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Changing Tides

There was plenty of activity across every market today. We saw a massive sell off in the crypto world. We saw the USD rally on Fed minutes. And we saw another dip in equities. Any one of these alone would make for an interesting day. The fact that they all occurred at once is noteworthy.

USD Rates

Although this came relatively late in the day, we can start here. The minutes from the April FOMC meeting were released today. Clearly they have already been talking about talking about when to taper bond purchases. Bond yields really did not move much at all, but the impact was felt in several other complexes, namely FX and equities. The rhetoric was not terribly alarming and the bond market seemed to barely notice it, with US 10 YR yield ticking up just a few basis points. FX had a stronger response. The USD rallied significantly, which you can see by the drop in the EUR at the same time.

FX

The EUR came sharply lower on the heels of the Fed minutes. The rest of the majors reacted similarly. The USD has been very weak this month. If US interest rates do not follow through or show signs of heading higher, we expect the USD downtrend to re-emerge. There are some fairly big levels that were in danger until the Fed comments today.

USDCAD

USDJPY

Nothing much to see here unless we can try higher and test the highs of 2021. A bit of risk off sentiment has kept USDJPY in check, so look to global equity markets for some clues.

FX Rates and Performance

Crypto

Today was nothing short of a bloodbath in crypto. Bitcoin plunged to $30k from $45k just yesterday. It did recover to nearly $40k but the horse is out of the barn. Once the 41k level was triggered, it was all over. The Chinese government helped nudge BTC lower with a comment that they were restricting financial institutions from allowing their customers to transact in crypto. By all measures, it was very messy. Other crypto currencies were equally impacted but for our purposes we will discuss just Bitcoin at the moment as everything else moved in largely corrolary fashion. We are still not out of the woods as BTC is faltering once again. The support level on the way down was $41k and that should serve as resistance on any subsequent rally. Stay tuned here.

A key takeaway from today was the service outage that affected numerous crypto exchanges today. In the midst of the collapse, several exchanges halted service. What’s worse is there were numerous liquidations of trading accounts. One estimate had it at 775,000 trading accounts liquidated. That is a staggering figure and could have a lasting impact on this market. There will probably be many stories of losses for exchanges and customers in the coming days.

Since we last commented on crypto, there has been a lot of activity. Elon Musk has had several run ins with the crypto world. For starters, he has relentlessly touted Doge coin, which is his crypto of choice. At the same time, he abandoned his support of Bitcoin for the most part. Most of it happened on twitter:

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