1 Minute Market Rundowns - brought to you by the BCB Trading Team

Today we’ll cover:

• Quarter and Month end flows dominate
• US yields break higher again
• Stocks crumble
• Seasonality in play or something more serious?

I am going to disappear down a bit of a USD rabbit hole today so be warned, but I think it holds relevance to Crypto and broader macro markets as well.

Yesterday saw a Crypto rally snubbed out in its prime yet again as the broader macro theme took over. We were skewed to sellers into the rally in the majors as month and quarter end flows dominated ours, and others books.

The rally in US yields is quite staggering to me as the 10 year trades above 4.6 amid some generic higher for longer comments from FED officials. US stock markets continue to lead the move lower in risk and in this environment no risk asset is proving safe. That said, for BTC to be above 26,000 and ETH above 1600 is seriously impressive and should be respected in the medium term.

The USD is reigning supreme as Eur/Usd makes new lows on the year, GBP is close to 1.2000 again having been above 1.3000 a few weeks ago and USD/JPY is within a whisper of 150 causing sleepless nights for the MOF.

This brings me to seasonal trends which have played out very well this year in the markets. This period of the year is often the worst performing time of the year for stock markets, as it is proving again, and the link between stocks and the USD is strong due to rebalancing flows. So it is worth noting that October is often a very strong month for stocks and with long positions cleared out and speculative shorts rife the set up is there once again for seasonal inflows to dominate. The danger to this view is with interest rates being so high it could reduce the money poured into risk when you can get 6% in the bank but I still believe the flows will materialise.

The USD often shows a similar seasonal path and this is highlighted by the USD index charts below. You can see that last year the USD was rampant at this time of year but peaked at the end of September as seasonal flows started a rout which continued for some time. The peak on the chart was September The 29th 2022 and what followed was an 8% move lower into the year end.

The set up this year is not dissimilar to then and is shown below as we zoom in on the recent move.

Is it too perfect? Perhaps.
Is it worth respecting? For me 100% with potential for good news next month in Crypto and other asset classes.

Good luck as always

Rich

Richard Usher
Head of OTC Trading

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Today we’ll cover:

• Central banks policy divergence laid bare
• USD reigns supreme for now as FOMC hold a hawkish tone
• Higher for longer the theme but peak in rates seems close
• Recession fears dominate

Well I suggested volatility and, crypto markets aside, I have not been disappointed. In a week dominated by central bank decisions the market expectation/hope from all the major decisions proved wrong.

The BOE and SNB were expected to hike and both refrained hinting at a top in place for rates but holding higher for longer. The BOJ yet again did nothing whilst moaning about the yen like a child who has dropped its dummy. Either pick it up or keep crying is the point we are at, and I suspect if/when usd/jpy trades at 150 the BOJ will intervene and pick its dummy up off the floor.

The FOMC held unchanged as expected but the dot plot (frankly an utter work of fiction) indicated the door is wide open to one more hike and very few, if any, cuts next year. Powell showed no signs of softening his stance and recession fears have come to the surface once again.

Stock markets have broadly had a terrible week(FTSE aside as the UK breathed a sigh of relief) and there will be few traders and investors sad to see the back of September. The USD has broadly gained as rate differentials dominate, but progress has been lacklustre thus far as we approach the years high for the USD index.

It has been a tough week for my “ease into usd shorts” trading mode but I still like it overall. Momentum higher will be hard fought from here and I remain in the camp that the USD finishes the year 5% lower than here and stocks 7% higher.

Crypto has held up remarkably well in this environment all things considered. Watching the mad rush in traditional markets one can’t help wondering how different things will be in 20 years time when the genuine alternative to money dominates ( we can only hope). Not much more to say here as specific news has been thin on the ground but with my views on the USD and stocks laid out above you do not need to be Einstein to figure out I am in dip buying mode for crypto still.

Good luck as always

Rich

Richard Usher
Head of OTC Trading

Today we’ll cover:

• Central banks take centre stage
• Crypto underlyingly bid with BTC the mainstay
• USD firm as yields hold lofty levels

Firstly thanks to everyone with whom I had meetings or spoke to at events and at the BCB Group stand at Token2049 in Singapore. It was an amazing event and the buzz around the industry remains real and intense.

Central Banks take centre stage for the rest of the week starting with the FOMC tonight and followed tomorrow by the SNB, BOE, Norges, Riksbank and the BOJ. What is intriguing is the divergence in policy which is now coming through. The ECB hiked unexpectedly last week but indicated they are likely done. The FOMC is expected to do nothing but indicate maybe more. The BOE was nailed on to hike today until inflation missed expectations this morning so anything is now possible. The BOJ, well who knows!

This all indicates one thing, volatility. I have a leaning to fade this USD strength as my base case is a weakening dollar into year end as stocks rally but I am far from married to the view and will watch Powell closely tonight.

Crypto has bounced really well recently from the sell off early last week. BTC has led the charge and been the main concentration of demand we have seen our end. Whispers of ETF approval as soon as next month are giving a reason to focus on fresh positivity and banishing worries over FTX liquidations. Sadly, the fact the rally is fairly BTC centric, combined with the plethora of moving averages and resistance levels between 27,500 and 28,500, leave me feeling a little cold towards the timing and sustainability of the rally broadly speaking. Chart of the day below is BTC/USD.

Short into 28,000 with a stop above 29,000 or buying the dip to 25,000 remain the games in town…

Good luck as always

Rich

Richard Usher
Head of OTC Trading