Mixed Messages

Key Takeaways

Markets remain on edge for any new tariff threats coming before April 2nd
Rates are expected to stay unchanged in this week’s FOMC decision
BTC trend bearishness continues with some chance for a firm low into Q2

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Digital Asset Commentary

The tariff uncertainty remains a key concern as markets brace for the enactment of reciprocal and retaliatory tariffs on April 2nd. This adds another layer of complexity to an already fragile economic environment, with investors closely watching the FOMC meeting this week for signals on monetary policy direction. Based on CME rate probabilities, no change in rates is expected at the meeting. Any comments from Powell regarding an end to QT should bring a reprieve to risk markets. The US dollar has also shown continued weakness over the past month, contributing to higher liquidity in global markets. However, despite this short-term boost, the 10/2 yield curve uninversion still casts a shadow, often seen as a precursor to recessionary conditions.

In the crypto market, Bitcoin maintains a bearish trend on the daily timeframe, with altcoins showing significantly weaker performance. Oddly, memecoins look the most poised for a mean reversion rally after a -80% move lower since December. BTC does hold bullish divergences on the RSI and volume which suggest the potential for relief in the short term. BTC also remains in the middle of a multi-year channel, leaving room for both upside and downside scenarios. While still a remote possibility, an inverted head-and-shoulders (iHS) formation could take shape into Q2, with a critical neckline resistance around $93K. This would require significant buying pressure and a risk-on rally, making the iHS chart pattern a scenario to monitor rather than an imminent reversal signal. Until gold reaches a temporary peak, BTC is unlikely to rally simultaneously, as the two assets typically exhibit a lead-lag relationship of several months.

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