TA Tuesday: Crypto Market Focuses on FOMC Meeting and NFP Release

FOMC Meeting and NFP Release Drive Week’s Focus as Crypto Market Consolidates in Cone Patterns. Time for alts?

Week-over-week performance:

  • BTCUSD: 28,121, +2.61%
  • ETHUSD: 1,836, 0.55%
  • US02Y: 4.12%, +6 bps
  • DXY: 101.95, +0.51%
  • GOLD (USD/OZ): 1,982, -0.60%
  • NDX: 13,321, +1.10%
  • VIX: 16.38, -7%
  • VVIX: 88, -6.38%

On the macro side:

On a broader scale, this week’s focus lies beyond the recent bank crisis that has affected First Republic Bank ($FRC).

Key events include the FOMC meeting and press conference on Wednesday at 2:00 pm ET, with an expected 25 bps hike (last one?), and the release of NFP on Friday at 8:30 am ET.

In my opinion, the FOMC press conference holds the most significance, as any indication of a Fed pivot could greatly benefit bitcoin. However, it appears that market participants, including those in the crypto space, have already positioned themselves well for the upcoming events, as seen through the low VIX and VVIX levels, both below 17 and 90, respectively, in the traditional financial markets.

On the crypto side:

BTCUSD on a daily chart is currently forming a cone pattern and trading at the POC level between the months of March and May at $28k.

Given the upcoming FOMC meeting, it seems reasonable to expect BTCUSD to continue trading within this range.
The RSI-14 indicator is currently in the 40s, and if the price action remains choppy, we could see a potential retest of the 30s, offering some attractive entry opportunities.

In the event that the cone pattern is broken to the downside, there should be support between $23.5k and $25.2k. On the other hand, if the pattern breaks to the upside, the initial target is $32.4k, followed by $36k.

The 7-day realised volatility is currently trading at 39%, slightly above the historical 25% of the distribution, while the ATM implied volatility is at 50.6%.

Looking at the Deribit May 5th expiry, the ATM straddle breakeven points are at $26.9k and $29k (+/- 3.6%), whereas for the May 12th expiry, which encompasses the FOMC decision, the breakeven points are at $26.2k and $29.9k (+/- 6.7%).

ETHUSD is currently forming a cone pattern from the downside and completing a head and shoulder pattern. If the cone pattern breaks to the downside, we may see a potential retest of $1.7k.

Alternatively, a break of the shoulder at $1.96k could push the target price to $2.1k initially and $2.5k subsequently.

The RSI-14 indicator is currently trending down and trading in the 40s, indicating fading momentum. Additionally, the 7-day realised volatility (RV) is currently trading at 28%, which is at a discount to BTC. However, this trend is not expected to last for long, and some RV pick up is likely in the near future.

In the derivatives market, the ATM implied volatility for ETH relative to bitcoin is trading at a zero premium for up to 30-day tenors and at a discount for longer tenors. This is historically rare and sets up a perfect scenario for a relative volatility trade. Two potential trades that could be considered are steepeners, which should profit from shifts in ATM, and strangles, which should profit from ATM shifts and ETH wings getting more expensive. Both trades involve taking a long ETH volatility and short BTC volatility position while playing with the ratios for the desired Vega/Theta exposure.

The Litecoin halving is expected to occur at the end of July, resulting in a significant reduction in supply. Historically, LTC has experienced a brief pump before the halving in a risk-on market, followed by a further drop before the supply shock triggered a rally.

Currently, the LTC chart shows that we are trading in a consolidation zone after increasing over 2x from the June low at $41. If we trigger the $84 level, we could retest $74, which appears to be an attractive entry point for a potential rally. Long-term support is at the 45 level.

In addition to this, bitcoin dominance has been rejected at 48.7%, suggesting a catalyst for altcoin outperformance. A promising trade setup involves taking a long LTC and short BTC position, which is currently trading at 0.003105 (the March 17th low). If the LTC rally begins, the first take-profit level (TP1) is at 0.0038 BTC, followed by TP2 at 0.0048 BTC.

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