during December’s meeting according to CME’s FedWatchTool.
The 10Y yield and the policy-sensitive 2Y yield are currently exchanging near 4.31% and 5.06% from 4.29% and 4.99% last Monday, extending the inversion of the yield curve to 75bps, from 70bps last week. An inverted 2-year -10-year curve is seen by the market as a sign of a possible incoming recession. The inversion widened slightly as investors await this week’s FOMC meeting.