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Market picture

The crypto market is losing about 4.5% from its peak on Friday, having reversed to the downside after news positive for the dollar. Another batch of labour market figures well above expectations has raised doubts that the Fed will soon follow the ECB and Bank of Canada in cutting rates. This shift in sentiment has reduced risk appetite, hurting cryptos.

Bitcoin failed its attempt to climb above $72K on Friday, pulling back below $70K. We haven’t yet seen an acceleration of the first cryptocurrency’s rise after breaking downward resistance. On the other hand, selling is also not gaining momentum. Clearly, the cryptocurrency market remains in a state of buying on downturns. Meanwhile, headwinds such as a rising dollar and tighter monetary policy are prolonging the consolidation.

At the same time, Ethereum is sending a very worrying technical signal. Timid attempts to move up from consolidation around $3800 were replaced by a very impressive sell-off. The second-largest cryptocurrency fell below the previous local lows to $3650. The next potentially important support area could be $3300, an important pivot area from March.

News background

The number of bitcoins in IBIT, a spot ETF from BlackRock, has surpassed 300,000. The fund’s capitalisation reached $21 billion, making IBIT the leader among spot ETFs in terms of capitalisation.

The volume of open short positions on MicroStrategy shares has tripled in the last six months to $6.9 billion. Shorts are counting on a correction after the company’s capitalisation jumped 5.5 times in the last year. MicroStrategy owns 214,400 BTC worth approximately $15.25bn.

Ex-CEO of BitMEX Arthur Hayes called for buying bitcoin (and later altcoins) because the rate cut cycle is starting. Last week, the ECB and Bank of Canada lowered their key rates by 25 bps. According to him, “Crypto bulls are waking up and are about to start tearing the skins off profligate central bankers.”

According to PeckShield, hackers stole at least $575 million in May, with damage from hacking attempts in the first quarter up 42 per cent compared to the first quarter of 2023. Attackers are giving up on finding vulnerabilities in smart contracts and are focusing on phishing attacks and stealing users’ private keys.

Ripple CTO David Schwartz warned of a new wave of scams using phishing links to steal XRP holders’ personal data.

Donald Trump declared his intention to become a cryptocurrency president and criticised Democrats’ attempts to regulate the industry.

In June, Eurozone Sentix Investor Confidence improved to 0.3 from -3.6, exceeding the expected -1.9. This marks the eighth consecutive monthly increase and the highest reading since February 2022. Current Situation Index also rose for the eighth month in a row, reaching -9.0 from -14.3, its highest level since May 2023. Similarly, Expectations Index increased to 10.0 from 7.8, the ninth consecutive rise and the highest since February 2022.

Sentix commented that while the recovery is ongoing, the "upswing lacks momentum". The increase in expectations offers some optimism that this positive trend could continue in the coming weeks. However, a stronger signal from Germany's economy is needed to boost this momentum, which has yet to emerge.

The slow pace of improvement in the current situation supports the case for ECB to consider further interest rate cuts. Nonetheless, the opportunity for such cuts appears limited. Sentix inflation barometer indicates an unfavorable inflation environment, putting additional pressure on ECB.

Full Eurozone Sentix release here.

Daily Pivots: (S1) 0.9670; (P) 0.9693; (R1) 0.9708; More....

EUR/CHF's fall from 0.9928 resumed today and intraday bias is back on the downside for 0.9563 support. Decisive break there will argue that whole rise from 0.9252 has completed, and bring deeper fall to 61.8% retracement of 0.9252 to 0.9928 at 0.9510. On the upside, above 0.9720 minor resistance will turn intraday bias neutral again first.

In the bigger picture, as long as 0.9563 support holds, rise from 0.9252 medium term bottom is still in favor to continue. Next target is 38.2% retracement of 1.2004 (2018 high) to 0.9252 (2023 low) at 1.0303, even just as a correction to the down trend from 1.2004. However, firm break of 0.9563 will suggest that the rally has completed and retain medium term bearishness.

Daily Pivots: (S1) 0.8481; (P) 0.8501; (R1) 0.8512; More...

EUR/GBP's strong break of 0.8491 support confirms resumption of larger down trend. Intraday bias is back on the downside for 0.8376 projection level next. On the upside, break of 0.8539 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

In the bigger picture, down trend from 0.9267 (2022 high is in progress). Next target is 100% projection of 0.8764 to 0.8497 from 0.8643 at 0.8376. Sustained break there will target 161.8% projection at 0.8211 next. For now, outlook will remain bearish as long as 0.8643 resistance holds, even in case of stronger rebound.

