Week-over-week performance:
- BTCUSD: 43,419 / +8.61%
- ETHUSD: 2,308 / -1.58%
- US10Y: 4.04% / -6 bps
- DXY: 103.54 / +0.51%
- GOLD (USD/OZ): 2,035 / +0.09%
- NDX: 17,596 / +1.54%
- VIX: 13.61 / +3.26%
On the macro side:
The absence of fresh “news” continues to keep the macroeconomic landscape relatively subdued, reinforcing the prevailing bullish trend in the market.
As we approach the FOMC week, I anticipate that the rate decision is likely to lean towards another rate skip, and I do not foresee any significant developments in that regard.
However, my primary focus is on the upcoming press conference. There appears to be some uncertainty regarding the timing of the Fed’s initiation of policy rate cuts, as market participants now anticipate the first cut in May instead of March. Conversely, the end-of-year projected policy remains at 4%, aligning with long-term yields.
Should Chairman Powell indicate that a rate cut is not on the horizon for the next FOMC meeting, I anticipate a potential offset in risk assets, mitigating some of the recent gains.
I would not be surprised to hear Powell discouraging bullish sentiments in the context of his commitment to addressing inflation and unemployment.
Nevertheless, the VIX hovering around 13 suggests that markets are currently not pricing in protection against this particular scenario.
Considering the overall health of the macro landscape, my bias is that any retracement resulting from the FOMC could present a favourable buying opportunity.
Looking ahead:
- Wednesday, 30 January: DE CPI, US ADP Nonfarm Employment, US FOMC
- Thursday, 1 February: EU CPI, BoE Interest Rate Decision, US Jobless Claims
- Friday, 2 February: US NFP, US Unemployment
On the FX side:
Throughout the week, the DXY maintained a trading range between 103 and 103.8, solidifying the low-volatility scenario and suggestion a lack of a clear direction, as previously highlighted in recent weeks.
While I anticipate the continuation of this trend, the USDCHF’s inability to break the trend-line and the EURCHF’s struggle to stay above 0.94 underscore the prevailing pressure in the market.
Historically, the ECB has been known for its measured response to shifts in the market, suggesting that ECB reaction to falling inflation may be gradual.
This slow response is likely to provide support to the euro.
For EURCHF, maintaining a key support level at 0.93 is crucial for any upward movement towards the 0.95 mark.
Chart 1: DXY 1d
On the crypto side:
Despite the absence of significant net inflows into BTC Spot ETFs, bitcoin managed to maintain the $38.5k level and even rebounded to around $44k.
The deceleration in selling pressure from GBTC suggests that most of the outflow may have originated from forced sellers, such as FTX, and this contributes to a bullish sentiment for bitcoin.
Conversely, as the approval for ETH Spot ETFs seems unlikely in the near future, as previously mentioned, ETHBTC has fallen to 0.053.
My stance on the crypto market remains consistent: with traditional risk markets maintaining a bullish trend, cash inflows will reach the crypto sphere at some point.
Although, currently, there are instruments available for big players, their entry into the market may take some time.
The decline in the futures basis, decreasing volatility, and a flattening of the vol term-structure, coupled with a $10k drop in BTC over the past 14 days, further solidify my inclination towards accumulating positions in anticipation of new bull runs.
Chart 2: BTC 1d
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