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Market picture

The crypto market cap has fallen back below $2 trillion, accelerating its decline and losing over 8%, while many altcoins have suffered double-digit losses within the last 24 hours.

Bitcoin pulled back to $54.7K, losing around 6.5% since the start of the day and hitting a low of $53.3K. The 200-day moving average failed to act as support, and we saw an acceleration in the sell-off after a break below this line. The current failure is an acceleration of the downtrend that has been in place since March. The fundamental pressure appears to be accelerating selling by miners and long-term “holders” such as the German and US governments, in addition to payments to Mt. Gox creditors.

On Friday morning, Ethereum rewrote February’s lows and briefly dipped to $2800. By the start of the active European trading day, the price had returned to the April and May lows, but it’s hard to see signs of active buying yet. So far, the situation looks like a pause before a new downward impulse that could take the price back to $2300.

News background

Bloomberg recalled the Mt. Gox trustee’s gradual refund of 137,000 BTC to customers of the bankrupt platform and traders’ concerns that some of the coins would end up on the open market.

Also causing nervousness is the distribution of digital gold by the US and German authorities. On Thursday, German authorities sent 1,300 BTC to Coinbase, Kraken and Bitstamp. On the same day, 237 BTC worth $13.67 million were transferred from a US government-linked address.

In addition, the US election factor may be putting pressure on the price. “The likelihood of Biden being replaced by a stronger Democratic candidate, who may not be supportive of cryptocurrencies, is one of the factors behind the decline,” said Digital Asset Capital.

10x Research has allowed bitcoin to fall towards $50,000 due to the sudden change in sentiment. On the BTC chart, a technical reversal figure, the double top, is being realized, suggesting a drop in prices to the $45K—$50K area. Miners, ETF buyers, and hodlers are leading the selling.

CryptoQuant noted that Bitcoin miners have started shutting down inefficient equipment and selling off reserves, which are clear signs of capitulation. Historically, such periods are associated with price lows.

Whale Alert noted that the 119 BTC that had been “dormant” for more than 12 years had been moved.

French election: Will the far-right win a majority?

French voters will head to the polls on Sunday, July 7 for round two of the parliamentary elections. In the first round, Mary Le Pen’s far-right National Rally party (RN) made big gains and won 33% of the vote. President Macron’s Ensemble alliance was relegated to third place, as voters delivered the President a stinging rebuke after he called the snap election.

Macron finds himself on the ropes and is desperate to prevent the NR from winning a majority in parliament. The NR is poised to become the biggest party but it will need to pick up 289 seats of the 577 seats in parliament in order to assured of an absolute majority. Election polls are projecting that the NR will win between 190 and 250 seats, which would mean that no single party can form a government on its own, leaving both the left and the right blocs maneuvering to form a coalition.

The scenario of no clear winner in the election, known as a ‘hung parliament’, could lead to weeks of political paralysis which could easily result in fluctuations in the financial markets.

An outright majority for the NR would be a nightmarish scenario for the markets. Le Pen is a Eurosceptic and has previously advocated that France leave the European Union, abandon the euro and revert back to the French franc. Le Pen has opposed market liberalization and with a parliamentary majority the NR could enact legislation which puts France at odds with the European Union. In the past, when the NR has had electoral success, French markets have reacted negatively. This would likely repeat itself if the NR wins a majority on Sunday.

Despite the uncertainty ahead of the election, investors aren’t panicking. The CAC 40, the benchmark French stock market index, posted slight gains this week and the euro has looked sharp, climbing 1.06% this week against the US dollar. If the euro can hang on to these gains, it will mark its best weekly gains in 2024. If the NR falls short of a majority, as expected, investor confidence should remain steady, provided that Macron is quickly able to form a coalition.

Eurozone retail sales volume rose 0.1% mom in May, below expectation of 0.2% mom. Sales volume, increased by 0.7% mom for food, drinks, tobacco, and by 0.4% mom for automotive fuel in specialized stores. Sales volume fell -0.2% mom for non-food products (except automotive fuel).

