This week, BTC peaked at USD 64,700 during the Asia session on Tuesday night before dropping to USD 59,000 by the close of the US session, breaking its key support level of USD 60,000. The drop was boosted by investors exercising caution before the FOMC meeting, taking on a risk-off approach, a strong rise in the USD (DXY peaking at 106.5 on Wednesday morning), and key major macro indicators such as the CB Consumer Confidence and Chicago PMI released data coming in worse than predicted during the Tuesday session.
BTC bottomed around USD 56,500 during the European session on Wednesday, and with the Fed keeping interest rates at 5.50% (as expected) but Jay Powell taking a dovish stance by basically reducing the pace of QT (balance sheet reduction programme from USD 65 billion to USD 25 billion to start in June), this should be positive for global liquidity. Nevertheless, global liquidity (and hence risk assets such as BTC) has been on the rise for the past year as the Fed’s QT has been offset by other treasury tools such as RRP. Despite some comments from Treasury Secretary, Janet Yellen, that the US needs to take significant steps to reduce the US deficit, my short-term bias is for more pain (currently, we are in a reversal phase before we have another leg down). My medium to long-term bias is for a further rise in global liquidity and hence a boost to risk assets.
The ETF net flows have been negative for seven days in a row, with IBIT having its first negative outflow day on Wednesday and total outflows of more than USD 560 million (the second largest outflow since inception).
This morning, BTC was rejected at USD 60,000, with immediate support at USD 58,200, then USD 56,500, from where the next strong support level is USD 52,000. On the upside, the first resistance is at USD 60,000, then USD 62,000, followed by USD 63,400.
In general and simple terms, we can say that anything below USD 60,000 is bearish, and if we manage to stay above it consistently, it is bullish. The same goes for ETH with the USD 3,000 level.
Over the weekend, ETH rallied to USD 3,350 on Sunday, with traders speculating on a quick ETF approval from the SEC as Franklin Templeton listed its Spot ETH ETF on the DTCC website. However, despite outperforming BTC, ETH also took a hit and found support at USD 2,815 and is currently trading just below USD 3,000. The next support is therefore at USD 2,715 and then USD 2,500. On the upside, the first resistance is at USD 3,050, the second at USD 3,200, and the third is at USD 3,300.
Other macro news includes the EUR CPI on Tuesday, which saw its CPI growth rate at 2.4% YoY for April, in line with economists’ expectations. The core CPI growth stood at 2.7%, slightly surpassing the anticipated 2.6% but dipping from 2.9% in March. In contrast to the US, where CPI rose, the Eurozone’s CPI continued to fall, approaching the ECB’s 2% inflation target. This increases the likelihood that the ECB will cut interest rates for the first time this cycle at its June meeting.
The 30-day BTC ATM implied volatility fell further from 55% to 53% (-2% WoW), while the 30-day ETH ATM implied volatility fell further from 60.5% to 58.5% (-2.5% WoW). Looking at the 25-delta skew, it is negative for BTC between the timeframes of 0-30 days (highest skew for 0-7 days) and for ETH between 0-90 days (highest skew for 14-21 days). The negative skew shift was even higher in mid-April as the Middle East conflict escalated.
All eyes will be on NFPs this afternoon. While next week will rather quiet, the key economic events to watch are the UK interest rate decision on Thursday, and UK GDP and preliminary US consumer sentiment on Friday.
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