Yesterday, the CPI data came out at 7.7% which is 3 percentage points lower than the forecasted 8%. This means that inflation is beginning to cool off at a faster rate than expected which is bearish for the Dollar.
The strong inflation data is a signal that the Fed can ease up contractionary measures with lower rate hikes in the upcoming FOMC meetings.
As the data was released, we saw a slide in the Dollar as cash flowed from the safe haven into riskier assets and other FX pairs. Gold broke out of its consolidation range to the upside, signaling a bullish reversal.
The EUR/USD price increase confirmed that we may be seeing a bull run in the asset after months of steady declines.
Bitcoin retraced up to $18,000 following the news but we may see the asset trade into new lows as the drama of the recent FTX collapse continues to unfold. The digital asset has held strong and we have not seen major volatility during this selloff. It has been much more sustained and controlled as opposed to other crypto crashes in recent times.
It seems there are fewer over-leveraged positions by institutions in the futures market and this has led to less aggressive liquidations as we have seen steadier declines instead of sharp price action.
In today’s DIFX Analytics, we’re going to look into the following assets:
The dollar slides as inflation cools off
The Dollar has fallen out of the consolidation range to confirm the bearish reversal. Price action for the Index is trading at $107.8 and is approaching the support at $106.8.
The 50-day EMA was broken clearly yesterday after CPI data came out at 7.7%, indicating a cool-off in inflation. This proves to the Fed that the aggressive rate hikes are working and they can begin to start pivoting from a hawkish stance to a less aggressive policy.
Bitcoin retracement to $18k supported by CPI data
Bitcoin set a new low this week at $15,600. CPI data on Thursday was bearish for the Dollar which resulted in Bitcoin bulls.
Price action increased to the $18,000 level after the data release and the asset is now trading at $17,300.
A continuation in the Dollar slide may help support the price of Bitcoin in the short term but as the effects from the FTT crash spreads, we may see Bitcoin set a new low at the $13,000 – $14,000 level.
Gold bulls break Fib level
Gold broke through the Fibonacci retracement level at $1722 and is now trading at $1761. We have seen Gold break into the $1722 – $1788 range.
RSI has risen up to the 70 levels on the Daily chart for the first time since the decline from $2000. This is a clear confirmation that the asset is experiencing a reversal.
We can expect price action to continue to the $1770 – $1780 range before seeing a retracement.
Euro indicates bullish confirmation
EUR/USD has broken above the resistance line at $1.009 and is trading at $1.02. We can expect price action to trade between $1.01 – $1.03.
RSI is touching the 70 levels and we can see a rapid increase in price action if it breaks above this level. This is a massive reversal in the FX pair which has seen a bear run since the Fed started raising the interest rate.
We can expect long positions to increase for the pair as the markets begin to price in the slowdown in the monetary policy.
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DIFX shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee, or implication by DIFX that the forecast information will eventuate, that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses in particular if the conditions or assumptions used for the forecast or mentioned in the analysis do not eventuate as anticipated and the forecast is not realized.