EU retail sales also rose 0.1% mom. Among Member States for which data are available, the highest monthly increases in the total retail trade volume were recorded in Denmark (+2.3%), Lithuania (+1.8%) and Luxembourg (+1.7%). The largest decreases were observed in Slovakia (-1.0%), Ireland (-0.9%), Bulgaria and Malta (both -0.8%).

Full Eurozone retail sales here.

Daily Pivots: (S1) 205.24; (P) 205.82; (R1) 206.36; More...

Intraday bias in GBP/JPY is turned neutral with current retreat and some consolidations would be seen below 206.15. Further rise is expected as long as 200.72 resistance turned support holds. Firm break of 100% projection of 191.34 to 200.72 from 197.18 at 206.56 will target 138.2% projection at 210.17.

In the bigger picture, long term up trend is still in progress. Next target is 100% projection of 155.33 to 188.63 from 178.32 at 211.62. Outlook will stay bullish as long as 197.18 support holds, even in case of deep pullback.

Daily Pivots: (S1) 173.97; (P) 174.21; (R1) 174.61; More...

Intraday bias in EUR/JPY is turned neutral first with current retreat, and some consolidations would be seen below 174.50. Further rally is expected as long as 170.87 resistance turned support holds, in case of deeper retreat. Firm break of 174.50 will target 138.2% projection of 164.01 to 170.87 from 167.52 at 177.00.

In the bigger picture, long term up trend is still in progress. Next target is 100% projection of 139.05 to 164.29 from 153.15 at 178.38. For now outlook will stay bullish as long as 167.52 support holds, even in case of deep pullback.

Daily Pivots: (S1) 0.8460; (P) 0.8467; (R1) 0.8483; More...

Intraday bias in EUR/GBP stays neutral and outlook is unchanged. On the upside, sustained trading above 55 D EMA (now at 0.8501) will extend the rise from 0.8396 short term bottom to 0.8529 support turned resistance. Nevertheless, On the downside, break of 0.8493 support will suggest that the corrective recovery has completed. Intraday bias will be back on the downside for retesting of 0.8396 low. Firm break there will resume larger down trend.

In the bigger picture, down trend from 0.9267 (2022 high) is in progress. Break of 0.8396 will target 0.8201 (2022 low). For now, outlook will remain bearish as long as 0.8643 resistance holds, even in case of stronger rebound.

Daily Pivots: (S1) 1.6047; (P) 1.6070; (R1) 1.6096; More...

EUR/AUD is extending the consolidation from 1.5996 and intraday bias stays neutral. With 1.6211 support turned resistance intact, outlook remains bearish. On the downside, break of 1.5996 will target 100% projection of 1.6679 to 1.6211 from 1.6418 at 1.5950. Firm break there will target 1.5846 key support next.

In the bigger picture, fall from 1.7062 medium term top is seen as a correction to the up trend from 1.4281 (2022 low) only. Strong support is still expected between 1.5846 and 38.2% retracement of 1.4281 to 1.7062 at 1.6000 to bring rebound. Break of 1.6148 resistance will argue that the correction has completed.

Daily Pivots: (S1) 0.9711; (P) 0.9733; (R1) 0.9755; More....

Intraday bias in EUR/CHF is turned neutral with current retreat and some consolidations would be seen first. Further rally is expected as long as 0.9639 minor support holds. Above 0.9754 will resume the rise from 0.9476 to 0.9928 high. Nevertheless, break of 0.9639 will turn bias back to the downside for 0.9476 low instead.

In the bigger picture, rebound from 0.9252 medium term bottom might not be completed yet. But even in case of resumption, strong resistance could emerge from 1.0095 to limit upside. Medium term outlook will be neutral at best as long as 1.0094 structural resistance holds. Meanwhile, break of 0.9476 will bring retest of 0.9252 low.

• GBPJPY remains in strong upside tendency in long-term
• RSI flirts with uptrend line above 70
• Stochastic looks overstretched

GBPJPY is declining somewhat after rallying to a fresh 16-year high of 206.15 earlier in the week. The pair posted 13 straight days of gains before falling near the 261.8% Fibonacci extension level of the down leg from 188.65 to 178.80 at 204.70.

