There is a potentially a key week ahead for the macro world, with the latest US CPI inflation report ahead of the Federal Reserve and then the ECB meetings.
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Macro vs Technicals
There is a potentially a key week ahead for the macro world, with the latest US CPI inflation report ahead of the Federal Reserve and then the ECB meetings. Dominique is looking for the Fed to pause next week but sees two more hikes by the end of 2023 – the market pretty much pricing a hike at the 26 July meeting. If so, it will be more about the message the Fed sends, either verbally or potentially through the dot-plots.
If there is a surprise and it causes increased volatility in the equity markets, I we could see a higher correlation develop with Nasdaq. As Dalvir highlights, Bitcoin is currently +33% correlated. Technically the charts remain constructive, with key support levels holding in the last week. But we need to see some upside momentum develop sooner rather than later.
Ethereum vs Bitcoin
The cross has developed a consolidation phase in the last week, pulling back to trend supports lying in the 0.06890-0.06810 region. A move back through that support would suggest a return to a lower range. Until then, my studies remain bullish for an eventual move back towards the previous range highs, but they are also mindful of stepping stone resistance levels at ~0.07245 and then ~0.07525 for signs of consolidation or rally failure.
My studies last week left open the risk of a further sideways action and/or a dip to key support in the 25,250 region. That dip was seen, but the fast reaction from that support area keeps the price action and underlying bullish outlook intact. We can range further at this stage, but my studies look for a break of 28,446 to trigger an acceleration up to the 30,000-31,013 highs from April. Then we need to monitor whether that holds for a larger range, or we just break to new highs. So, medium-term still targeting an eventual move through 31,000 to the 33,000 region.
A collapse through 25,000 would be the first warning sign that isn’t the case and opens the risk for a move to 22,000-20,000.
Long-term, my studies suggest the bear cycle from the 2021 highs completed last year around 15,500. First targets and resistance in the bull move lies in the 33,000 region, but the main target is 36,000 (that being Fibonacci and head and shoulders projection). I suspect we see that region hold on the first test, but ultra long-term targets are 42,000-48,000. To change this long-term outlook, we would need a decline through 19,500. Such a move would suggest we in a choppy range between 15,000 and 30,000 for a number of months.
Prices dropped back through 1855-1850 support suggesting further range trading, which has been seen with the range support levels of 1780-1740 holding. While this holds the underlying outlook remains bullish, with a break of 1931 triggering a move back to the 2019 Fib resistance and then the 2141 highs. Ultimately seeing new highs. The longer we hold in this lower range the greater the risks are than we see another test lower, so the coming 1-2 weeks is going to be important confirmation for the bull view.
A collapse through and close below 1740 and then 1665 would signal the bullish outlook is wrong and risk a much deeper setback towards the 1370 March lows.
From a longer-term perspective, the reversal from last year’s lows targets ~2400/2450 resistance, but through there can extend towards 3000-3300. A decline back through 1400 negating this bigger picture outlook, signalling the gains have just been another 3-wave correction and keeping us in a wide but lower choppy range.