Whisper it but Crypto bullet proof

This Daily Digest will cover:

• Welcome to the second half of the year!
• SEC reject ETF proposals but leave the door open
• Whisper it but Crypto bullet proof
• Quiet start to the week likely with Independence Day tomorrow

A new month, quarter and half of the year begins and the main question is, will risk markets match H1? The Nasdaq had its best first half the year for 40 years rising 35%, Crypto majors matched it showing correlations aren’t completely dead. This against a backdrop of rising rates and a likely recession around the corner. I have been guilty of fixating on the future issues this year so will try and be a little more fleet of foot in the short term. New money often gets put to work at this time of year so I expect risk markets to remain supported in the short term before tailing off later in the year.

In FX it has frankly been a frustrating and quiet first half the year. The exception here being the Yen up story being abandoned and replaced by the carry trade or long cross/yen. This has seen record levels in eur/jpy, chf/jpy gbp/jpy etc. This trade is undoubtedly stretched but is earning a 4 % in carry so is well insulated. The danger comes from either a turn in risk markets (possible) or an intervention by the Bank of Japan (likely). Officials from Japan are noticeably ratcheting up their rhetoric about the weak yen which is generally a precursor to action. The question is when and where? Last year they cratered usd/jpy from above 150, but I suspect we could see action before that level this time due the basket level of yen being even lower. 147/148 is the likely zone where I think we could wake the sleeping dragon.

Crypto markets went on a wild ride Friday. We were primed for a close above 31,000 before the SEC did what they do and announced a rejection of the proposed ETF filings. A rapid sell off to 29,500 and 1850 ensued before calmer heads prevailed. The door is left well and truly open with some tweaks and this good news story has not gone away. Whilst I am nervous about chasing stocks higher in H2 I do not feel the same about Crypto. The market is under weight and sceptical. This will see higher prices later this year and I think we will see above 40,000 and 2,200 in BTC and ETH in H2.

This week is likely to start slowly as markets in the states close early and are shut tomorrow in a homage to a Will Smith film. Volatility is likely to resume from Wednesday onwards.

Good luck as always

Richard Usher
Head of OTC Trading