Week-over-week performance:
- BTCUSD: 59,188 / -5.66%
- ETHUSD: 2,521 / -5.83%
- US10Y: 3.92% / +10 bps
- DXY: 101.76 / +0.90%
- GOLD (USD/OZ): 2,494 / -0.76%
- SPX: 5,648 / +0.57%
- NDX: 19,574 / +0.30%
- DVOL: 53.35 / +7.67%
- VIX: 15.01 / -7%
Looking Ahead – Economic Calendar:
- Tuesday, 03 September: US ISM Manufacturing PMI
- Wednesday, 04 September: BoC Interest Rate Decision, US JOLTs Job Openings
- Thursday, 05 September: US ADP Non-Farm Employment Change, US Jobless Claims, US ISM Non-manufacturing PMI
- Friday, 06 September: US Average Hourly Earnings, US NFP, FOMC Williams Speaks
- Saturday, 07 September: Fed Waller Speaks
On the macro side:
Macro sentiment continues to improve, with markets now consolidating around a 69% probability of a 25 basis point cut in September as we enter the FOMC blackout period. The year-end target remains 1% lower than current levels.
Chart 1: Target Rate Probabilities for September 18, 2024 Fed Meeting
This week’s focus is on several key data releases, particularly the US Non-Farm Payrolls (NFP) on Friday. A weaker NFP could increase the likelihood of a 50 basis point cut. Additionally, speeches by Williams and Waller may influence market pricing.
Meanwhile, the S&P 500 (SPX) is now just 36 basis points away from its July all-time high.
With macroeconomic indicators pointing toward a soft landing and inflationary pressures easing, the upward trend seems set to continue.
On the FX side:
The US Dollar Index (DXY) rebounded strongly, with EUR/USD forming a rounding top at 1.12 and USD/CHF finding solid support at 0.84.
Despite this, the interest rate differential between the USD and other G10 currencies remains significant, with only the GBP offering a higher yield. The Bank of England is expected to gradually reduces rates given solid economic data and persistent inflation.
Overall, the upside for DXY may be limited in the event of a soft landing.
Key resistance stands at 102, while 101 remains a strong support level.
Chart 2: DXY 1d
On the crypto side:
August ended with mixed performance in the crypto markets: BTC/USD fell by 3.65% month-on-month, ETH/USD dropped 15.54%, SOL/USD declined 11.58%, and TOTAL3 (excluding BTC and ETH) was down 2.70%. Liquidity remains exceptionally low, even compared to equities, and correlations with economic news have been weaker than usual, which is a concerning trend.
In derivatives, perpetual funding rates remain negative to flat, with basis rates stable at around 2 basis points per day.
In the options market, the at-the-money (ATM) term structure is steepening, with weekly volatility trading at 47.4%, which is 1.49x the realised volatility. Longer maturities are consistently bid, with a notable kink around the November elections, where forward volatility stands at 78.41%, indicating potential for further steepening.
Given the current term structure, selling November volatility while buying September 13 volatility seems appealing, as market clarity could emerge before the elections, similar to how the last debate between Trump and Biden affected price action. I expect the September 10 debate to be a significant catalyst.
Chart 3: BTC ATM Term Structure
On the spot market side, holding the USD 58,000 level is crucial for the next upward move. With prices ranging, lower realised volatility combined with a lower RSI could help momentum pick up again.
Chart 4: BTCUSD 1d
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