Cryptocurrency prices are being weighed by a distinctly risk-averse tone to macro trading conditions. Major stock indices in the US and Europe are trading lower (the Nasdaq 100 is down 1.9%), after a negative session for Asia equities. The risk aversion has also driven downside in government bond yields and upside in the safe-haven US dollar. US 10-year yields were last down about 11 bps to back under 3.0% while the DXY hit fresh multi-decade highs above 108.00.
What’s Hurting Risk Appetite?
Analysts are citing a combination of factors on weighing on risk appetite. US banks kick off the start of the US earnings later this week and investors are nervous that current earnings estimates might be overly optimistic.
Meanwhile, last week’s strong US jobs and service sector activity survey data, whilst easing near-term recession fears, is being cited as a negative for sentiment as it might encourage the Fed to continue tightening monetary policy in an overly aggressive way.
Upcoming US data releases later this week will decide whether the Fed raises interest rates by 50 or 75 bps later this month. June Consumer Price Inflation (CPI) data is out on Wednesday and June Retail Sales data is out on Friday. Traders will recall an upside surprise in the May CPI data sent risk assets into a tailspin after forcing the Fed to up the pace of rate hikes to 75 bps from 50 bps per meeting.
Profit-taking ahead of macro risk events is thus also being cited as a factor weighing on risk assets like stocks and crypto on Monday.
Tezos (XTZ)
The native token to the Tezos blockchain XTZ was last higher by about 3.0% on Monday, extending its gains over the past three sessions to more than 9.0%, despite most other cryptocurrencies having fallen over that some time period. According to CoinMarketCap, XTZ is the best performing cryptocurrency in the top 50 by market cap over the last 24 hours, with gains of over 7.0%.
However, XTZ looks to have run into a key area of short-term resistance. At current levels just under $1.70, it is testing its 50-Day Moving Average and its late-June high. Should the cryptocurrency break this area of resistance, the door is open technically speaking to a run higher towards the early-June highs in the $2.35 area.
Given that XTZ’s technicals are looking positive, this is a very possible outcome. The cryptocurrency has been trending higher since the start of the month, consistently posting higher lows and higher highs. It looks to have formed an ascending triangle, a pattern that often forms prior to bullish breakouts.
Of course, ascending triangles can also break out to the downside. If XTZ/USD was to break below the upwards support trendline that has been in play since the start of the month, the door would be open to a swift drop lower towards the 21DMA at $1.50. A drop under that would bring a test of the sub-$1.20 annual lows from mid-June into play.