Daily Pivots: (S1) 1.6348; (P) 1.6384; (R1) 1.6458; More...

EUR/AUD retreated sharply after edging higher to 1.6418 ans intraday bias remains neutral. . On the downside, firm break of 1.6211 support will resume the whole decline from 1.6742, as the third leg of the correction from 1.7062. On the upside, sustained break of 55 D EMA (now at 1.6386) will resume the rebound from 1.6211 instead.

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). In case of deeper fall, strong support is expected around 1.5846 and 38.2% retracement of 1.4281 to 1.7062 at 1.6000 to bring rebound. Break of 1.7062 is in favor as a later stage.

Daily Pivots: (S1) 169.14; (P) 169.79; (R1) 170.52; More...

Intraday bias in EUR/JPY remains neutral first. On the downside, break of 168.01 support will strengthen the case that rise from 164.31 has completed at 170.78 already. Intraday bias will be back on the downside for 167.31 support, and then 164.01. Nevertheless, break of 170.87 will resume the rally to retest 171.58 high instead.

In the bigger picture, a medium top was formed at 171.58 after brief breach of 169.96 (2008 high). But as long as 55 W EMA (now at 159.51) holds, price actions from there is seen as correcting the rise from 153.15 only. That is, larger up trend remains in favor to continue. However, sustained break of 55 W EMA will argue that larger scale correction is underway and target 153.15 support.

Daily Pivots: (S1) 198.59; (P) 199.20; (R1) 200.01; More...

Intraday bias in GBP/JPY remains neutral for the moment. On the downside, break of 197.28 will strengthen the case that rise from 191.34 has completed. Intraday bias will be back on the downside for 195.02 support first. However, decisive break of 200.72 will resume larger uptrend instead.

In the bigger picture, as long as 188.63 resistance turned support holds, long term up trend is expected to continue. Sustained trading above 200.53 will pave the way to 100% projection of 155.33 to 188.63 from 178.32 at 211.62.

Investors will begin the week in a state of uncertainty regarding the outlook of Europe's political landscape.

The four-day European Parliament elections concluded on Sunday. According to Reuters, the results showed a significant gain for eurosceptic-nationalists, who have displaced liberals and greens.

Additionally, President Emmanuel Macron dissolved the French Parliament, calling for early legislative elections later this month after losing to Marine Le Pen's far-right party in the European Union elections.

All this puts pressure on the structure of the European Union, weakening the euro's value.

As shown by the EUR/GBP chart, trading on the currency markets opened on Monday around the 0.8465 level—a price not seen since August 2022.

According to the technical analysis of EUR/GBP today:

→ The price broke below the critical support level of 0.85, which had been in place since 2023;

→ In terms of price dynamics since autumn 2022, the market is in a downward trend (as indicated by the red channel). The bearish break of 0.85 reinforces this trend;

→ The median line of the channel could serve as a consolidation zone below 0.85, confirming the relevance of the channel;

→ The 0.85-0.853 zone may provide significant resistance in the future if bulls attempt to rectify the situation.

In a negative scenario for the market (e.g., a political crisis within Europe), the EUR/GBP price could potentially reach the lower boundary of the indicated channel.

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• Gold (XAU/USD) plummeted below its 20-day & 50-day moving averages, and recorded a daily loss of 3.45% last Friday, 7 June; its worst daily performance since November 2020.
• The main negative catalyst has been a halt in China’s gold purchases in May after 18 consecutive months of buying through its official reserves.
• A further rebound in the US 10-year Treasury yield coupled with a steady increase in large speculators’ net bullish positioning in gold futures towards a 3-year high may add further downside pressure.
• Watch the US$2,380 key medium-term pivotal resistance on Gold (XAU/USD).

After a minor recovery of +3% from its US$2,320 support seen on 3 June to a recent US$2,388 intraday high printed last Friday, 7 June, price actions do not have a positive follow-through as it sliced below both its 20-day and 50-day moving averages within three hours on last Friday, 7 June and slumped to record a daily loss of 3.45%, the most since November 2020.

China halted its official gold purchases in May

The main catalyst that triggered last Friday’s horrendous decline was a halt in China’s upward trend of gold purchases after 18 consecutive months of gold buying as seen from its latest official reserves data; the amount of gold in China’s reserves stood at 72.8 million ounces for May, unchanged from April.

