Signals · theoretical, educational setups
Two Central Banks and the Yen, Alphabet's Five-Day Slide, and Bitcoin Under $80,000
Three theoretical setups for the day before the Fed: the dollar against the yen, back near 157.6 after a 1.6% drop last week, with the Fed and the Bank of Japan deciding about a day and a half apart; Alphabet, down five sessions in a row to $316.80, its lowest close since April, before Wednesday's report; and bitcoin, which has made a lower daily high for five straight days and slipped below $80,000.
USD/JPY · US Dollar / Japanese Yen — Bullish, Short-term (days). The dollar fell from about 158.6 yen on October 20 to a low of 156.07 in Asian trading on October 23, a drop of about 1.6%, as the October 22 flight to Treasuries pulled the 10-year yield down about 20 basis points in a session. It has since recovered to about 157.6 on Tuesday morning, and the gap that drives this pair has not moved: the Fed's target range is 3.75% to 4.00%, with futures pricing a hike in December, while the Bank of Japan's policy rate is 1.25% after its September increase, which passed by seven votes to two. The two decisions come within a day and a half of each other. The Fed decides on Wednesday afternoon, and the Bank of Japan ends its meeting on Friday, October 30, with Standard Chartered among those expecting a hold and a hawkish tone rather than a move, leaving January as the base case for the next hike. The setup is that a firm Fed and a patient Bank of Japan put the pair back toward the top of its recent 156.5 to 159 range. The risks sit on both sides: a dovish surprise in Washington, a hike in Tokyo, or Japan's Ministry of Finance, which intervened to support the yen in July and becomes more vocal as the pair approaches 160. A daily close below 156.07 yen per dollar, last Friday's low, would invalidate the setup.
GOOGL · Alphabet Inc. (Class A) — Neutral, Short-term (days). Alphabet closed at $316.80 on October 26, its fifth straight decline and its lowest close since April 7, down 7.95% from $344.18 on October 19 and 21.3% below its record close of $402.62 on May 13. The slide came as the market questioned the cost of the AI build-out, with suppliers such as Dell and Super Micro losing more than 20% in a week earlier this month and Lam Research falling after its guidance last Wednesday, while Microsoft, which reports the same evening, closed on Monday almost exactly where it stood a week earlier. Alphabet reports after the close on Wednesday, hours after the Fed, with consensus near $2.94 a share, and its capital-spending line is the number that matters: in July the stock fell 7.13% in a day, from $342.09 to $317.69, on a report whose operating results were strong but whose spending plans were larger than expected. The current price is almost exactly that July post-report close, which cuts both ways. A market that has already sold the stock for five days may have priced a large capex number, and Meta showed last week that strong advertising growth buys forgiveness for heavy spending; but a Saxo review found that Microsoft and Amazon moved about 1.85 times what options had priced in July, so the reaction can be larger than anyone expects in either direction. The levels define the outcome rather than a view: a daily close above $337.27, the October 21 high, would say the selling before the report was positioning; a close below $314.90, the July 23 intraday low, would take the stock beyond the range in which it has traded since April.
BTC/USD · Bitcoin — Bearish, Short-term (days). Bitcoin's daily highs on Binance have stepped down for five days in a row, from $84,898 on October 21 to $84,377, $82,061, $81,214, $81,034 and $80,845 on October 26, while the lows have held above $79,220; early on Tuesday it traded just under $80,000. A falling ceiling over a flat floor is a descending triangle, a pattern that more often resolves lower, and the context gives the buyers little reason to step in before the data. The October 22 drop, when about $474 million of crypto futures were liquidated as the Nasdaq fell, showed how closely bitcoin is trading with technology stocks this month, and those stocks face the Fed on Wednesday afternoon and Alphabet and Microsoft that evening; Coinbase and Strategy report on Thursday, alongside the first estimate of third-quarter GDP and the September PCE price index. Last week's inflows of about $301 million into US spot bitcoin ETFs, according to Farside data, did not stop the slide, which is a sign of how much supply is still meeting each rally. The setup is a break of the $79,200 floor into the Fed decision. The risks are a dovish Fed or a relief rally in technology after the megacap reports, either of which could squeeze a market that has been leaning short. A daily close above $82,061, the October 23 high, would break the sequence of lower highs and invalidate the setup.