Monday, September 19th
This past week saw Equities as well as Bitcoin and Ethereum register important losses with BTC sliding below the 20,000 mark as inflation report – 8.3% – exceeded estimates, giving the Fed’s committee additional arguments to continue its monetary tightening and proceed to further rate hikes later this week.
This week, markets will have their focus on the September Federal Reserve rate decision which comes in the wake of the disappointing August US inflation report (CPI), which could lead to a 75-bps-100bps rate hike.
Crypto Markets are retracing, and Equity Markets are trading sideways today whereas DXY is trading just below the 110-high mark in anticipation of the Fed’s decision.
We still have our portfolio position breakdown around 32% exposure to the market and the rest in cash. We maintained our positions in BTC and a few large-cap coins since the last profits made on a SOL trade.
In the short term, should BTC test the 17,500 levels, we could consider adding funds to our existing long positions as we still have 68% of the AUM in cash.
Bitcoin is now trading just above the 19,000 level, losing close to 16% over week and is now just up 4% this month as last week’s retracement brought the price back close to 19,000s levels. BTC is facing a bearish trend as the strong US inflation rates had markets anticipating a rate hike from the Fed meeting this week. The interpretation of the Fed’s decision will be a key driver for BTC price action.
We could see price action keep trying to break below the Dec 2017 high and the 19,500 area that acts as a major support. We still see long term support in the $17,500 area – then next support would be 12K/13K.
As mentioned last week, the probability of price action re-capturing the upward channel is very low given the current macro conditions and the Fed’s commitment to bring down inflation.
Despite the bullish sentiment around the Merge, ETH started last week retracing and dropped further on Tuesday as the US Consumer Price Index (CPI) data for August came in higher than expected, paving the way for further rate hikes to come.
ETH is now trading in the 1,280 – 1,350 range and losing close to 23% over last week, retesting lows from last July. The MTD performance is close to -14%.
We believe ETH could continue on this bearish trend and retest July levels and lower as the current bearish mood around inflation seems to prevail on the optimism the merge was bringing to the price action. The next support could be the 1,250 mark – which if we go there we could enter a swing trade- and then the lowest of the year – $900 level.
However, ETH is approaching oversold levels and the 90-day correlation between BTC and ETH has dropped to 0.83, which represents its lowest level since Mid-January, which might entice bullish traders to support the price action in the short term.
Stocks also traded in the downward trend last week, with S&P 500 SPX losing –5.67% and Nasdaq COMP, -6.8% on Friday. Today equities are trading sideways in anticipation of the Fed’s decision.
DXY ($ index),
$ has been consolidating over last week and is now trading in a 109.5-110 range with the major catalyst for the week being the decision of the Fed on Wednesday.
Other catalysts remain the weakening EURUSD testing the 1.00 resistance level and the GBPUSD still under pressure at the 1.15 level with concerns about the UK economy, which still make for strong DXY trading levels.