• Bitcoin continues to trade in a defined support and resistance band
  • Interest rate markets flooded with speculation as the yield curve flattens
  • US stocks fall record high

Elon Musk’s social media shenanigans running Bitcoin (BTC)

Bitcoin broke the $ 40,000 mark this week after tweets from Tesla CEO Elon Musk helped boost the cryptocurrency. In his tweet, Mr Musk sidestepped the fact that Tesla could reinstate the use of Bitcoin as a payment method if the energy sources used in BTC mining came from a renewable base ”.

In other news, the FBI managed to track down the physical identities of cybercriminals who received $ 2.3 million worth of Bitcoin. This could significantly undermine the anonymity associated with digital currency going wrong.


Bitcoin Daily Chart:

Graphic prepared by Warren Venketas, IG

Bitcoin price action has been relatively subdued lately, with the daily chart showing a rectangle pattern (yellow). This setup gives market participants hope for a potential breakout above or below the rectangle. While many analysts believe there is a further rise, traders should look for a confirmatory breakout before opting for a directional bias.

Bulls will look for the recent swing top as initial resistance to $ 41,303.6 while Saturdays down to $ 34,659.6 will hold as a support.

Hawkish shock disrupts markets

The Federal Reserve met this week announcing somewhat of a disruption from earlier expectations, that the March dot chart has been revised quite significantly. The 2023 forecast called for two rate hikes during the period, resulting in notable changes in financial markets.

This change in feeling might be fleeting because it is about long term adjustments to which one has reacted; while the current environment remains extremely accommodating. At the end of August of this year, the Jackson Hole Symposium could provide the next installment of significant transformations, but by then it’s likely we’ll see minimal change from current predictions.

One of the main reactions to the news was reflected in the yield curve (see below) which flattened – yields on longer-dated bonds fell. The narrowing of yield spreads between short and long-term bonds has affected the topic of reflation, as evidenced by falling commodity prices linked to reflation.


flattening of the US yield curve

Graphic prepared by Warren Venketas, Refinitive

SPX hits record highs as finance adds to the downside

the S&P 500 the index slipped after the FOMC announcement that essentially brought investors back to reality after being inundated with cash. This could be the “hangover” fix that many analysts have been waiting for.


American financial index

Graphic prepared by Warren Venketas, Refinitive

First, US financials reacted positively after the Fed, which was one of the few sectors to benefit from the Fed’s hawkish announcement. A little after as shown in the Refinitiv US Financials index below, financial stocks fell in response to the flattening of the yield curve aboveEven though the US dollar Carry onre to arise. The logic behind this is that rate-sensitive sectors like banks react badly to a narrowing yield spread. One of the main tools for banks to make money is to borrow at short-term rates and lend at long-term rates, therefore when spreads go down, profit margins tend to go down.


4-hour SPX chart:

4 hour SPX chart

Graphic prepared by Warren Venketas, IG

The above 4-hour SPX chart shows potential rising corner pattern (yellow) unfolding which has since broken under the wedge support. Although usually an upward wedge is preceded by a downtrend, this should not be ruled out. Bears will watch the June trough at 4167.33 as initial support since

the 4200.00 psychological level was pierced.

— Written by Warren Venketas for DailyFX.com

Contact and follow Warren on Twitter: @WVenketas

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