TA Tuesday: Crypto Market Braces for ECB Decision, Eyes on US Jobs Data

Week-over-week performance:

  • BTCUSD: 68,819 / +1.57%
  • ETHUSD: 3,756 / +2.21%
  • US10Y: 4.40% / -6 bps
  • DXY: 104.1 / -0.31%
  • GOLD (USD/OZ): 2,349 / -0.13%
  • SPX: 5,283 / -0.40%
  • NDX: 18,600 / -1.10%
  • DVOL: 51.79 / -5.20%
  • VIX: 13.12 / +10%

Looking Ahead – Economic Calendar:

  • Tuesday, 04 June: US JOLTs
  • Wednesday, 05 June: US ADP, BoC Interest Rate Decision
  • Thursday, 06 June: ECB Rate Decision, US Jobs figures
  • Friday, 07 June: US Average Hourly Earnings, US NFP

On the macro side: 

As we approach the week of the ECB rate decision and prepare for the 12 June FOMC meeting, expectations for the Fed’s year-end policy rates have shifted downward, now pricing in a year-end target rate of 475-500 bps, a 50 bps cut from current levels. 
This shift has generally weakened Treasuries and the US dollar, while risk assets have also moved in the opposite direction.

The main focus this week will be on the ECB, not for the interest rate decision, which is widely expected to be another rate skip, but for the forward guidance. 
With the SNB already cutting rates, the ECB could be the first major central bank to deviate from or anticipate the Fed in a rate cut programme. 
This would likely push the USD higher in the short term and weaken risk assets in USD terms. 
However, as equities and cryptocurrencies are real assets, it is challenging to calculate the exact multiplier effect of an ECB policy shift.

A key figure to watch this week will be the US Non-Farm Payroll (NFP) report, which has always been a major volatility event.

My bias remains for higher values in risk assets as the risk appetite increases and dips are quickly bought.

Chart 1: Target Rate Probabilities for the 18 December 24 Fed meeting (today vs. 1w ago)

On the FX side:

The USD has seen significant selling pressure, with the DXY losing 2.42% from its May high. 
The EURUSD is once again flirting with the downward sloping trend line at 1.09.
Going into a week with the ECB rate decision and the US NFP, I favour selling the EUR and buying the USD at this level.
Similarly, USDCHF failed to break above 0.9225 and is now sitting at 0.8965, which has been a good accumulation/pivotal point since April 2023, in line with my long USD position. 
In EURCHF, taking profit last week proved to be a good decision as we are now trading in the mid-range from March, so I am taking a wait-and-see approach.

Overall, as I expect the USD to strengthen in the short term, risk assets and cryptocurrencies should weaken in USD terms.

On the crypto side:

While intraday moves have been violent across the board, week-over-week the change has been minimal, with 7-day realised volatility in BTC at 18% (in the bottom 10% of last year’s observations).
The market does not appear to be positioned at all as BTC open interest is stable, the forward curve is flat at 14%, and implied volatility is in slight contango with weekly iv at 45%.
While this makes sense at the moment, a sleepy market can be caught offside, and our bet is on the bullish side, especially for ETH.

Both BTC and ETH have been trading in ranges with attempts to break through, but quickly fading both on the upside (i.e. BTC USD 70,000 and ETH USD 3,900) and on the downside (i.e. BTC USD 67,000 and ETH USD 3,700).
This again confirms my view that violent moves are a must buy/sell; I maintain my bias that the overall picture is bullish, and that is why I like to accumulate on the lower end of the range.
In the absence of any updates from the SEC regarding the updated S-1 and S-3 forms, I believe that prices will continue to trade in this range.

Chart 2: BTCUSD 1d

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