Blocksmith Says: Dollar, US Yields Up; Equities, Crypto Down

20 July 2022

We are going to take a slight detour today and look at the Euro vs US dollar as a crypto read through. As one of my smartest institutional clients told me today “Europe is the poster child for everything that is wrong at the moment”.

Apart from nascent populist uprisings because of the WEF inspired attack on farmers, technocrat Draghi being given the boot in Italy and the so called globalist agenda on the backfoot, Europe and especially Germany are most vulnerable to Russia and energy prices. Tomorrow we’ll find out if the gas is switched back on.. base case though is 40% flow. So nothing really changes and there’s a lot of chilly Germans this winter and the economy continues to get coshed. 

This directly impacts the euro which with an 85% positive correlation to main risk proxy S&P 500 futures, in turn impacts the risk on spurt we are seeing at the moment which in turn impacts the rally in crypto. So the preferred view remains as follows: dollar back up, US yields up, equities down, crypto down.

Looking at the daily data chart in EURUSD from start 2022, we can see price channeling down nicely, hitting parity at the bottom of the channel (just below actually) rebounding from natural support and then zooming upwards.  However, momentum wise it came from nowhere (i.e. no slowdown before) and the intraday wave structure is not impulsive. So despite news of a wall of money hitting markets as sentiment became too bearish, this move and many others (especially Nasdaq which is a key lead indicator) still look corrective and therefore suspicious. 

Meanwhile Bitcoin is still testing the top of the ostensible flag pattern we have been looking at and may overspill but there is a natural resistance point at around US$25,400 the spike low on 12 May. 

Christopher Grafton
Christopher Grafton

Chris has been working in the markets for over 15 years variously as a broker, analyst and researcher. He is the author of a well-known book on Hurst cycles analysis, and runs his own market analysis software platform on Bloomberg. He’s also a keen student of both the cello and Brazilian Jiujitsu.

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