Market updates: BTC, CPI, and the FED
Bitcoin Price Analysis Summary
Bitcoin (BTC) is entering a pivotal week with a weakened price stance, as its 2023 trends seem to indicate a "double top" pattern. The currency had an unfavourable weekly close, falling below the $26,000 mark, and is now struggling to gain traction amidst a backdrop of lower volatility. Some analysts, noting the current downtrend, are predicting further lows for Bitcoin. They argue that current liquidity conditions lend weight to this pessimistic outlook.
However, there are potential positive signs on the horizon. One on-chain metric hints that Bitcoin might be undergoing a significant shakeout, comparable to the situation in March 2020. Additionally, the relative strength index (RSI) of Bitcoin suggests a possible rebound to its "fair value", as the RSI has retraced its gains from the start of the year and is now at its lowest since early January.
A key point of discussion is the recent weekly close of Bitcoin, which solidifies the double top pattern—a bearish indicator. Rekt Capital, a popular trader and analyst, cautioned that if Bitcoin were to close below $26,000, it would likely confirm this double top structure. Current charts depict Bitcoin reaching two local highs in 2023, both above $31,000, with a dip to $26,000 in between. This pattern might lead to further downward movement.
In the broader context, there has been speculation regarding Bitcoin's historical tendency to "fill gaps" in the CME futures markets, especially during weekends and holidays. This means that the difference in closing prices between two trading sessions sometimes acts as a draw for Bitcoin's future price movements. Currently, a significant price gap is present at the $20,000 mark. While some believe Bitcoin might revisit this level, others argue that there's no certainty, pointing to previous unfilled gaps as evidence.
In conclusion, while there are concerns about Bitcoin's price trajectory, the market remains unpredictable, with both positive and negative indicators present.
U.S. Market & Key Reports
U.S. futures are showing a positive trend in anticipation of crucial inflation reports this week. Specifically, the Nasdaq 100, S&P 500, and the Dow Jones futures have risen by 0.60%, 0.43%, and 0.35%, respectively. Key reports to be released soon include the Consumer Price Index (CPI) for August, set for September 13, followed by the Producer Price Index (PPI) on September 14. These releases are especially significant as the Federal Reserve will use them to inform its upcoming interest rate decision. Furthermore, this week will also see data on retail sales, consumer sentiment, and the weekly jobless claims.
In the tech sector, Oracle is poised to announce its Q1FY24 results today. Adobe is also on deck, planning to report its Q3FY23 results on September 14. A notable event to watch out for is Apple's unveiling of the iPhone 15 on September 12. However, Apple is currently facing challenges in China, as the nation's government officials are now prohibited from using iPhones.
European & Asia-Pacific Markets:
European stock markets are trending positively this morning, with traders eagerly waiting for key data releases this week. A significant announcement is expected from the European Central Bank on September 14 regarding its monetary policy. Over in the Asia-Pacific region, markets displayed a mixed performance. Notably, China's CPI growth was slightly below expectations, while its PPI declined as forecasted. As a result, the Hong Kong index saw a drop, but both the Shanghai and Shenzhen indices experienced gains. In Japan, the primary indices reflected a modest decline.
Federal Reserve's Stance on Inflation and Interest Rates
Ahead of the Federal Reserve's upcoming policy meeting, officials have hinted at a potential slower approach in combating inflation. This comes as the labour market displays signs of softening and prices begin to decline from pandemic peaks. While there might be a pause in action this month, this doesn't signify an end to the central bank's rate increases.
Lorie Logan, the president of the Federal Reserve Bank of Dallas, emphasised the need for a gradual approach during her speech to the Dallas Business Club on September 7. She suggested the possibility of skipping a rate hike in the upcoming meeting but also highlighted that this shouldn't be interpreted as an end to the bank's efforts. The focus remains on assessing the balance between controlling high inflation and not overly suppressing the economy. She indicated that future data might necessitate further measures to control inflation.
Similar sentiments were shared by the Boston Federal Reserve President, Susan Collins, who spoke about the importance of patience and comprehensive data assessment. In her speech to the New England Council on September 6, she suggested that even if we are nearing the peak of policy rates, further tightening might still be needed based on incoming data.
The forthcoming policy meeting scheduled for September 19-20 will likely see officials maintaining the rates in the range of 5.25%-5.5%. This decision will be to assess if the inflation data continues to indicate a cooling trend.
Recent statistics have shown a drop in inflation from over 9% to around 3%. However, when focusing on core metrics, which exclude fluctuating food and energy prices, inflation remains at about 4%, double the Federal Reserve's target. The Fed's preferred measure of inflation, the "core" Personal Consumption Expenditures (PCE) Index, displayed a rise of 4.2% year-on-year in July. This was a slight increase from June's 4.1% but less than the 4.5%-4.6% seen in the first half of the year. Another metric, the "core" Consumer Price Index, saw an increase of 4.7% in July, marking its slowest growth since October 2021. The figures for August's CPI will be released soon.