Market Focus: All Eyes on Inflation

 

BitDelta Market Matrix – Bridging Traditional Finance with Digital Assets.

This week is heavy on macro data worldwide – from central banks and interest rates to inflation, markets will certainly be watching.

Starting off with inflation data set to come out on Friday, this week is posed to be pivotal for investors, with a series of major economic data and earning reports, which could significantly influence market trends.

Key Events

Inflation Data Due This Week

 

• PCE data comes out this Friday in the United States.
• This is the most important indicator that the Federal Reserve uses to gauge inflation.
• Forecasts have Core PCE coming out at 3.0% (YoY).
  
   

High inflation:

• If we get a reading that is higher than expected, this will signal that inflation is sticky.
• This, in turn, will lower projections for the March rate cut.
• And as no rate cut in March is perceived as hawkish policy, this will result in a more bullish dollar.
  
   

Low inflation:

• If the reading for PCE data is lower than expected, this will indicate that we are on target for the March easing.
• As the market prices in more dovish policy - we can expect to see a dollar sell off.
• All other major FX pairs will be affected by dollar moves, so traders need to keep an eye on PCE data this Friday.

Buying Opportunities for Bitcoin

 

• The Bitcoin ETF trade began last year in September, and ended up receiving approval from the SEC just recently.
• Bitcoin increased as much as 95% since BlackRock first applied for a Spot-Bitcoin ETF.
• Key levels near $37k and $34k are expected to be reached as bearish price action continues.
• Traders will look to get in at these support levels in anticipation of the Bitcoin halving in April.

Market Insights

BoJ Gov. Ueda Dropped More Hints of Stimulus

 

• Over December, the Yen saw major gains against the dollar and USD/JPY fell to $140.8 as Ueda hinted at rate hikes for 2024, and a move away from ultra-dovish policy.
   
• However,with Japan being hit by an earthquake after NYE, this dampened expectations of any tightening in January, and USD/JPY gained as much as 5.6% so far this year.
   
• BoJ interest rate decision came out on Tuesday, with markets widely expecting no change there - traders were more interested in the Press Conference that followed for any signals in the language from Ueda.
   
• Governor Ueda made some strong hints that loosening might start at the next meeting, however, the market is pricing in the first rate hike by March or April.
   
• We can expect the Yen to fall against the dollar until the BoJ makes some real moves as language alone won't keep the Yen elevated.

Tesla Hits 2023 Sales Target of 1.8m Units

 

• Tesla hit its target of 1.8 million vehicles sold in 2023 after record quarterly sales in Q4.
   
• The EV behemoth slashed prices for the Model Y by around 26.5% in 2023, stamping authority on the price war it started over a year ago.
   
• Stock prices for Tesla have fallen to $208.80 per share, down from highs of $414.50 per share seen in late 2021.
   
• Wall street is expecting a 21% rise in sales for Tesla in 2024, way below the 50% year-on-year target set by Elon Musk a few years ago.

Trading Strategies

The big question now: what should traders be watching and how can traders set-up for the next moves ahead?

PCE Surprises High - Gold Short

 

• If inflation data comes out higher than expected, then we should see a gold sell off with dollar gains.
   
• Traders can find short entries near the upper range of the bearish trend.
   

• The top of the trend is near. If traders anticipate higher than expected inflation, they could begin taking short positions around $2032.
   

   

  The Fibonacci retracement lines show key support areas where you can take profits:

1. $2000

2. $1976

• Traders should keep an eye on the 2-year US treasury yields to get some line of sight on what Wall Street is expecting this Friday.

PCE Lower Than Expected - Gold Long

 

• If we see an inflation reading which is much lower than the forecast then this will be bullish for gold.
• A low reading which means the Fed can cut interest rates in March which is dovish policy.
• The dollar will become bearish on a dovish Fed which will increase demand for the precious metal.
• Traders can look for a break out of the bearish trend which will be a confirmation of bullish price action.
• An entry could potentially be $2018 if we see the asset fall to this Fibonacci retracement level during the week.
• Traders should be patient though as gold could fall to $2000 before the data is released.

Take profits after a break out:

1. $2046

2. $2061