This week’s macro figures:
Wednesday, July 26:
GfK Consumer Confidence Germany (exp. -28.9, prev. -27.4)
FED Interest Rate Decision (exp. 2.5%, prev. 1.75%)
Friday, July 27:
(Prelim) Inflation Rate Germany (exp. 7.4%, prev. 7.6%)
(Prelim) GDP Growth QoQ (Q2) (prev. -1.6%)
Initial jobless claims (exp. 253k, prev. 251k)
On Thursday, the FED will announce its decision. The market (target rate probabilities) expects a 75 bps hike with a 75.1% probability, and a 100 bps hike with a 24.9% probability. Due to the good forward guidance of the FED in recent weeks, I think the market is adequately positioned, and it will be more of a non-event. The reaction on Friday’s figures will be interesting to watch. If preliminary GDP growth in the U.S. is negative, the term recession will dominate the financial press in the days to come, and potentially lead to volatility.
In terms of inflation, I see the pressure and momentum easing. Be it wheat, which is now trading 30% lower since the end of April, live cattle at -5%, coffee at -25% or copper with -25%. Especially copper, which is considered a good indicator of industrial demand, and is therefore also called Dr Copper, points to a significant cooling of the global economy. “Bond King” Jeffrey Grundlach’s favourite indicator is the so-called Copper-Gold ratio. Historically, this is a good leading indicator for the direction of the 10-year yield. The ratio (orange) has been pointing sharply lower since early May, while the 10-year yield (blue) has been able to hold at the high level. I do not think that interest rates can stay up there; they could even correct downward significantly.
Now let us turn to our main topic: crypto.
August will be interesting. An attractive technical set-up is forming. Looking at BTC$, we can see the medium-term downtrend, which has been in place since April. Then again, we have been seeing an underlying slight uptrend since June. At the end of last week, we bounced off of the dowtrend line. The big question now is whether or not the market can break through this trendline. In case of a breakout, prices of USD 29,000 are possible in the short-term. If we cannot overcome the downtrend, prices of USD 15,000 are probable. My 2 cents on this: we will be seeing USD 15,000.
In the last three weeks, ETH$ has performed well. This is due to the good news regarding the merge. Nevertheless, a consolidation towards USD 1,260 is likely. We will then need to reassess the situation.
An interesting set-up is forming in DYDXBTC. On the one hand, I find the project exciting, and on the other hand, the downtrend, which has lasted since December, was broken to the upside. Currently, I see 0.000085 as the support, and at the same time a potential stop loss. I see a first resistance at 0.000105. After this resistance, I see a price potential of up to 0.00015.