CFT Update Tuesday, Jan 17th 2023
BTC and ETH soared last week, closing near $20,000 and $1,500 on Friday and ending the week up +17% and +14 % as Thursday’s CPI data coming out lower than expected propelled prices upward – confirming the progress in the Fed’s efforts to tame inflation.
Equities also benefited from the news, with S&P and Nasdaq printing 2.7% and 4.8% for the week.
US treasuries inversely fell with the 10Y yield trading near 3.51% on Friday (-1.14% on the week) as investors kept adjusting their scenario of a slowdown from the Fed. DXY also lost some ground closing near 102.2 (-1.65% on the week). Oil prices rose steadily with the WTI closing near $80 on Friday boosted as investors remained optimistic regarding China’s demand.
Cryptos and Stocks are settling today, trading close to flat with BTC, ETH, S&P and Nasdaq trading near $21,150, $1,570, 3,995 and 11,085 respectively.
This week, investors will focus on the earning season that will continue to unwrap with major Financial – Morgan Stanley, Goldman Sachs – and Airline – American Airlines, United – firms set report as well as Netflix and Procter & Gamble among others.
Investors will also keep an eye on Wednesday’s US Retail Sales data and PPI – Producer Price Index – data for the month of December to better assess the state of consumer spending and inflation in December in anticipation of next Fed’s meeting in early February. Lastly, the latest housing sales data will also become available on Friday.
We closed a position on a large-cap coin and took profits on 2 other large-cap trades, realizing 13% and 12% gains on these trades respectively.
We also opened 2 short positions on large-cap coins over the weekend -ETH and SOL.
We still have two long positions in BTC and one large-cap coin – DOT.
The exposure to the market is now 23%, the rest being in cash.
BTC ended the past week near $19,930, up +17.4% and increased vigorously throughout the holiday extended weekend in observance of the Martin Luther King holiday. Price action was boosted by Thursday’s CPI inflation number for the month of December coming out lower than expected, which spurred bets of a Fed rate slowdown or pivot in the near future and drove prices up for the rest of the weekend. BTC’s 30-day – Historical Volatility – HV- has now rebounded and is near 32% – last week’s level was below 25%.
BTC is maintaining its momentum today, trading near 21,330, up +0.6%, bringing the performance for the month up to 28%.
The potential for a Fed slowdown or pivot combined with a stalling DXY we mentioned in our past reports seems to have materialized further this past week with the release of the lower-than-expected CPI data, which triggered a bullish momentum on the markets. However, we remain cautious and believe more clarity brought by the US regulatory framework later in 2023 may be essential to continue to fuel a rebound in the longer term. On the upside, the $22,500 and $24,500 regions act as resistances while the next support to watch on the downside is near the $19,000 level.
After closing the first week of January with 5.8% gains, ETH continued its streak of positive weekly gains in 2023 as it closed last Friday near $1,451, up +14% on the week.
ETH continued to rally throughout the extended holiday weekend, hovering near the $1,570 level and is now trading just below the $1,600 level, bringing the performance for the month up to +31.6%.
The bullish trend line that started to form last week shaped up further this week. Price action broke and confirmed above the ascending parallel channel with support now near $1,450 with the next resistance being near the $1,780 level.
US Equities also gained this week with S&P and Nasdaq printing +2.7% and 4.8% for the week. Like the crypto market, US Equities benefited from the favourable CPI data feeding further the hypothesis of a Fed rate hike slowdown.
S&P and Nasdaq are trading close to flat today, bringing the performance for the month to 4.2% and +6.1% respectively.
Inversely to Cryptos and Equities, DXY ended the week with losses, down -1.6% near 102.2 from 103.9 last week. Price action traded downwards, within our descending parallel channel with USD Index inching towards a seven-month low at 101.60. According to the CME FedWatch tool, the chances of raising interest rates to 4.50-4.75% by hiking interest rates with a 25 bps rate hike have scaled above 94%, showing the anticipation of the Fed slowdown from the markets.
DXY is trading close to flat with a slightly bearish tone, exchanging near 102.3 (-0.26%) with the 7-month low of 101.6 acting as support and the upper line of our parallel channel acting as resistance – currently at 104.
Bond yields declined this past week, with the 10Y yield falling near 3.45%, losing close to 8 bps (from 3.53% to 3.45% over the week), deepening further the inversion of the yield curve with the 2Y note yielding close to 4.2%
The 10Y yield rebounded early this week and is now trading near 3.53% – ie flat from last Monday, and the 2Y yield is at 4.19% – from 4.2% last Monday.