The opportunity cost of holding gold has ticked higher

Fig 1: US 10-YR Treasury real yield major & medium-term trends as of May 2024 (Source: TradingView, click to enlarge chart)

Despite a mixed US labour data release for May last Friday where the unemployment rate increased higher to 4%, the first time since January 2022, most market participants seem to get fixated on the headline non-farm payrolls numbers that rose more than expected to +182K jobs, above the consensus estimates of +185K, and April’s downward revised figure of +165K.

The rosy headline non-farm payrolls data have pushed up the US Treasury yields as odds of a potential second Fed funds rate in the December FOMC meeting get priced out with only a 41% chance according to the CME FedWatch Tool as of 7 June 2024.

In addition, the US 10-year Treasury real yield has managed to stage a bounce after a test at a key support of 2.03% that confluences with the 200-day moving average, keeping its major uptrend phase in place since 8 March 2022 low intact (see Fig 1).

A further potential upmove in the US 10-year Treasury yield increases the opportunity costs of holding Gold (XAU/USD) as it does not yield any recurring fixed income, in turn may put further downside pressure on its prices.

Large speculator players’ net bullish positioning in gold futures heading toward a 3-year high

Fig 2: Commitments of Trader large speculators’ net positioning in Gold futures as of 3 June 2024 (Source: Macro Micro, click to enlarge chart)

Based on the latest data Commitments of Traders data as of 3 June 2024 (compiled by Macro Micro), the aggregate net bullish open positions of large speculators in the gold futures market of NYMEX (after offsetting the aggregate positions of large commercial hedgers) have risen to +503,233 contracts (net long), a steady of increase in the past three weeks, and coming close to its highest level in three years with +581,344 contracts recorded on 7 May 2022 (see Fig 2).

Given that net open large speculative positioning flows (primarily from hedge funds) are contrarian in nature which suggests that a relatively high level of net positioning may see an opposite reaction in price actions if related data or news flows disappoint.

In the current context of Gold (XAU/USD) movements, the risk of further profit-taking activities cannot be ruled out as large leveraged speculators have committed a relatively high amount of net bullish open positioning.

Thus, if there is a lack of fresh supportive catalysts coming out from this Wednesday, 12 June key risk events; the US CPI data release for May, and the US Federal Reserve monetary policy decision together its latest update on the “dot plot” projections for US inflationary trend, Fed funds rate may eventually see late buyers rushing to exit their positions which increases the risk of a liquidity cascading downward effect on Gold (XAU/USD) prices in the short-term to medium-term.

Medium-term momentum has weakened for gold

Fig 3: Gold (XAU/USD) major & medium-term trends as of May 2024 (Source: TradingView, click to enlarge chart)

In the lens of technical analysis, the Gold (XAU/USD) medium-term uptrend phase from the 6 October 2023 low has been damaged as price actions have decisively broken below its 50-day moving average with a daily and weekly close below it last Friday, 7 June (see Fig 3).

In addition, the daily RSI momentum indicator has broken below a key parallel ascending trendline support at the 48 level with a prior bearish divergence condition.

These observations suggest a bearish medium-term momentum condition has arisen that increased the odds that the price actions of Gold (XAU/USD) may unfold another leg of a multi-week corrective decline sequence within its major uptrend phase (as illustrated by green major ascending channel from 28 September 2022 low).

Watch the US$2,380 medium-term pivotal resistance with the next medium-term supports at US$2,206/2,195, and US$2,149/2,131 that confluences with the median line of the major ascending channel, and 38.2%/50% Fibonacci retracement of the prior rally from the 6 October 2023 low to the 12 April 2024 all-time high.

However, a clearance above US$2,380 sees the revival of the bullish impulsive sequence to retest the all-time high area of US$2,420/2,450 before exposing the next medium-term resistance of US$2,540.

Daily Pivots: (S1) 1.3696; (P) 1.3732; (R1) 1.3801; More...

USD/CAD's break of 1.3742 resistance revive the case that correction from 1.3845 has completed at 1.3589. Intraday bias is back on the upside for retesting 1.3845 high next. On the downside, break of 1.3662 support will extend the corrective pattern from 1.3845 with another falling leg instead.

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern. In case of another fall, strong support should emerge above 1.2947 resistance turned support to bring rebound. Firm break of 1.3976 will confirm up resumption of whole up trend from 1.2005 (2021 low). Next target is 61.8% projection of 1.2401 to 1.3976 from 1.3176 at 1.4149.