TA Tuesday: Navigating FOMC Week, Insights on Market Trends, and Trading Opportunities

Week-over-week performance:

  • BTCUSD: 64,090 / -10.68
  • ETHUSD: 3,338 / -16.82% (!)
  • US10Y: 4.32% / +22bps
  • DXY: 103.77 / +0.94%
  • GOLD (USD/OZ): 2,156/ -0.82%
  • NDX: 17,985 / -1.50%
  • VIX: 14.51 / -4.79%

On the macro side:

It is FOMC week, and we are entering it with a mixed bag of data.
Real economy is robust, but inflation is still hovering above the target range, which leads me to expect Powell to take a very hawkish stance.
However, with the VIX below 15, it appears that the market is not positioned for this shift.

Consequently, given the market’s persistent long bias, a hawkish Fed could trigger a short-term sell-off, presenting a buy-the-dip opportunity in risk assets.
Despite the recent almost zero correlation between digital assets and US equities, an equity sell-off would likely affect cryptocurrencies as well, offering another enticing buying opportunity.

Looking ahead:

  • Tuesday 19 March: US Building Permits
  • Wednesday 20 March: UK CPI, DE PPI, FOMC
  • Thursday 21 March: SNB Interest Rate Decision, BoE Interest Rate Decision
  • Friday 22 March: Fed Chair Powell Speaks

On the FX side:
Following the release of hotter-than-expected US figures, the DXY has broken its downward sloping trendline and is now on track towards 104.

As we approach a week filled with central bank monetary decisions, my bias remains that the US economy is likely to maintain higher rates for a longer period, while Switzerland could potentially be the first to cut rates.

Although the Swiss franc has softened slightly, it remains very strong, which is why I continue to favour short positions on CHF and long positions on the EUR and USD.
The EURCHF pair appears well anchored between 0.9605 and 0.9673, with a breakout above this potentially leading towards 0.98.
USDCHF has held onto the 0.88 support level, and I am eyeing a move towards 0.89 and beyond.

The stronger US dollar is also weighing on digital assets.

Chart 1: DXY 1d

On the crypto side:
The week saw BTC taking investors on a rollercoaster ride, plummeting from USD 73,700 to USD 63,500 within days.
Despite a widespread sell-off that slashed the total crypto market cap from USD 2.7T to USD 2.35T (-13%), leverage remains prevalent.

Futures basis and funding rates continue to show strong contango, and long-term calls remain pricey.
However, with BTC spot ETF inflows slowing down, it appears that those betting on a mid-term reversal are overly optimistic.
Given the high cost of leverage, I expect this bullish bias to wane soon, prompting the closure of many leveraged positions.
A significant entry opportunity could arise following a leverage wash-out.

For BTCUSD, USD 62,300 acts as support, while USD 68,000 poses as resistance.
In derivatives, I favour selling short-term puts at USD 60,000, and I think that selling 100-day+ risk-reversals is advantageous due to this strong contango.

Chart 2: BTCUSD 1d

In ETH and altcoins, a high-beta effect is evident, with smaller caps underperforming bitcoin.

Solana and AI tokens continue to lead year-to-date, and I remain bullish on them.
Despite solana facing the known decentralisation challenges, it is still just 20% of ethereum’s market cap.

My stance persists that 2024 will not be the year for an ETH ETF, and I view a long SOL short ETH position as the optimal trade for Q2 2024.

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