Seasonality in play?

Today we’ll cover:

• Quarter and Month end flows dominate
• US yields break higher again
• Stocks crumble
• Seasonality in play or something more serious?

I am going to disappear down a bit of a USD rabbit hole today so be warned, but I think it holds relevance to Crypto and broader macro markets as well.

Yesterday saw a Crypto rally snubbed out in its prime yet again as the broader macro theme took over. We were skewed to sellers into the rally in the majors as month and quarter end flows dominated ours, and others books.

The rally in US yields is quite staggering to me as the 10 year trades above 4.6 amid some generic higher for longer comments from FED officials. US stock markets continue to lead the move lower in risk and in this environment no risk asset is proving safe. That said, for BTC to be above 26,000 and ETH above 1600 is seriously impressive and should be respected in the medium term.

The USD is reigning supreme as Eur/Usd makes new lows on the year, GBP is close to 1.2000 again having been above 1.3000 a few weeks ago and USD/JPY is within a whisper of 150 causing sleepless nights for the MOF.

This brings me to seasonal trends which have played out very well this year in the markets. This period of the year is often the worst performing time of the year for stock markets, as it is proving again, and the link between stocks and the USD is strong due to rebalancing flows. So it is worth noting that October is often a very strong month for stocks and with long positions cleared out and speculative shorts rife the set up is there once again for seasonal inflows to dominate. The danger to this view is with interest rates being so high it could reduce the money poured into risk when you can get 6% in the bank but I still believe the flows will materialise.

The USD often shows a similar seasonal path and this is highlighted by the USD index charts below. You can see that last year the USD was rampant at this time of year but peaked at the end of September as seasonal flows started a rout which continued for some time. The peak on the chart was September The 29th 2022 and what followed was an 8% move lower into the year end.

The set up this year is not dissimilar to then and is shown below as we zoom in on the recent move.

Is it too perfect? Perhaps.
Is it worth respecting? For me 100% with potential for good news next month in Crypto and other asset classes.

Good luck as always

Rich

Richard Usher
Head of OTC Trading

The information contained in this document should not be relied upon by investors or any other persons to make financial decisions. It is gathered from various sources and should not be construed as guidance. The information contained herein is for informational purposes only and should not be construed as an offer, solicitation of an offer, or an inducement to buy or sell digital assets or any equivalents or any security or investment product of any kind either generally or in any jurisdiction where the offer or sale is not permitted. The views expressed in this document about the markets, market participants and/or digital assets accurately reflect the views of BCB Group. While opinions stated are honestly held, they are not guarantees, should not be relied on and are subject to change. The information or opinions provided should not be taken as specific advice on the merits of any investment decision. This document may contain statements about expected or anticipated future events and financial results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, new legislation and regulatory actions, competitive and general economic factors and conditions and the occurrence of unexpected events. Past performance of the digital asset markets or markets in their derivative instruments is not a viable indication of future performance with actual results possibly differing materially from those stated herein. We will not be responsible for any losses incurred by a client as a result of decisions made based on any information provided.