TA Tuesday: Credit ratings, crypto volatility, and Litecoin take centre stage

Credit ratings, crypto volatility, and Litecoin take centre stage.

Week-over-week performance:

  • BTCUSD: 27,395, +1.28%
  • ETHUSD: 1,860, +2.71%
  • US02Y: 4.34%, +36bps (!!)
  • DXY: 103.27, +0.78%
  • GOLD (USD/OZ): 1,961, -2.29%
  • NDX: 13,849, +3.25%
  • VIX: 17.2, 0.58%
  • VVIX: 97.64, +3.16%
On the macro side:

This week, the economic landscape will be influenced by notable economic indicators and appearances from Federal Reserve speakers, shaping the overall market dynamics.

In terms of economic indicators, the upcoming release of the PCE report is expected to align with recent trends observed in the CPI. Additionally, new minutes from the FOMC will provide insights into the discussions and decisions made during the May meeting. Fed Chair Jerome Powell’s acknowledgment that stresses in the banking sector could alleviate the need for further interest rate hikes suggests a nuanced perspective within the central bank. Moreover, the openness of Neel Kashkari, one of the Fed’s prominent hawks, to a potential pause or skipping of an interest rate hike at the June meeting signals a possible shift in stance.

Fiscal concerns come into play as former Treasury Secretary Janet Yellen expressed doubts about the US’s ability to meet its financial obligations by June 15th. Economists at Goldman Sachs predict that the Treasury’s cash levels may fall below the minimum requirement for meeting obligations by June 8th or 9th, raising concerns about potential risks. The resolution of debt ceiling issues remains unpredictable, carrying significant implications for the market and economy. Notably, as of Thursday, the Treasury’s cash balance stands at just $57.3 billion!

In recent weeks, the euro has depreciated against the US dollar and Swiss franc by approximately 1.5%. This depreciation is also attributed to rumours surrounding the possible downgrading of credit ratings for several European countries, including the possibility of Italy’s debt being rated as junk. Such developments would have massive implications for the euro. While concerns exist regarding the debt levels of many EU countries, it is worth considering that the United States is rated TRIPLE-A! The ability to print money is a factor, but in my opinion the implications of such actions warrant examination.

Meanwhile, the MOVE stands at 132, placing it in the top 10% of historical levels. The VIX is at 17.2, which falls in the bottom 50%, and DVOL is at 48.44, placing it in the bottom 10%. All good or is something wrong here?

On the crypto side:

The cryptocurrency market currently lacks significant catalysts, leading to low volatility. BTC’s 7-day realised volatility is at 25%. While short-term volatility remains low, it may not be sustainable in the mid-term. With BTC dominance at 48%, there is a bias towards altcoins and high beta assets.

Referring to the LTCUSD analysis from a couple of weeks ago (ref: https://www.crypto-finance.com/de/ta-tuesday-crypto-market-focuses-on-fomc-meeting-and-nfp-release/), LTCUSD presented a favourable entry point at 78. Currently, it is trading at USD 92, which poses as a short-term resistance level. Considering that LTCBTC is trading at 0.003369 and the upcoming halving, it remains an intriguing trade opportunity. However, given the RSI at 57, it may be prudent to wait for momentum to slow down before considering re-entry in the pursuit of higher levels towards 100+.

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