On Tuesday (May 21), the US dollar index held its ground at 104.62, and gold retreated from its overnight high of $2,450 to $2,427. Several Fed officials delivered speeches, and the long-term high interest rate path seems unchanged. Rumors of Ethereum spot ETF approval are rife, with Bitcoin breaking through $71,000 and Ethereum reaching $3,680. The cause of the crash of Iranian President Raisi was revealed, and US President Biden accused the International Criminal Court of issuing an arrest warrant to Israeli senior officials.
Iranian state media: President Raisi's plane crash was caused by "technical failure"
The deaths of Raisi and Iran’s foreign minister leave the country without two influential leaders at a particularly tumultuous moment of international tensions and domestic discontent, though analysts and regional officials do not expect much change in Iran’s foreign or domestic policies.
Raisi, 63, and Foreign Minister Hossein Amir Abdollahian died in a helicopter crash over the weekend due to a "technical malfunction," according to Iran's official news media. They were traveling from Iran's border with Azerbaijan after the completion of the dam project when their helicopter crashed in the mountains near the city of Jolfa. Rescue teams searched the rugged, densely forested area for hours in rain and fog before finding the crash site. In the end, no one survived.
The New York Times reported that after the U.S. official statement did not specifically mention Lacey's record, State Department spokesman Matthew Miller harshly criticized it at the daily press conference: "We are very clear that Lacey has been a brutal participant in the repression of the Iranian people for nearly 40 years."
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Miller added: "Some of the worst human rights violations occurred during his presidency, particularly against Iranian women and girls. That being said, we regret any loss of life and do not want to see anyone die in a helicopter crash."
He went on to note that the Biden administration's "basic approach toward Iran has not changed and will not change," and specifically emphasized that Americans will stand with the Iranians in urging open, free societies and democratic participation.
Biden accuses ICC of 'issuing arrest warrants against Israel'
Biden condemned the ICC chief prosecutor's decision to issue arrest warrants for two senior Israeli officials, Prime Minister Benjamin Netanyahu and Defense Minister Yoav Galant, in a White House statement on Monday. He stressed: "No matter what this prosecutor may suggest, there is no reciprocity between Israel and Hamas."
Biden's decision to stand firm behind Netanyahu was echoed by U.S. Secretary of State Antony Blinken, who in a statement called the actions of prosecutor Karim Khan "shameful" and said the United States rejected his "comparison between Israel and Hamas."
Blinken accused Khan of “announcing charges on cable TV” even as his staff canceled a planned visit to Israel to discuss the ICC’s investigation into Israel’s war practices. “These and other circumstances call into question the legitimacy and credibility of this investigation,” he said.
“This is shameful,” Mr. Blinken said of the prosecutors’ decision to seek arrest warrants for leaders on both sides of the conflict, saying it meant both sides were equal. “Hamas is a brutal terrorist organization that has committed the worst massacre of Jews since the Holocaust and still holds dozens of innocent hostages, including Americans. This decision does not help ongoing efforts to reach a ceasefire that would allow the hostages to be rescued and humanitarian aid to be increased.”
Fed officials re-enact "hawk-dove battle" and the dollar holds its ground
Atlanta Fed President Raphael Bostic said it will take some time for the Fed to feel confident that inflation is back on track. "The question now is when can we be confident that inflation is clearly back to 2%. I think it will take us some time to be confident of that," he said in an interview with Bloomberg TV.
Federal Reserve Vice Chairman for Supervision William Barr called this year's inflation data "disappointing."
Speaking at a Mortgage Bankers Association conference in New York, Federal Reserve Vice Chairman Philip Jefferson said it was too early to tell whether the recent slowdown in the pace of deflation would be long-lasting.
Cleveland Fed President Loretta Mester hinted she is considering abandoning her earlier forecast that the Fed would cut interest rates three times this year. As recently as early April, Mester was projecting three rate cuts in 2024.
“Based on what I’m seeing in the economy right now, I don’t think that’s appropriate,” she explained. She noted that inflation risks have risen since the first quarter and said the real economy is “a little bit stronger than I would have expected.”
