Macro vs Technicals
The macro backdrop is showing little sign of disinflation in the recent data prints. Today’s PCE upside surprise a case in point (core PCE MoM at 0.6% is 20bp above expectations of 0.4%).
This article is only available to Macro Hive subscribers. Sign-up to receive world-class macro analysis with a daily curated newsletter, podcast, original content from award-winning researchers, cross market strategy, equity insights, trade ideas, crypto flow frameworks, academic paper summaries, explanation and analysis of market-moving events, community investor chat room, and more.
Macro vs Technicals
The macro backdrop is showing little sign of disinflation in the recent data prints. Today’s PCE upside surprise a case in point (core PCE MoM at 0.6% is 20bp above expectations of 0.4%). While we have already seen a significant re-pricing the Fed’s upper bound terminal rate, my studies suggest room still for US yields to push higher. This should, in turn, continue to provide some support to the USD but, more importantly, pressure equity indices. As highlighted last week, this fits with the short-term cycles in cryptocurrencies, suggesting a greater probability of a multi-week correction, which looks to have started.
Ethereum vs Bitcoin
No change. 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 bias for XET to out-perform in this process. (Blue lines depict the current range).
No change from last week, in that the short-term correction has started.
From a long-term perspective, the decline from the 2021 high at 4866 completed a bear cycle at 880 in June 2022. Since then, we have seen a significant recovery, with the most recent leg from the November 2022 lows reaching 5th wave projection targets around 1742. We now look to be in the correction phase highlighted last week, targeting a move 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. 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.
Likewise, no change for BTC in that the short-term correction has started
From a long-term perspective, the bear cycle from the 2021 highs completed last year at 15,574. We staged an impulsive recovery from that low, which completed a 5-wave cycle exactly at projection resistance, which was aligned with the pivot resistance going back to May 2022.
We have now moved into a short-term correction phase, at least targeting the previous 4th wave and 38% Fibonacci support in the 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.