Week-over-week performance:
- BTCUSD: 59,239 / +6.37%
- ETHUSD: 2,652 / +5.74%
- US10Y: 3.91% / +7 bps
- DXY: 103.12 / +0.17%
- GOLD (USD/OZ): 2,461 / +2.71%
- SPX: 5,344 / +3.05%
- NDX: 18,542 / +3.62%
- DVOL: 56.86 / -6.76%
- VIX: 20.72 / -46.28% (!)
Looking Ahead – Economic Calendar:
- Tuesday, 13 August: US PPI
- Wednesday, 14 August: UK CPI & PPI, EU GDP, US CPI
- Thursday, 15 August: JP GDP, UK GDP, CH PPI, US Jobs
- Friday, 16 August: US Building Permits
On the macro side:
It has been a week since the sharp downturn across the markets, and prices have rebounded strongly.
As I mentioned last week, the macroeconomic picture has not changed significantly, but escalating tensions in the Middle East between Iran and Israel continue to overshadow the market. With the US preparing for potential attacks on Israel this week, any significant developments could trigger a major market sell-off, which I would see as a buying opportunity.
This week, key economic figures from the US will likely be the trigger for the next market wave.
As we remain in this left-tailed return distribution with high-volatility I expect cross-correlation to stay high heading into key economic figures from the US.
On the FX side:
The US Dollar Index (DXY) rebounded from its low of 102.16 but faced resistance at 103.54 as the euro remains particularly strong.
If tensions in the Middle East escalate, I expect the Swiss franc to serve as an effective hedge against geopolitical risks. For this reason, I am currently hedging my long crypto portfolio with a short USD/CHF position.
In terms of the DXY, the key support level to watch is 103, with 102.2 being a potential point to close hedges and buy risk assets. On the upside, the next resistance level is at 103.64.
Chart 1: DXY 1d
On the crypto side:
Crypto markets have rebounded strongly, with high-beta assets performing well since last Monday’s lows:
- BTCUSD: +21% (current: 59,454; low: 49,052)
- ETHUSD: +25% (current: 2,654; low: 2,116)
- SOLUSD: +33% (current: 146.65; low: 110)
I anticipate the strong correlation between crypto assets and macro-risk assets to persist as macroeconomic uncertainty remains a dominant theme, especially as BTC continues its struggle to hold the USD 60,000 level.
In the derivatives market, while volatility has normalised across the curve, ETH volatility is still trading at 1.2x BTC volatility. This aligns with ETH’s beta to BTC but contrasts with the past year’s trend, where ETH volatility was consistently lower. The put skew remains bearish, and while puts were aggressively sold during the downturn, upside volatility remains “cheap” and unclaimed, signalling ongoing uncertainty.
If Middle East tensions escalate, it will likely trigger a risk-off move in crypto. Similarly, any US economic data indicating a recession would be short-term bearish for the market.
On the chart, I expect BTC to range between USD 59,000 and USD 63,000 in a “no news” scenario. However, given this week’s developments, there might be some volatility ahead with possible buying around USD 52,000 and taking profits above USD 64,000.
Chart 2: BTCUSD 1d
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