
Week-over-week performance:
- BTCUSD: 62,300 / -2.40%
- ETHUSD: 2,416 / -8.52%
- US10Y: 4% / +21 bps
- DXY: 102.4 / 1.53%
- GOLD (USD/OZ): 2,645 / +0.08%
- SPX: 5,695 / -1.16%
- NDX: 19,800 / -1.30%
- DVOL: 56.26 / +1.21%
- VIX: 22.65 / +35.47%
Looking ahead – Economic calendar:
- Tuesday, 08 October 2024: HBO documentary on Satoshi’s identity, RBNZ Interest Rate decision
- Wednesday, 09 October: FOMC Minutes
- Thursday, 10 October: ECB Minutes, US CPI, US Jobs
- Friday, 11 October: UK GDP, DE CPI, US PPI, US Banks Earnings
- Sunday, 13 October: AXS unlocks 6% MC
On the macro side:
Last week brought two significant events:
- Middle East escalation
- US employment updates
The conflict in the Middle East initially pushed risk assets lower while gold and oil rose. Although Israel appears to be in a strong position, there is a tangible risk that the regional conflict could escalate. In the US, political instability is adding to the volatility.
On the employment side, Friday’s data was a shocker, with a 4-sigma event—US NFP came in at 254,000 vs. the expected 150,000. Previous months were also revised upward, and the unemployment rate dropped from 4.2% to 4.1%. Wages rose 4% year-over-year, up from 3.8% the previous month. Altogether, this data is quite explosive.
In response, we saw a repricing of Fed rate expectations. The likelihood of a 25 bps cut at the November 7, 2024,FOMC meeting is now at 90%, compared to 63% a week ago. The odds of no rate cut have increased to 9%.
Chart 1: Target rate probabilities for the November 7, 2024, Fed meeting (current vs. one week ago).
With the FOMC minutes and US CPI data, the pain trade lies in no rate cut, as the 25 bps cut is already priced in. I will be closely watching the earnings from banks, particularly investment banking units. Nevertheless, real yields are enormously positive, leaving a big space for cuts.
Also interesting from last week:
- Gold failed to break its all-time highs despite geopolitical tensions (this is something to keep in mind when it comes to BTC)
- The VIX is building up, and the forward curve is now above 20, but there has not been much flow into short-volatility products yet—still early?
- The MOVE index is at 125, and UST yields rose by an average of 30 bps, yet corporate credit spreads are tightening, indicating credit conditions are unchanged or even improving—this is bullish.
On the FX side:
Overall, last week was clearly bullish for the USD, with the DXY gaining 1.53%.
This was a key driver behind the underperformance of risk assets, and the 3-sigma weekly move in the DXY indicated that many were caught on the wrong side of the trade.
That said, I used Friday’s liquidity as an opportunity to exit my long USDCHF position. My outlook remains that the path for rate cuts is well defined, and with US real yields so elevated, there is significant room for future cuts.
From a technical perspective, I expect a DXY retracement towards the lower 102 range, though 103 remains a key resistance level.
Chart 2: DXY 1d
On the crypto side:
Crypto markets took another hit, particularly in response to the escalation in the Middle East.
I maintain a bias that TradFi tends to be right on spot pricing, and then when crypto does not follow crypto is wrong.
This leaves room for further upside, especially as optimism grows around a potential Trump victory. According to Polymarket, Trump now leads with 53%.
Chart 3: 2024 Presidential Election Winner
Today, HBO is releasing a Bitcoin documentary, and I am curious to see if it will bring more mainstream attention to the space—similar to how Drive to Survive boosted F1’s popularity.
Despite this, the focus remains on US macro data.
In derivatives, while at-the-money implied volatility has declined week-over-week, the wings remain sticky, particularly in the 10-delta range and below (e.g., 10D weekly butterflies are up +1.5v). This reflects the recent appetite to short volatility at previous levels. With that in mind, an upward move could easily see BTC hitting USD 66,000. Additionally, with 1 month to expiry for the Election options, now seems like a good time to start closing short-volatility positions.
From a technical standpoint, BTCUSD forming a higher low at USD 60,000 is bullish, providing strong support, while USD 63,000 remains the key level for another upward leg.
Read more News here