LAST WEEK
BTC and ETH retraced last week, with BTC breaking below $30,000 and finding support near $29,700. The two cryptocurrencies were trading near $29,910 and $1,890 on Friday, ending the week down -1.4% and -2.4% despite the SEC accepting eight spots for Bitcoin ETF applications for review and French Bank Societe Generale’s digital currency division SG Forge securing France’s first digital asset license this past week, in the wake of XRP partially favorable ruling.
US Equities were mixed last week with S&P and Nasdaq closing near 4,536 and 14,033, up +0.7% and down -0.6% as investors assessed the latest corporate earnings results with strong results from Pharmaceuticals and Financials but mitigated earnings from Amazon, Netflix, and Tesla among others, as well as the retail sales and housing market data for June ahead of this week’s FOMC meeting and key inflation numbers.
US Treasury yields were mixed with the policy-sensitive 2Y yield gaining over the week while the 10Y yield remained stable. The 10Y and 2Y yields ended near 3.84% and 4.85% on Friday in anticipation of the expected rate hike at the next FOMC meeting. Markets are now pricing in a 99% chance of a 25-basis point hike during this week’s FOMC meeting, according to CME’s FedWatchTool, which would bring the target rate to 5.25% – 5.50%. DXY also gained, making a strong comeback above the 100 mark thanks to the resilient job market data. The index rose from this month’s low of 99.58 to a high of 101.19.
Oil prices continued to rally for a 4th consecutive week as markets improved their anticipation of the global demand in the later part of the year thanks to stimulus measures in China, increasing demand from India, and tensions between Russia-Ukraine supporting oil prices. The WTI was trading near $77 on Friday.
BTC and ETH are down today, with BTC nearing $29,100 as markets anticipate a heavy week with the FOMC meeting and decision on interest rates to take center stage on Tuesday and Wednesday along with many major companies set to report – Alphabet, Boeing, Coca-Cola Company, ExxonMobil, Ford Motor Company, Microsoft, Mastercard, McDonald’s, Meta Platforms, Visa among others. Investors will also keep an eye on the estimate of the Q2 US GDP set to release on Thursday as well as Friday’s PCE index for June, the Fed’s preferred inflation indicator.
CLIENTS PROFIT
We kept our short positions on BTC and ETH
The exposure to the market is 14% of the AUM, the rest being in cash.
BTC
BTC retraced last week, breaking below $30,000 and finding support near $29,700. BTC was trading near $29,910 on Friday, ending the week down -1.4% despite the SEC accepting eight spots Bitcoin ETF applications for review and French Bank Societe Generale’s digital currency division SG Forge securing France’s first digital asset license this past week, in the wake of XRP partially favorable ruling.
Price action left the narrow range between 30,000 and 31,000 where BTC was trading over the past weeks and gradually edged lower, confirming below the $30,000 with a low of $28,861 earlier today and is now just above $29,100. The US$30,000 acted as a major support and keeping BTC above this level could play a key role in the bullish continuation. It is also a psychological level, whereas confirming below this level could pave the way to more selling pressure in the market.
As mentioned last week, BTC, like in April, failed to confirm above the $31,000 resistance for more than a couple of days and the bearish divergence we mentioned in our last reports between money supply and US Equities could potentially add more selling pressure in the coming weeks. We remain bullish on the very long term but remain however bearish on the medium and short term. There is a risk of a dropback if BTC doesn’t find the momentum to break through to the upside with major supports near $27,000, $25,000, and $24,000 further below.
BTC’s 30-day Historical Volatility – HV- dropped significantly over the past week and is now nearing 25% – from 38% last week ahead of the FOMC meeting.
BTC ended the month of June up +11.9%, benefitting from the first “BlackRock rally” in June, and the performance for July is currently down -4.4% with the YTD performance for 2023 being +76%, from +80% last week.
ETH
ETH also had a difficult week, retracing for 6 consecutive trading sessions to settle near $1,890, ending the week down -2.4%. Price action fell below the $1,880 over the week and continued to edge lower over the weekend, inching closer to the $1,850 mark.
ETH tested the $1,830 earlier today and is now retesting its MA100 near $1,860, with the 200 MA acting as a major support currently near $1,740. The 200 MA being a strong indicator of the overall trend, if ETH breached below that level, the price could move downwards towards its next support near $1,715 and $1,370 further below.
ETH’s performance for June was +3.2% and the MTD performance for July steadied at -4.4%, with the YTD performance being +54%, from +58% last week.
OTHER MARKETS
US Equities were mixed last week with S&P and Nasdaq closing near 4,536 and 14,033, up +0.7% and down -0.6% as investors assessed the latest corporate earnings results with strong results from Pharmaceuticals and Financials but mitigated earnings from Amazon, Netflix, and Tesla among others, as well as the retail sales and housing market data for June ahead of this week’s FOMC meeting and key inflation numbers.
S&P and Nasdaq’s MTD performances for July are currently +2.3% and +2.0% and the YTD performances are +18.6% and +34% – from +18% and +36% respectively as of last week.
As mentioned in our previous reports this month, the comparison between the rallying US Equities and the contracting Monetary supply M2 could put in perspective the timing of a possible correction in stock markets considering the divergence currently occurring in 2023 as we can see in the graphs below. The divergence widened over the past week with the latest inflation data and corporate earnings propelling prices upwards.
DXY
DXY gained, making a strong comeback above the 100 mark thanks to the resilient job market data. The index rose from this month’s low of 99.58 to a high of 101.19, regaining the 100.7 level and confirming the above throughout the week.
DXY is currently near 101.4 with 102 now acting as the nearest resistance and on the downside 100.7 acts as support before the 100 mark that could act as a psychological level before the 200-Week ie 1000-Day MA further below currently near 98.2. The index is expected to remain volatile as other central banks could adjust their policies later in the year.
US TREASURIES
US Treasury yields were mixed with the policy-sensitive 2Y yield gaining over the week while the 10Y yield remained stable. The 10Y and 2Y yields ended near 3.84% and 4.85% on Friday in anticipation of the highly expected rate hike at the next FOMC meeting. Markets are now pricing in a 99% chance of a 25-basis point hike during this week’s FOMC meeting, according to CME’s FedWatchTool, which would bring the target rate to 5.25% – 5.50%. The picture for the remainder of the year, however, is less clear and investors will carefully monitor the guidance issued by the central bank and remarks from Fed Chair J. Powell.
The 10Y yield and the policy-sensitive 2Y are currently exchanging near 3.88% and 4.92% from 3.81% and 4.74% last Monday, widening the inversion of the yield curve to 104 bps, from 93 bps last week.