LAST WEEK
BTC and ETH continued to retrace last week, with BTC briefly hitting a low below $28,850 last Monday before finding support near $29,000. The two cryptocurrencies were trading near $29,320 and $1,875 on Friday, ending the week down -2.0% and -0.9% where central banks’ rate decisions and inflation outlooks took center stage.
US Equities rallied with S&P and Nasdaq closing near 4,582 and 14,316, up +1.01% and +2.02% over the week as investors welcomed the encouraging earnings reports – from Intel and Mondelez among others – as well as the PCE data confirming the continued cooling of inflation: Price consumer Expenditures for June came out slightly lower than anticipated, with Core PCE rising 4.1% vs 4.2% expected which confirmed the Fed’s progress to tame inflation.
US Treasury yields rose with the policy-sensitive 2Y yield edging moderately higher over the week in the wake of the anticipated 25bps rate hike from the Fed and the ECB while the 10Y yield rallied towards the end of the week as the strong earnings reports discounted the scenario of a recession a bit further. The 10Y and 2Y yields ended near 3.95% and 4.88% on Friday – from 3.84% and 4.85% the week before.
DXY edged higher despite some consolidation sessions on Tuesday and Wednesday, maintaining the strong momentum above the 101 mark following the FOMC rate decision. The index rose from this month’s low of 99.58 to a high of 102.04 this Friday and closed the week near 101.7.
The oil price rallied to clinch its fifth-straight week of gains, the longest rally since April 2022, with markets benefitting from increasing demand from India and China, lingering tensions between Russia-Ukraine, and recent production cuts by OPEC+ supporting oil prices. The WTI was nearing $80 on Friday.
BTC and ETH are trading flat today with a slight bearish bias amidst today’s news that the SEC requested Coinbase to halt trading in every activity except Bitcoin. BTC and ETH are trading near $29,210 and $1,860 as markets look ahead to this week’s corporate earnings with Apple and Amazon set to report among others. Investors will also keep an eye on ADP employment numbers on Wednesday as well as ISM manufacturing and services respectively on Tuesday and Thursday for July. On Friday, the market will shift its focus toward the US jobs report with the NFP numbers for July expected to give the tone in the latter part of the week.
CLIENT PROFITS
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 continued to retrace last week, briefly hitting a low below $28,850 last Monday before finding support near $29,000. BTC traded near $29,320 on Friday, ending the week down -2.0% where central banks’ rate decisions and inflation outlooks took center stage.
BTC has been consolidating in a tight range below $30,000 and testing its MA-50 over the past week near $29,200, which is currently still being tested. 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, especially if the bearish divergence we mentioned in our last reports this month between money supply and US Equities starts to affect Stocks and subsequently BTC prices.
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- steadied over the past week near 25%.
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%.
ETH
ETH also retraced this past week, edging lower -0.9% over the week to trade near $1,875 on Friday.
ETH hovered near $1,860, testing its 50-day MA – currently near $1,856 and price is still evolving near that level with the 200 MA acting as a major support currently near $1,800. The 200 MA is a strong indicator of the overall trend, if ETH breached below that level, the price could move downwards towards its next support near $1,750 and $1,370 further below.
ETH’s performance for June was +3.2% and the MTD performance for July is now at -4.0%, with the YTD performance being +55%, from +54% last week.
OTHER MARKETS
US Equities rallied with S&P and Nasdaq closing near 4,582 and 14,316, up +1.01% and +2.02% over the week as investors welcomed the encouraging earnings reports – from Intel and Mondelez among others – as well as the PCE data confirming the continued cooling of inflation: Price consumer Expenditures for June came out slightly lower than anticipated, with Core PCE rising 4.1% vs 4.2% expected which confirmed the Fed’s progress to tame inflation.
S&P and Nasdaq’s performances for July are now +2.8% and +3.8% and the YTD performances are +19% and +37% – from +18.6% and +34% 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 edged higher despite some consolidation sessions on Tuesday and Wednesday, maintaining the strong momentum above the 101 mark following the FOMC rate decision. The index rose from this month’s low of 99.58 to a high of 102.04 this Friday and closed the week near 101.7.
DXY is currently near 101.9 with the 102 level still acting as nearest resistance and the 50-day MA above next, currently near 102.5. On the downside, the 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 rebounded this past week but is expected to remain volatile as other central banks could adjust their policies later in the year.
US TREASURIES
DXY is currently near 101.9 with the 102 level still acting as nearest resistance and the 50-day MA above next, currently near 102.5. On the downside, the 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 rebounded this past week but is expected to remain volatile as other central banks could adjust their policies later in the year.
The 10Y yield and the policy-sensitive 2Y are currently exchanging near 3.96% and 4.88% from 3.88% and 4.92% last Monday, reducing the inversion of the yield curve to 92bps, from 104 bps last week.
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