Fed officials remain cautious about the timeline for rate cuts, and upcoming data will determine the timing of the easing cycle. Last week's April inflation and retail sales data disappointed, and the market will focus on S&P data later this week to learn more about the health of the US economy.
The probability of rate cuts in June and July remains low, so investors are pushing back the first rate cut until September.
Treasury yields continued to rise, with the 2-year Treasury yield at 4.83%, the 5-year Treasury yield at 4.44%, and the 10-year Treasury yield at 4.42%.
“I think the FX market is pretty lacking catalysts at this stage after the U.S. CPI (Consumer Price Index) last week,” said Michael Brown, market analyst at London-based online broker Pepperstone.
He noted: “While the FOMC calendar is once again unusually busy, speakers appear to have little new information to add at this stage, especially given that the reaction function is so clearly signposted, all but ruling out another rate hike, and that at least a few more promising inflation readings will be needed to provide the necessary confidence that inflation is moving back up to 2% before the first rate cut can be implemented.”
The possibility of the SEC approving Ethereum spot ETF increases
Bloomberg senior analyst Eric Balchunas tweeted that he had heard some rumors that the U.S. Securities and Exchange Commission might make a 180-degree turn in its stance on approving an Ethereum spot ETF, thereby increasing the probability of approval from 25% to 75%.
He said that everyone is preparing desperately now, but after seeing more evidence, such as before applying for renewal, the probability cap will be set at 75%.
Later, Bloomberg analyst James Seyffart responded on Twitter that Eric raised the probability of approval of the Ethereum spot ETF to 75%. But this is only for the 19b-4 document (change in trading rules), and the S-1 (registration statement) approval is also required. It may take several weeks to months for the S-1 approval and the actual launch of the Ethereum spot ETF.
After the news came out, Ethereum soared more than 17%, breaking through $3,680.
US Dollar Technical Analysis
FXStreet analyst Patricio Martín said that indicators on the daily chart of the US Dollar Index reflect an undecided market waiting for a driver. The relative strength index (RSI)'s flat position in the negative zone reveals the conflict within the market, detailing the struggle between buyers and sellers. In addition, the moving average convergence divergence (MACD) histogram, which shows red flat bars, supports the idea that bears are trying to seize short-term control. However, the nature of the stagnation indicates a lack of decisive momentum in either direction, reflecting that the market is waiting for a clear direction.
The simple moving average (SMA) section tells a similar story, with the index trading below the 20-day moving average, suggesting that bears have made some progress recently. However, the fact that the US dollar index remains above the 100-day and 200-day moving averages suggests that the long-term bullish momentum cannot be completely ignored.
Gold Technical Analysis
Vladimir Zernov, an analyst at FXEmpire, said gold was testing new highs as traders reacted to geopolitical developments. Demand for safe-haven gold increased after Iranian President Ebrahim Raisi was killed in a mysterious helicopter crash.
Gold prices tried to stabilize above $2,450 but lost momentum as some traders decided to book profits near all-time highs. A break above $2,450 would push gold prices towards the $2,500 level.
Bitcoin Technical Analysis
CoinTelegraph noted that Bitcoin’s rebound from psychological support near $60,000 appears to have sparked buying interest in spot Bitcoin ETFs.
Farside Investors data shows that inflows last week were about $950 million, the best weekly performance since March. If the inflows continue, Bitcoin could see a surprising rise.
Markus Thielen, head of research at 10x Research, is bullish on Bitcoin. He said in a report that their Bitcoin ETF model predicts that if Bitcoin breaks through $67,500, it will set a new all-time high.
Bitcoin has been trading in a tight range around $68,000 for the past three days, with tight ranges around overhead resistance levels usually interpreting as upside.
The rising 20-day EMA at $64,371 and the RSI in the positive territory suggest that the path of least resistance is to the upside. If the $68,000 level is crossed, bitcoin could start a rally to $73,777, a level that is likely to witness strong selling by the bears.
The moving averages are the key support to watch on the downside and a breakout and close below them would suggest that the bulls have given up. Bitcoin could drop to $59,600 and subsequently to $56,552.
