The financial markets got off to a flying start in 2023 with an astonishing positive performance on shares in the most offensive sectors on the stock market. As for the crypto market, it offered a small rebound, in a reduced volume, however. The risk now is that all these movements will be reversed by disappointment in the US inflation figures.
https://cryptoast.fr/bitcoin-btc-clef-fondamentale-linflation-us/
Bitcoin, the fundamental issue of inflation figures in the United States
Equity markets record an astonishing bullish performance since the beginning of the year, in particular the major European stock indexes which are almost back in contact with their historic highs. In parallel with this rise in equities in the most cyclical sectors, bond interest rates stabilized and the US dollar is now down more than 10% on the floating exchange market since last October.
In the pre-FTX world, all of these inter-asset class stock movements would have caused a sharp rise in the price of the crypto market; but the latter is still largely hampered by the crisis of confidence vis-à-vis the major crypto intermediaries, as well as by its fall of more than 70% since its historic peak in November 2021.
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The rise in risky assets at the start of 2023 was forged on the conviction of investors that the process of disinflation is well underway. The inflation rate in the United States has risen from 9% to 7.1% in the space of three months and the consensus for this Thursday, January 12 stands at 6.5%. It is precisely here that there is a market risk because the consensus is very optimistic. The risk for the equity market and the price of bitcoin is to be taken from the back by inflation, which would slow down much less than expected.
This ongoing disinflation is fueling hopes that the Federal Reserve of the United States (FED) will limit itself to a rate of 5% for its Terminal rateto then perform its famous “pivot” during the first quarter of 2023. But a rebound in the price regime would upset this fundamental narrative and would represent a major market risk for high-beta assets on the stock market.
The answer, during the publication of the US CPI this Thursday, January 12 at 2:30 p.m.
Chart showing the evolution of the components of the annual inflation rate in the United States
In terms of technical analysis of the bitcoin price, here is a reminder of the dominant graphic factors of the moment:
An uptrend line that joins all the most salient lows of the weekly time horizon for the past 5 years; The price of $16K which represents a 50% retracement of the entire rise since the low point of the health crisis; The price of $12K that the doxa is impatiently awaiting (beware of the consensus, sometimes it is taken the wrong way); The resistance of 20K$ that must be exceeded to go back bullish.
Chart that exposes the weekly closing price of bitcoin, juxtaposes its 7-day realized volatility
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The trend of the US dollar will act by correlation on Bitcoin this beginning of the year 2023
Finally, to conclude this new contribution within the columns of Cryptoast, I draw your attention to the support level on which the US dollar has returned to Forex. The most favorable scenario for the crypto market would be for the US dollar to break this support, at least if it does not offer a strong bullish bouncedue to the inverse correlation with the crypto market.
Chart that exposes Japanese candles in weekly US Dollar (DXY) data against a basket of major Forex currencies
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Vincent Ganne is a market strategist, technical analyst, trainer on the stock market and speaker on BFM Business. With a long experience in the field of analysis, he offers a global approach to financial markets. Both from a macroeconomic point of view and from a microeconomic point of view. Vincent Ganne also uses many aspects of chart analysis with the aim of forecasting trends in financial assets over the medium and long term.
Vincent Gane
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