There is little sign of deflation in the latest data prints, leading to a significant rise in pricing the Fed upper bound terminal rate to around 5.50% and then pretty much unchanged into the end of the year – rather than aggressive cutting in H2.
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Macro vs Technicals
There is little sign of deflation in the latest data prints, leading to a significant rise in pricing the Fed upper bound terminal rate to around 5.50% and then pretty much unchanged into the end of the year – rather than aggressive cutting in H2. This has started to weigh on risk sentiment, and that certainly fits with the short-term cycles in the crypto currencies, suggesting a greater probability of a multi week correction developing.
Ethereum vs Bitcoin
The cycle structures highlighted below show that Bitcoin and Ethereum should overall work in tandem, and we should therefore remain in the current range. However, while range support holds, there is a mild bias for XET to out-perform in this process. (Blue lines depict the current range).
From a long-term perspective, the decline from the 2021 high at 4866 completed a bear cycle at 880 in June 2022.
We have been witnessing a recovery since then, the most recent rally phase from the November 2022 lows reaching the 5th wave 1742 projection resistance to complete this cycle. We should now see the market develop a short-term correction back to at least the previous 4th wave and 38% Fibonacci support at 1486. But we cannot rule out a deeper setback towards 1400-1330 at this stage – the latter targets being more aligned with equity market expectations.
Once the correction is complete, we should resume the reversal from last year and see a move up to test the 2020 reaction highs and then onto 2450 longer-term targets.
From a long-term perspective, the bear cycle from the 2021 highs completed last year at 15,574. We have staged an impulsive recovery from that low, which, with this week’s move to new highs has completed a 5-wave cycle. The 5th wave peaking exactly at projection resistance, which was aligned with the pivot resistance going back to May 2022.
We should now move into a short-term correction phase, at least back to the previous 4th wave and 38% Fibonacci support 21,510 region, while we cannot rule out a deeper setback to ~20,000-19,000 support – the lower targets being more aligned with the pullback expected in US equities.
Once this correction is complete, the reversal from last November should continue, with a move up towards 33,000.
Robin is a global market veteran, with over 30 years of experience on the sell and buy-side, as a strategist and trader. He now provides strategic trading and investing advice to hedge funds, family offices, HNW individuals and trading desks around the globe.
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(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)
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