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WEEK AHEAD: MAY 31

Short Description

Non-farm payrolls are released this Friday following the shock miss from last month, while I discuss the possible next moves in Bitcoin and cryptocurrencies as well as rundown the economic calendar for the week ahead . Thanks! Rich

Video Script

Non-farm payrolls & Bitcoin | WEEK AHEAD 

 


Hi everyone, hope you’re doing well. This has without doubt been a mad period for cryptocurrencies so this week I’ll talk a bit about where I think Bitcoin could be headed next. But, of course it’s a new month and NFP is released on Friday so I discuss what that could mean for the dollar as well. 

Now before I talk more about the possible next move in Bitcoin, let’s run through the highlights of the economic calendar. CPI data out of Germany is expected to come down slightly to sit right on the ECB’s target of 2%. Watch out for an upside surprise, because given all the debate over inflation, a number over two could push up the Euro-dollar forex pair. 

The central bank to watch this week is the Reserve Bank of Australia. It will be interesting to see if they follow in the footsteps of the neighbouring Reserve Bank of New Zealand and signal a late 2022 rate hike. If they do, that could see the Aussie dollar chase the Kiwi to the topside. 

The big one is on Friday with non-farm payrolls, especially after the shock disappointment of last month. Bear in mind guys, if the US economy actually is slowing as shown by slowing job growth while inflation is rising – that’s called ‘stagflation’. That’s not a good place to be -and any whiff of that could be very risk off for markets, where the dollar could benefit as a safe haven asset.

Now let’s have a look at the chart of Bitcoin to remind ourselves where we are. Of course, we had the big drop the week before last, then most of last week was stuck in a 30,000-to-40,000-dollar range. The 40k level is backed up by the 200-day moving average and the January peak. A sustained move above 40 could bring 50 into sight pretty quickly.

But what’s the chance we see another leg lower below 30k? Well one thing to bear in mind is that the previous two times that Bitcoin fell under the 200-day moving average after a big bull market, the price ultimately dropped 80% from nearly 20,000 to just over 3,000 in 2018 through 2019 and then 70% from nearly 14,000 to under 4,000 later in 2019 through 2020. 

Given the record high of 65,000 – if Bitcoin dropped 80%, that’d take the price back down to just 13,000. If it dropped 70%, that’d be down to $19,500. And for the sake of arguments, a drop of 60% would be down to $26,000.

Now Bitcoin bulls will tell you that the story for Bitcoin now is very different from those previous declines. There have been much more promising signs of corporate adoption from the likes of Square and PayPal, though obviously not Tesla anymore for the moment. Also, a number of famous hedge fund managers – most recently Carl Icahn - have thrown their backing behind crypto.

But still, while cryptocurrencies and the Blockchains they operate on are looking increasingly useful, there is not a clear way to value them and so the price can still fluctuate wildly based on investor sentiment, which I think could crumble pretty quickly if there’s another big decline. 

The good things for us as traders, there should be big opportunities whichever way Bitcoin breaks.

Right thanks everyone, good luck trading this week and make sure to subscribe so you don’t miss the next episode of the week ahead.