The technical oscillators indicate an overstretched market, as the RSI is heading south, meeting the uptrend line that has been holding since the beginning of June, above the 70 level. Also, the stochastic oscillator is pointing down after the bearish crossover within the %K and %D lines above the 80 level.

If there are more declines and a dive below the immediate Fibonacci level, the market could visit the 20-day simple moving average (SMA) at 202.30, ahead of the 201.64 support level. Even lower, the bearish correction may continue until the 50-day SMA, near the 198.90 support, before testing the long-term ascending trend line at 198.50.

In the positive scenario, a successful climb above the latest multi-year peak could meet the next round numbers, such as 207.00 and 208.00, until the high in July 2008 at 215.90.

All in all, GBPJPY has been in a strong upward trend since the start of the year, and only a decisive fall below the 200-day SMA near the 190.00 psychological mark could change the current outlook.

• EUR/USD rises above 1.0800 due to weak US economic data and a weaker USD.
• Market anticipates a 71.6% chance of a rate cut in September.
• DXY is at a psychological support level ahead of US jobs data release.

EUR/USD continued its upward momentum on US Independence Day, capitalizing on a weaker USD and low market liquidity to rise above the 1.0800 level.

A series of weak US economic data this week has increased expectations for rate cuts. ISM services data disappointed yesterday, contracting at its fastest rate in four years.

The ADP job numbers also came with a warning from ADP Chief Economist Nela Richardson, who noted that job growth had not been widespread. The leisure and hospitality sectors bolstered the ADP figure, which is unsurprising given the significant rise in travel during the summer.

This data has led market participants to price in a 71.6% likelihood of a rate cut in September, up from about 60% a week and a half ago. Last night’s Fed minutes revealed no new information, with the Fed emphasizing their lack of urgency to cut rates. Can upcoming data influence the Central Bank’s decision?

US Interest Rate Probability

Source: LSEG 

EU Retail Sales,US Jobs Data

Eurozone retail sales figures will be released shortly, with expectations for a 0.2% month-over-month increase and a 0.1% year-over-year rise. After the disappointing results in April, market participants are hoping that May’s numbers indicate some improvement. A positive reading could support the Euro against the US Dollar, even if the gains are temporary.

The importance of this NFP report and the unemployment rate release has been extensively discussed. After last month’s exceptional NFP figures, markets are eager to see if that result was an anomaly or part of a trend.

Technical Analysis on DXY and EUR/USD

The Dollar Index (DXY) is once again trading at a psychological support level, where numerous factors converge just ahead of tomorrow’s batch of US data. This positions the DXY delicately as we approach the release.

Should the data exceed forecasts, the DXY could retest the 106.00 level. Conversely, a disappointing data release could put the DXY at risk of breaking below the 100 and 200-day moving averages (MAs). These moving averages are situated just below psychological support and above the long-term ascending trendline.

The 100-day MA is at 104.75, with the 200-day MA slightly lower at 104.49. Combined with the trendline, the area just below 105.00 is dense with confluences. Therefore, a sustainable break below this level may be challenging unless the jobs data falls significantly short of expectations.

US Dollar Index Daily Chart, July 5, 2024

Source: TradingView.com (click to enlarge)

Key Levels to Keep an Eye on;

Support

• 105.00
• 104.75
• 104.50
• 104.00

Resistance

• 105.60
• 106.00
• 107.00

EUR/USD

EUR/USD is enjoying a bit of a renaissance following a two-week period of rangebound trading. Having finally broken above the resistance level at 1.0750, the pair has advanced and crossed above the 100-day MA.

A daily candle close above the 100-day moving average has positioned EUR/USD favorably ahead of the NFP and jobs data release in the US. Immediate resistance lies in the 1.08400-1.08500 range. A break above this level would bring the short-term descending trendline and the 1.0900 mark into play.

A significant downside miss in the NFP data could propel EUR/USD towards the psychological 1.10000 level. Conversely, if the data surpasses estimates, EUR/USD could head towards recent lows, potentially pushing beyond 1.07000 and highlighting the 1.0600 support level.

EUR/USD Daily Chart, July 5, 2024

Source: TradingView.com (click to enlarge)