Week-over-week performance:
- BTCUSD: 64,432 / +12.14% (!)
- ETHUSD: 3,463 / +12.54% (!)
- US10Y: 4.21% / -7 bps
- DXY: 104.35 / -0.64%
- GOLD (USD/OZ): 2,430 / +2.79%
- SPX: 5,631 / +1.06%
- NDX: 20,387 / -0.25%
- DVOL: 55.34 / +8.38%
- VIX: 13.13 / +6.23%
Looking Ahead – Economic Calendar:
- Tuesday, 16 July: US Retail Sales
- Wednesday, 17 July: UK CPI, EU CPI, Fed Beige Book
- Thursday, 18 July: ECB Interest Rate Decision, US Jobless Claims
On the macro side:
US CPI turned negative on a monthly basis for the first time since June 2020.
Chart 1: US CPI MoM
Combined with a weaker labour market, this sets the stage for potentially lower rates soon. The target rate probabilities for the Fed meeting on 18 December now show a 56.2% chance of a 450-475 bps target rate (3x 25 bps rate cut from September).
This trend also supports the market’s upward momentum.
Chart 2: Target Rate Probabilities for the Fed Meeting on 18 December
Bank earnings were positive, with Goldman Sachs ($GS) showing strong performance in its trading units, and a recovering capital market business boosting overall results.
However, $GS generated fewer fees from M&A activity than JPMorgan ($JPM), which is unusual given $GS’s typical leadership in this area.
These robust performances are not solely driven by interest income, and as I mentioned last week, they will continue to fuel the current market momentum.
As rates continue to fall, gold is approaching all-time highs, and the recent assassination attempt on Trump may affect the election outcome, which will likely maintain a risk-on market environment. The outlook remains bullish.
On the FX side:
The US Dollar Index has declined week-over-week and is now below 104.5.
At the same time, EUR/USD was rejected at 1.09 and GBP/USD was rejected at 1.30.
This week, the ECB is expected to announce a rate-skip decision, with projections for two 25 bps rate cuts at the September and December meetings.
Although inflation is not yet at the ECB’s target, the current Deposit Facility Rate of 3.75% is quite restrictive.
With this in mind, I expect EUR/USD and GBP/USD to reverse their recent gains, barring an unexpected CPI report on Wednesday.
Conversely, for USD/CHF, I maintain my view that the narrowing yield differential will lead to a depreciation of the USD against the CHF.
On the crypto side:
The German government has completed its BTC liquidation, and Genesis has sold 13,000 BTC, presumably as part of their ongoing bankruptcy liquidation procedures. (They hold another BTC 32,000 per Arkham https://platform.arkhamintelligence.com/explorer/entity/genesis-trading).
Mt. Gox crypto and cash repayment (ca. USD 9 billion) and FTX cash repayment (ca. USD 11 billion) are yet to come and could counterbalance.
Boomers have been aggressively buying bitcoin as we have seen significant growth in spot ETF inflows and the Trump assassination attempt definitely favours crypto as the election odds have shifted in his favour for a second term.
Trump is scheduled to speak at Bitcoin 2024 on 27 July to discuss “the future of the American Bitcoin industry,” according to David Bailey.
The biggest news would be if Trump talks about bitcoin’s role as a reserve asset (this would be extremely bullish).
In derivatives, the flow remains muted with short-term protection and long-term topside exposure with more upside volatility expected in ETH.
I maintain my bias that last week’s price action in BTC below USD 58,000 was a good buy, and while we may have another spot sell-off with Mt. Gox BTC distribution, I maintain my bias towards new ATHs into year-end.
Looking at the chart, in BTCUSD S1 at USD 63,000, S2 at USD 59,000 and R1 at USD 67,000.
Chart 3: BTCUSD 1d
In Ethereum, SEC request for “FINAL S-1s” to be returned on Wednesday and requested “effectiveness on Monday after close for a TUESDAY 7/23 LAUNCH” – we are there.
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