Trade the Extremes
Crypto Needs to Bounce Soon
A generally quiet and rangy day for the markets which taught us little new but served to demonstrate the themes continue. All eyes are focused on the US CPI on Friday and the ECB on Thursday for clues to the relative interest rate paths. There is a little new to add before that bar a couple of themes that look to be playing out. The market is trading like it is very short of GBP. The fact that Boris only won his confidence motion by a narrow margin and is sabre rattling over the NI protocol were shrugged off and the pound surged over 1% yesterday. We are approaching key levels at 1.2630/50 and whilst we respect them for now, a move above opens the door to a nasty squeeze towards 1.2800. The short yen trade continues unabated, Usdyen vaulting to 20 year highs and all cross yen pairs following suit. It is hard to argue with the logic of the trade with the BOJ continuing its solo low rate policy, however the pace of the move causes concern to this scribe. Any sign of inflation dipping on Friday could see this trade take a nasty hit so we urge caution and look for better levels to enter.
In Crypto a late surge on the news checkout.com and Paypal were stepping up their Crypto acceptance and offering has been unsustained for now. Whilst I continue to view this current malaise as consolidation and I get more bullish for the medium term, I am getting more and more concerned that another leg lower to wash out the short term speculative longs is coming. The ability of ETH in particular to hold the key 1700 level has been impressive but its inability to rally away from the zone is equally disturbing. I feel a move to 1500/50 is required to cleanse the market before the next big rally. Sell through 1700 is the trade for me. A break above 2000 and 32,000 is required to indicate the base may be in place earlier than I expected.
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