downside

BTC/USD has been trading downside yesterday and I found exhaustion and breakout of the mini downside channel, which is good sign for the further growth. Due to the rejection of the key support at $26.500 and the exhaustion pattern, I see potential for the further growth towards upside references. Upisde objectives are set at the price of $27.560 and $28.000 MACD and RSC oscillators are showing bullish divergence, which is another good confirmation for the further upside movement. Key support cluster is set at the price of $26.500

Gold has been trading downside as I expected and I found re-break of the symmetrical triangle pattern in the background, which is good sign for the further downside movement. Due to the breakout of the upside channel and tight triangle in the background, I see potential for the further drop towards lower references. Downside objectives are set at the price of $1.861 and $1.819 MACD oscillator is showing increasing in the downside momentum, which is good confirmation for the further downside movement. Key resistance is set at the price of $1.967

There is more room to the downside for market rates, but we will go up first Given all of this, we anticipate that the US 10yr Treasury yield can get back above 4%, back to where it was before the SVB story changed the dynamic. The 10yr could well take out the previous high, and remain elevated for a time. With European central banks tending to show urgency on the inflation issue, there is ample room for eurozone market rates to rise too. The 10yr Bund yield is quite likely to break back above 2.5%, and then trend towards 3%. The cycle high seen when SVB went down was 2.75% – that’s liable to be taken out. We think these are moves that should be faded through, as increasingly we expect the residual oomph factor to be outweighed by an increasing angst factor. Growing unease with respect to the commercial real estate loan portfolios being held by banks will also begin to count. And further falls in inflation should be a natural outcome as demand slows. Once key core inflation readings have moved below 3%, the way will be clear for the Fed to consider rate cuts. A 2% handle is all that’s needed (so, for example, 2.9% will be good enough). The ECB won’t be too far behind. So sure, anticipate further rises in market rates now, but prepare for much bigger falls ahead.

GBP: Sterling enjoys the travails of the euro Having traded as high as 0.87 last week on the back of the softer UK CPI data, EUR/GBP is now back at 0.8570. This is entirely a euro-driven move and does not represent some bullish re-appraisal of sterling's prospects. Indeed, the UK calendar looks very light until the Bank of England (BoE) rate meeting on August 3rd. Here, the market is now pricing 33bp of tightening in the policy rate, down sharply from the 50bp of tightening that was priced in mid-June. Given that we are mildly negative on the euro going into tomorrow's ECB meeting and that UK rates might be dragged higher by US rates later today, we would say EUR/GBP could have a little more downside to the 0.8520 area over the next couple of sessions.

USD/JPY Dollar-yen has entered its pre-FOMC/BOJ consolidation range. Heading into the FOMC decision the data has been holding up. The US economy has still yet to feel the complete impact of the Fed’s rate hiking campaign as the flash PMIs showed that business activity is slowing and as consumer confidence surged to a two-year high. Wall Street wants to believe the Fed will be one and done, but the data might not allow that to happen. They are likely to signal an extended pause, but hold onto a tightening bias, which could help push dollar-yen higher initially. Will USD/JPY rise towards prior intervention levels around the 145 is the big question at hand. A short-term advance in the dollar seems possible going into and that could extend post Fed if policymakers focus on the resilience of the US economy. The bigger driver for USD/JPY might stem from the BOJ decision. There was a chance that we could get a Yield Curve Control (YCC) tweak, but that seems less likely. A key Tokyo CPI report will occur hours before the BOJ decision, but probably won’t sway the bank unless it comes scorching hot. The BOJ should deliver a tweak, but Ueda’s comments from a conference in India last week suggest they will stay the course with their ultra-loose monetary stance. The BOJ might eventually need to trigger an abrupt change to policy given the trajectory of the US economy and how high inflation has turned. To the downside, a break of the 140 level could see momentum selling target the 137.50 region. The 142.50 level should provide initial resistance, with the 145 level likely to trigger calls of future currency intervention.