TA Tuesday: Central Banks’ Influence on Global Markets and Crypto Outlook

Week-over-week performance:

  • BTCUSD: 26,344 / -1.62%
  • ETHUSD: 1,591 / -2.63%
  • US02Y: 5.15% / +9bps
  • DXY: 105.98 / +0.75%
  • GOLD (USD/OZ): 1,914 / -0.83%
  • NDX: 14,768 / -3%
  • VIX: 16.89 / +20.56%

On the macro side:

Last week, major central banks took centre stage, and for the first time in a while, it became evident that the fate of the US dollar, and consequently, global equities, is not solely under the control of the US Government and the Fed.
Other economies can exert influence.

Powell came with a “hawkish pause,” which initially led to a partial decline in risk assets.
However, while the ECB came with a rate hike, the SNB, BoE, and BoJ opted to keep rates unchanged.
This collective action resulted in the US dollar rising, an increase in VIX, and a decline in risk assets, with defensive sectors outperforming (e.g., DJI down 2% week-over-week).

While inflation numbers are trending in the right direction, it appears that underlying concerns persist.
In my view, a tail event is other central banks cutting rates before the Fed.
Such a move could strengthen the US dollar (which would favour the trade balance) but render the Fed’s actions less impactful, leading to a cascade of consequences.

Turning to the US treasury market, we observed a parallel shift of 20bps for maturities longer than 5 years over the week (20bps for 30-year yield is huge).
To me, this does not only mean “higher for longer” or “regime shift” but instead uncertainty, and uncertainty is not good for capital markets and businesses (I think of SPX in the 4,200-4,300 range).

Chart 1: US Treasury Yield, Today vs 1-week-ago

Looking ahead:

This week, on Thursday, there are key events to watch, including German CPI, a revision of US GDP, and a speech by Jerome Powell.
On Friday, Europe’s CPI.

On the FX side:

DXY, the US Dollar Index, has finally breached its year-to-date highs, signalling potential further gains on the horizon.
I’m maintaining my target levels: EURUSD at 1.52 and USDCHF at 0.92, which could possibly drive the DXY index to 107.
Key events to watch for guidance in this context will be the GDP revision and Europe’s CPI.

Chart 2: EURUSD 1d



Chart 3: USDCHF 1d


On the crypto side:

Volumes are currently extremely low, and therefore, I maintain a bias towards high intraday volatility but low realised volatility

Translating this into prices:

For BTCUSD, I anticipate consolidation above the $25,000 mark, with the possibility of a dip to $24,300.
On the upside, I am watching for a breakout above the trend line, confirmed by trading volumes, followed by resistance around $28,000.


Chart 4: BTCUSD 1d

In the ETHBTC pair, we recently witnessed the 0.06 level with significant buying interest. I now anticipate a rebound toward 0.062.


Chart 5: ETHBTC 1d


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