CFT Update – Tuesday, Feb 28th 2023
BTC and ETH dropped last week, with BTC and ETH pulling back from their highest of the year and trading last Friday near $23,000 and $1,610, down -6.4% and -5% from their level a week ago – $24,580 and $1,694 with cryptos limiting the losses throughout a week marked by the release of the core personal consumption expenditures price – PCE – index, coming in above expectations – a rise of + 0.6% in January and + 4.7% from the prior year – and adding up to the already hot CPI numbers from mid-February – 6.4% in January, above the forecast of 6.2%.
US Equities fell as well, with S&P and Nasdaq closing near 3,970 and 11,395 on Friday, down -2.7% and -3.3% as fears of higher interest rates for an extended period of time started to emerge with stronger than expected PCE inflation numbers.
US Treasuries continued to rise this week, with the 10Y and 2Y closing near 3.95% and 4.82% on Friday, from 3.82% and 4.62% the week before, maintaining the inversion of the yield curve to historically high levels – 87 bps difference. DXY rose last week closing near 105.26 on Friday from – 103.88 the week before – and Oil price decreased slightly as the US Dollar rebound keep shedding some concerns over the demand, with the WTI closing near $76 on Friday – from $77 the week before.
Cryptos are retracing today as well as US Equities, as investors digest last week’s inflation data and turn their focus to Wednesday’s ISM manufacturing numbers reflecting the latest information on the business conditions in the U.S while keeping an eye on several Fed officials’ allocutions later this week. Investors will also continue to monitor the unwrapping of the earnings season with Costco, Target, Lowe’s, Salesforce, Zoom Video Communications, Dell Technologies, and Hewlett Packard set to report.
Client Profits
We took profits on a short position in a large-cap coin (MATIC) last week.
We also took partial profits on our long position in BTC when the price action was near the $25,000 level before re-entering at a lower price point later in the week when price action broke below the $23,500 mark.
We still have our short positions in SOL, AVAX and ETH and our long position in BTC.
The exposure to the market is now 20.5%, the rest being in cash.
BTC
BTC ended last week near $23,000, down -6.4% on the week driven by the prevailing bearish sentiment after the release of the latest PCE number, coming out higher than expected, which had investors come to terms with mounting evidence that the Fed could maintain the quantitative tightening for longer than previously expected.
BTC’s 30-day Historical Volatility – HV- is still above the 50% mark, pretty much in line with its level from a week ago.
Price action gained a little over the weekend, still trading within the upward parallel channel, and reaching a high of $23,678 on Sunday. BTC is trading slightly bearish today near $23,150, bringing the MTD performance for February close to flat and the YTD performance for 2023 to +40%.
The uncertainty surrounding the crypto regulation framework as well as the macroeconomic policy have laid the ground for a bearish pressure fuelled by strong inflation data. The $25,000 mark will be an important level to watch in the coming weeks We remained cautious as price action could continue to consolidate or pull back in the coming weeks, especially if investors reassess how US interest rates will rise this year. The latest PCE index and the CPI data follow last month’s strong labor report, which showed that employers added 517,000 jobs, well above expectations and raising concerns that the economy remains too hot, which could keep inflation at high levels for some time.
On the upside, the $24,500 region still acts as resistance while the next support to watch on the downside is the upsloping support of the parallel channel, currently near the $22,300 level and then the ATH from Dec 2017 just under $20,000 and major support near $18,350 further below.
ETH
Like BTC, ETH ended the week with losses closing near $1,610 on Friday, down -5% over the week from its $1,694 level the week before, testing the lower band of the ascending parallel channel near $1,585 over the weekend before rebounding and settling near $1,610.
Despite ETH retracing today, trading near $1,610, the performance for the month of February remains in positive territory with +1.5%.
Price action is still evolving within our ascending parallel channel with the $1,780 level acting as a resistance and the lower trendline of our upward-sloping parallel channel acting as minor support, currently near $1,600 with major support near $1,350.
Other markets
US Equities fell this past week, with S&P and Nasdaq printing -2.7% and -3.3%, ending near 3,970 and 11,395 on Friday, throughout a week marked by PCE data taking center stage: the Fed’s preferred measure of inflation showing a stronger-than-expected increase in prices in January.
Core PCE rose 4.7% year over year in January – higher than the 4.3% growth economists expected and Core PCE month over month came out at 4.6% – 4.4% expected, showing price growth at the end of last year was hotter than anticipated, which could lead the Fed into maintaining its restrictive policy for longer than expected.
S&P and Nasdaq are sliding moderately today, down -0.3% and -0.1% near 3,970 and 11,455. The performance for the month of February is now -1.2% and -0.5% respectively.
DXY
DXY soared this past week, printing its biggest weekly gain in 2023 (+1.33%), ending near 105.3 on Friday from 103.9 the week before. Price action steadily increased over the week as USD gained some traction with the hot inflation data release.
DXY is trading moderately up today at 104.9, confirming above the 103.5 support and inching closer to its MA 200 acting as the next resistance – currently at 106.4.
US Treasuries
US Treasuries continued on their streak of weekly gains as PCE data had investors bet on a more aggressive Federal Reserve, with the 10Y and 2Y closing near 3.95% and 4.82% on Friday, from 3.82% and 4.62% the week before, deepening a bit further the inversion of the yield curve – 87bps difference, accentuating the reading of a possible recession in the future.
The 10Y is now gaining slightly, trading near 3.93%, and the 2Y yield is at 4.81%.