Cypto sentiment/price is stuck between a rock and hard place , the rock being the economic uncertainty and the hard place being the geopolitical tensions, both are not good for "risk on" assets like crypto.
As is so often the case, crypto price direction will be largely effected by US economic data or other outside factors in the coming days.
In the coming days crypto needs pro interest rate cut data without that data pointing to an imminent recession.
Core PPI m/m (excluding food and energy) and PPI m/m both just came out lower.
PPI is the change in price of finished goods and services sold by producers, it is used as a gauge of inflation.
This is a good reading for interest rate cuts and therefore Crypto price, These PPI readings show inflationary pressures are easing and further support an interest rate cut in September, possibly a 50bps cut.
Crypto and market indexes like the S&P500, Nasdaq ,Nikkei, RUS2000 all had a mildly Bullish reaction to this reading.
PPI is not usually a huge market mover, the market will react far more to the data coming out in the next couple days.
Most importantly for "Risk on" assets like Crypto there is currently the threat of further escalation in tensions in the Middle East.
The tensions in the Middle east, the uncertainty over recession fears and the Yen carry trade unwind are still leading to a more "risk off" sentiment.
The price of Gold (Safe Haven asset) reflects this.đ , Gold price is near ATHs.
For "Risk on" assets like Crypto any escalation or retaliation by Iran or its proxies will cause crypto price to fall, the larger the retaliation, the more likely it will lead to further conflict, this will lead to further "risk off" sentiment.
We need this conflict to come to an end for humanity, that is far more important than crypto price, it is sad to have to include conflict/war into your investment or trading strategy.
High Impact readings in the coming days.
Wednesday Aug 14th (Inflation fears)
The Wednesday CPI data will have a huge impact on price if there are any shock readings, i dont expect any shock readings, the actual numbers are expected to be as forecast with a possibility of softer readings (lower) as shelter costs started to fall in June and these make up around 30% of the CPI number.
If these numbers come out lower it will be Bullish for Crypto, if they come out higher (especially much higher) it will be bearish for Crypto.
A September rate cut is priced at 100%, the CPI data will effect how the market prices in a 50bps cut and not just a 25bps cut.
Lower CPI readings support a 50bps(or more) September cut.
Higher CPI readings would make a 25bps cut more likely (for now).
Thursday 15th Aug (Recession fears)
On Thursday we have Core Retail sales (excl Automobiles), Retail sales, Unemployment claims and the Empire state and Philly manufactoring index.
All of these will be looked at for recession fears.
Bad news is only bad news for any of these readings.
These readings are much harder to predict and its where shock readings could effect the market.
5-6 months ago the market looked for these readings to show a slowing economy, bad news is good news.
Now that is the total opposite, the market is looking for strong readings to show a recession is not likely.
What Crypto needs is higher retail sales and lower unemployment numbers.
Friday 16th
On Friday we have building permits and Prelim (most important) University of Michigan (UOM) inflation expectations and consumer sentiment.
Consumer sentiment will be the most important, consumer sentiment is how surveyed consumers feel about the current and future economic environment, it is important as consumers make up the majority of overall economic activity.
Over the last 5 readings consumer sentiment has come out lower than expected, this shows increasing economic pressure and uncertainty felt by consumers.
These readings on Friday will be important, more so if they are in line with data that is released on Wednesday and Thursday, they will be used more for confirmation of market sentiment.
Final thoughts,
The best case scenario for Crypto in the coming days would be for a de-escalation in tension in the Middle east, lower than expected CPI readings on Wednesday followed by stronger than expected retail sales and lower unemployment on Thursday.
None of these readings or factors can be viewed in a vacuum.
Good CPI data tomorrow could lead to a short term Bullish rally but that will quickly end for Crypto if anything happens in the Middle East or if retail sales or unemployment give a very bad reading Thursday.
Market crash worries might have eased but recession fears are still valid, it will take a few good readings for those fears to subside, in the coming days the retail sales and unemployment data will be where the market looks for recession worries.
The sideways action in Crypto over the last few days shows the uncertainty around Crypto, this is due to its "Risk on" status, current economic and geopolitical tensions are acting as an anchor for crypto price.
Also note the full effect of the Japan carry trade unwind could still effect the market, this was a global event that effected Trillions worth of positions across the globe, i am sure many large holders and banks are still in crisis mode over this.
For the technicians out there we can clearly see that a strong level of support has now become resistance on the daily crypto market cap chart.đ
For now a sustained breakthrough of this level of resistance will be determined mostly by the US economic data released in the coming days.
Price action could be volatile in the coming days, especially around and in the hours that follow high impact data releases.
Trade safely.
Peace.
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