Breakfast Bites - Risk off continues as US awaits inflation data
A closer look at where Bitcoin may go
Rise and shine everyone.
It’s Friday and the last day of February. We’re already done with the first two months of the year, and the news hasn’t been all that positive. The focus for today will be the PCE Inflation numbers.
The estimates suggest that the market is expecting a mixed print, but not necessarily a better print. From what we’re seeing on the consumer spending side, the picture remains unclear. On the one hand, we have reports from companies that seem to suggest that the US consumer remains resilient. Walmart mentioned it three times on the call. However, we also saw quite an ugly print from Retail Sales - coming in negative MoM. Sure, Nov - Dec are high spending periods and comparatively January comes in lower, but when we look at Jan 2024, it was worse than that. ⤵️
Yesterday’s second estimate of 4Q GDP growth remained unchanged, and while 2Y yields moved slightly higher on this, it gave it all back and then some. Markets closed significantly lower, with Nvidia down almost -8.5%.
Further news of tariffs continues to weigh on the market, with President Trump confirming yesterday that tariffs on Mexico and Canada would go into effect on Mar 4, and added a 10% tariff on China because he was not happy with progress made on stopping Fentanyl.
This is what pushed the USD higher, hitting the Canadian Dollar and Mexican Peso.
Asian equities took quite the hit this morning. The Nikkei and Kospi were down over -3%. Chip-related stocks declined with Hynix down -3.9%, Advantest plunging -9.2%, Kioxia -4.5%, and SoftBank Group -4.9%.
Europe opened lower, caught in a broad risk-off mood. German Retail sales edged up +0.2% MoM, but e-commerce slumped -4.2%. German state CPI readings suggest the national print may come in at or slightly above the 2.3% YoY consensus. In France, Q4 final GDP was revised slightly lower to 0.6% YoY, while February’s flash CPI fell to a four-year low of 0.8% YoY. Eurozone inflation expectations for the next 12 months dropped to 2.6%. German 10-year Bund yields fell to 3.8% as risk-off flows and dovish ECB bets gained traction.
Commodities are mixed this morning. Metals and energy are lower. Ag is holding in there. Gold is down over -3.5% from its highs.
Bitcoin
I saw a Twitter post from Michael Saylor today that really ticked me off.
I know he’s just trying to be sensational but, posts like these tell me that there’s panic. And there’s probably a good reason for him to panic. (Disclaimer: I have a small position in IBIT mainly to track price.)
Firstly, we’re clearly seeing “risk-off” in the markets with people suddenly realizing that Tariffs are here to stay, and all these Federal Spending cuts will create unemployment and reduce what’s been driving GDP growth over the past two years. But, I digress.
So here it is. I looked at the charts for Bitcoin. And this is what I see.
On daily timeframe, Bitcoin has slashed through the 200 Day Moving Average (blue), which is a very important psychological level for traders. That’s today. If it “closes” below this level today, we’re in for some trouble. I highlight close because Bitcoin is on 24/7 but for the sake of charting, the close will be when the clock turns.
Looking at the chart above you can see that there this distribution, i.e., people are simply selling.
Now let’s look at the weekly timeframe.
On the weekly, we’re coming up on the 50-week moving average (green). This also coincides with the 75,000 level that I’ve marked out with the yellow line. Again, this is a psychological level and could be a level where price bounces up. But, breaking below this level would likely move us down to the box, where there has been some accumulation activity, and we could see people buying again.
These are just my observations. But, given the risk-off sentiment and uncertainty, there is a downward bias.
What We’re Watching
8:30 am US PCE Release
Updates on the Tariff situation
Calendars
(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)
