Stock futures seek next catalyst, bitcoin continues slide

2 mins read

By Naeem Aslam  

US and European stock futures are trading a bit flat, while traders focus on the next big catalyst that is going to drive the price action.

The past few weeks have been about the US debt, and the drama it created has kept traders busy.

In addition, most of the fascinating companies have also reported their earnings, so the tailwind that was coming from the earnings season has also stopped. Thus, the current price action has become somewhat lacklustre, and traders need a new catalyst that can shift prices to the next level.

One factor that sticks out like a sore thumb is the Fed’s monetary policy next week, with the ECB also coming with its monetary policy.

When the Fed released its last minutes, traders thought it was very much done with the rate hike cycle and that a pause was a highly likely scenario for US monetary policy. But the recent surprise reactions from the RBA and the BOC have changed the game to some extent; both of these banks weren’t expected to hike rates, but they did due to the immense inflationary pressure.

The key takeaway from their decision has been that no matter what the cost, interest rates need to move higher.

The Fed is in a much better state compared to the other central banks, and this is because they have plenty of support for their monetary policy in terms of the US labour market. The jobs market is robust and showing no signs of any significant weakness, and the Fed is likely to use this factor to hike rates further going into the next week.

But for now, next week’s event is a bit too far away for traders to focus on, so the market’s price action is very dull.

Oil needs more demand

Wishful thinking continues among the optimist oil traders who believe that oil prices are unlikely to see more weakness. But the reality is that it is the demand equation that matters the most.

Yes, OPEC is playing an important active role in the market and must never take their eyes off this important aspect. But what the world needs is more demand.

Thursday saw significant improvement in the Japanese GDP number, which itself is a good piece of news for oil demand, but when it comes to oil demand, Japan is nowhere near enough to China. Traders know that if we are going to see oil prices move higher and remain on that trajectory, then we have to see improvement in oil prices.

Looking at the overinflation situation and two big monetary policy decisions that are due next week, it is likely that the global economy may slow down further, and as a result, we could see some more weakness heading for oil prices.

Bitcoin prices under pressure

We are certainly far from being out of the crypto woods. The news headlines are still very much full of the SEC’s action against the crypto exchanges, which weren’t playing by the book, and crypto traders worry about the future of the crypto industry.

But Bitcoin is bigger than any other crypto asset, and one thing is certain: currently, we mainly have bitcoin whales and professional institutions that are in the markets.

Retail traders, who were in for the short-term gain, have been long flushed out, and they were very much responsible for the excessive volatility in the markets.

Bitcoin prices are still likely to remain under pressure, and current price action suggests that there are chances that the price may violate the important price support of $25K, but we may also see some bargain hunting at that price point.


Naeem Aslam is Chief Investment Officer at Zaye Capital Markets.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Zaye Capital Markets.